GREENWING RESOURCES LTD - Annual Report 2011

==> picture [215 x 80] intentionally omitted <==

ABN 31 109 933 995

Annual Report for the year ended 30 June 2011

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1.	CORPORATE DIRECTORY	2
2.	REVIEW OF OPERATIONS	3
3.	DIRECTORS’ REPORT	26
	STATEMENT OF COMPREHENSIVE INCOME	38
	STATEMENT OF FINANCIAL POSITION	39
	STATEMENT OF CHANGES IN EQUITY	40
	STATEMENT OF CASH FLOWS	41
	STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES	42
4.	INDEPENDENT AUDIT REPORT TO THE MEMBERS OF THE BASS METALS LTD	96
5.	AUDITOR’S INDEPENDENCE DECLARATION	99
6.	ADDITIONAL INFORMATION	100
7.	CORPORATE GOVERNANCE	105

ANNUAL REPORT For the year ended 30 June 2010

==> picture [101 x 37] intentionally omitted <==

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

Level 1, 91 Havelock Street West Perth WA 6005

PO Box 1330 West Perth WA 6872

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

LEGAL ADVISORS

Blake Dawson Level 32, Exchange Plaza 1 The Esplanade Perth WA 6000

Gilbert & Tobin 1202 Hay Street West Perth WA 6005

Page Seager Lawyers 162 Macquarie Street Hobart TAS 7000

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth WA 6000 Telephone: 1300 557 010

AUDITORS

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

STOCK EXCHANGE LISTINGS

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 38] intentionally omitted <==

1. CHAIRMANS LETTER

Dear Fellow Shareholder

The past year was a busy, successful and yet challenging period for Bass Metals Ltd (“Bass Metals” or “Company”). The Tasmanian operations achieved an excellent safety record through the year, which is a credit to the entire workforce. Key production milestones included the completion of the Que River open pit mine after three years of continuous and profitable operation, the commencement of underground mining at Fossey, and the recommissioning of the Hellyer Mill. Operations were significantly impacted by two adverse technical events in the June 2011 quarter however these issues have been managed. The Company’s exploration focus continues to bear fruit, with important discoveries in the Hellyer area at Fossey East and Switchback during the year, and the exciting McKay discovery shortly after year’s end. Feasibility studies into recovering metals from the large Mineral Resource inventory in the Hellyer tailings were initiated and preliminary results from the gold evaluation highlight the potential to establish a substantial new gold business.

Production Milestones

The Que River open pit mine was closed in October 2010 as planned, with the exhaustion of Ore Reserves. Although modest in scale, this mining operation was extremely successful and profitable, producing in excess of $25 million in cash flow from the mining of 166,000 tonnes of ore over a three year period, considerably more than originally forecast.

Ore production from the newly commissioned Fossey underground mine commenced in the December 2010 quarter, and a total of 156,000 tonnes of ore was mined during the year. Concentrate production commenced in February 2011 and the Hellyer operations were officially opened in a ceremony held in April 2011. Four milling campaigns were successfully completed in the second half of the year, with a total of 130,000 tonnes of ore being treated, producing 10,000 tonnes of zinc concentrate and 4,200 tonnes of lead concentrate that was sold under an off-take agreement to Nyrstar.

June 2011 quarter production and cash flows were adversely impacted by the combination of a major water inflow into the underground mine, and ore grade underperformance. The latter has been resolved following a program of underground infill drilling and the generation of a modified Ore Reserve estimate that has resulted in acceptable reconciliation between mine and mill, and installed dewatering and power supply capacity is being upgraded to properly manage future water inflows. Mill and mine continue to operate as normal, with Fossey mine production currently (September 2011) averaging around 30,000 tonnes per month.

Exploration Success

The Fossey East, Switchback and McKay exploration discoveries demonstrate the quality of our exploration team and the value of the new exploration model being applied, as well as the substantial resource potential for the Hellyer-Que River area. Importantly, the Fossey East and McKay discoveries lie close to the existing Fossey underground mine infrastructure and to the Hellyer processing facility and, subject to further successful exploration and feasibility studies, have the potential to add to mine life. Evaluation of the Fossey East deposit is well advanced, with infill drilling in progress to update the resource and assist in mine planning. .

Growth Potential

Significant progress was achieved during the year in evaluating the potential to recover base and precious metals from the large Hellyer tailings Mineral Resource acquired in 2009, which contains over 500,000 tonnes of lead and zinc, 800,000 ounces of gold and 32 million ounces of silver. Separate feasibility studies were initiated into evaluating the potential to recover lead/zinc and gold/silver. Both feasibility studies are still in progress but preliminary results from the gold/silver study are encouraging and highlight the potential to establish a large scale gold production facility.

Funding

The Company funds its development and mining activities through a combination of debt and equity. The adverse technical events encountered in the June 2011 quarter highlighted the need for the Company to be recapitalised, and this is being achieved in stages. Subsequent to year’s end, a further $4.3 million (before costs) was raised by the issue of a combination of Convertible and Loan Notes, which was followed up with a credit approved offer to increase Bass Metals’ Corporate Facility with RMB Australia Holdings Ltd by an additional $13 million. The final stage is in progress comprising a non-renounceable entitlements offer to existing shareholders to raise up to another $10.7 million (before costs). These funds are intended for general working capital requirements as well as sustaining a large scale exploration and refractory gold recovery feasibility study program.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 38] intentionally omitted <==

1. CHAIRMANS LETTER (continued)

Future

The Company responded quickly and decisively to unexpected technical events at its Hellyer Mine Project to place the operations back on track to generate positive cash flows with which to further develop and grow the Company’s asset base. The Board considers that the Company has a number of exciting growth opportunities such as new exploration prospects and a large scale tailings gold-silver resource, all underpinned with strong cash flow estimates from the Fossey Mine, but the first priority is to ensure the success of the recapitalisation process to provide an appropriate working capital buffer so that the Company is in a better position to withstand any future unanticipated adverse events.

The Company’s management and workforce and its contractors and partners have worked hard to achieve the Company’s many successes during the year, and to overcome a number of unexpected technical challenges, and on behalf of the Board I would like to acknowledge and thank them for their respective contributions to the Company’s development. I would also like to thank our shareholders and stakeholders for their ongoing interest and support of our activities and urge shareholders to join the Board in supporting the non-renounceable entitlements offer.

Yours sincerely

==> picture [69 x 54] intentionally omitted <==

D Boyer Chairman

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 38] intentionally omitted <==

2. REVIEW OF OPERATIONS

2.1 SUSTAINABILITY

2.1.1Safety

The Company achieved an excellent safety record through the year with a Lost Time Injury frequency rate (LTIFR) of 3.8, with one LTI. On 8 June 2011 the Fossey Project recorded 500 days LTI free. This is a reflection of the commitment from crews and staff towards maintaining a safe working environment and is a tremendous outcome given some of the difficult operating conditions and extreme weather events experienced during the year.

2.1.2 Environment

The Company continues to take a proactive and dedicated approach to environmental management of both legacy issues and those arising from its own activities. Acid mine drainage and the quality of run-off water is the major focus and given the size of the site and the scale of the activities, presents challenges requiring innovative solutions. During the year the Company commenced a care and maintenance type rehabilitation program at its Que River mine site. Around the Hellyer site, in particular the Hellyer Tailings Storage Facility (TSF), Bass Metals initiated the installation of an automated process system to monitor and treat contaminated water run-off into the TSF. An overall improving trend in the quality of water out flows has been achieved and further improvements are expected once the automated system is fully commissioned.

2.2. OPERATIONS

Bass Metals operations during the year comprised the Que River Project and the Hellyer Mine project (HMP).

2.2.1 HMP

The HMP is a new development with ore sourced from the newly developed Fossey underground mine and processed on a campaign basis at the Hellyer flotation concentrator to produce zinc, lead and copper-precious metals concentrates. Development of the HMP commenced in early 2010 with the start of decline development into the Fossey deposit and refurbishment of the Hellyer plant. Mine development intersected the Fossey ore body in December 2010, and stoping ore production commenced in March 2011. The first milling campaign and concentrate production occurred in February 2011 from development ore, and first zinc concentrate sales were also achieved in February 2011.

Full production statistics for the FY 2011 are presented in Table 1 with additional commentary provided in the following section.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 38] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Table 1: HMP Production Summary FY 2011

Description	Units	March Qtr 2011	June Qtr 2011	FY2011 YTD	Project to date
MINE PRODUCTION
Underground Development	m	646	586	2,235	2,773
Mine Ore Production	t	47,502	109,607	157,109	157,109
Zinc	%	7.7%	7.6%	7.6%	7.6%
Lead	%	4.7%	3.9%	4.1%	4.1%
Silver	g/t	113	113	113	113
Gold	g/t	1.9	2.0	1.9	1.9
Copper	%	0.23%	0.25%	0.25%	0.25%

PROCESSING
Ore Treated	t	40,917	89,213	130,130	130,130
Concentrator Feed Grades
Zinc	%	6.1%	5.7%	5.8%	5.8%
Lead	%	3.7%	3.3%	3.4%	3.4%
Silver	g/t	94	102	99	99
Gold	g/t	0.70	2.05	1.62	1.62
Copper	%	0.22%	0.20%	0.20%	0.20%

CONCENTRATE PRODUCED
Zinc concentrate	t	2,501	7,548	10,049	10,049
zincgrade	%	48%	48%	48%	48%
silvergrade	g/t	151	154	153	153
goldgrade	g/t	1.2	1.1	1.1	1.1

Lead concentrate	t	761	3,491	4,252	4,252
leadgrade	%	52%	51%	51%	51%
silvergrade	g/t	924	697	738	738
goldgrade	g/t	1.6	2.9	2.6	2.6

Copper-Precious metals concentrate	t	123	376	499	499
Copper	%	16%	18%	17%	17%
Silver	g/t	5,755	6,352	6,205	6,205
Gold	g/t	9.0	12.8	11.8	11.8
Lead	%	11%	11%	11%	11%

2.2.2 Mine Production

By the end of June 2011, mine development had extended to three ore production stopes on the vertically central 465 level, the decline extended down to the lower 445 level and incline development had commenced to access ore on the 485 level.

Ore production comprised 157,109 tonnes comprising approximately 25% development ore and 75% stoping ore.

Towards the end of FY 2011 two technical events had a major adverse impact on the mine operations; a sudden high water inflow (in excess of 200 litres per second (l/s)) and lead and zinc head grade underperformance. The water issue caused delays as well as extra costs for ground support and dewatering. This water inflow has (at September 2011) stabilised to approximately 140 l/s and further capital works are well advanced to permanently increase the pumping capacity to 300 l/s.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 38] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

The lead and zinc grade issue became apparent in late May/early June as the fourth milling campaign of 56,607 tonnes, which for the first time comprised largely stope ore, when mill grades trended consistently well below the planned grades. Geological and assay data from a detailed infill drilling program undertaken from underground and completed on 30 May, 2011 was utilised to produce a revised resource model and subsequently, a revised Ore Reserve for the Fossey Mine (Refer section 2.4 Mineral Resources and Ore Reserves). This revised mine plan now forms the basis of the Company’s production plan and, as at late September 2011, is reconciling very closely.

2.2.3 Hellyer Concentrator Operations

The 1.5mtpa capacity Hellyer Mill was recommissioned in January 2011 and concentrate production and metal recovery has ramped up through the six months to the end of June 2011. Overall, the Company has achieved an improving trend with each campaign in terms of both availability and concentrate production. This performance is reflected in Figures 2 to 5 which are summaries of zinc, lead and copper concentrate production.

Metallurgical performance is impacted by head grade, with lower recoveries generally associated with lower head grades. Therefore, given the lower head grades in the 4th campaign, the Hellyer Mill performed exceptionally well to achieve the resultant high recoveries. With this performance, and grades expected to improve through successive campaigns, there is clearly potential for further improvement above budgeted levels and previously achieved levels.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [102 x 38] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Figures 2 to 5: Graphical Summaries of Mill Performance per Campaign

Figure 2: Processed Tonnes and Grade

==> picture [264 x 333] intentionally omitted <==

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

60,000 (Pb+Zn) 16%
50,000 14%
12%
40,000
10%
30,000
8%
20,000
6%
10,000 4%
0 2%
Campaign #1 Campaign #2 Campaign #3 Campaign #4 Campaign #5
(August 2011)
Ore Treated Pb+Zn Grade
Figure 4: Lead concentrate produced
3,500 62%
60%
3,000
58%
2,500
56%
2,000 54%
1,500 52%
50%
1,000
48%
500 46%
0 44%
Campaign #1 Campaign #2 Campaign #3 Campaign #4 Campaign #5
(August 2011)
Lead concentrate lead grade
Tonnes
Conc. Grade
Tonnes
Conc. Grade
----- End of picture text -----

Figure 3: Zinc concentrate produced

==> picture [271 x 327] intentionally omitted <==

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

7,000
54%
6,000
52%
5,000
50%
4,000 48%
3,000 46%
2,000 44%
1,000 42%
0 40%
Campaign #1 Campaign #2 Campaign #3 Campaign #4 Campaign #5
(August 2011)
Zinc concentrate zinc grade
Figure 5: Copper concentrate produced
300 20%
250
18%
200
16%
150
14%
100
12%
50
0 10%
Campaign #1 Campaign #2 Campaign #3 Campaign #4 Campaign #5
(August 2011)
Copper‐Precious metals concentrate copper grade
Tonnes
Conc. Grade
Tonnes
Conc. Grade
----- End of picture text -----

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

2.2.4 Concentrate Sales & Marketing

The Company has zinc and lead concentrate sales agreements with Nyrstar Sales and Marketing AG for production from its Fossey and Fossey East deposits, and agreements with LN Metals International Ltd for the copper-silver-gold concentrate for concentrate production sourced from the Fossey deposit.

Total concentrate sales for the year comprised $19.21 million, comprising (on a reconciled basis) 10,049 tonnes of zinc concentrate and 4,252 tonnes of lead concentrate. A stockpile of approximately 500 tonnes of copper-precious metals concentrate remained at site at year’s end, pending shipment to the customer in the September quarter of 2011.

2.2.5 Que River Mine

Mining at Que River was completed in October 2010 with the last ore being extracted from the PQ open pit and sold to MMG’s Rosebery operations. A production summary for the year and since start-up in September 2007 is presented in Table 2, below.

Table 2: Que River Production Summary

Description	Units	FY 2011	Project to Date
Mine Ore Production	t	8,452	166,846
zinc	%	13.5%	15.8%
lead	%	7.7%	8.7%
silver	g/t	241	232
gold	g/t	3.9	4.31
copper	%	0.31%	0.4%

Ore sales in FY 2011 totalled $3.32 million. The Que River Mine site is currently on a care and maintenance regime, with the final stages of rehabilitation work in progress. This includes ameliorating run-off issues associated with the historical workings and the construction of a small dam to manage potential acid mine drainage events.

2.3 SPECIAL PROJECTS

Two feasibility study processes initiated during the year and currently in progress focussed on the significant Hellyer Tailings Mineral Resource, which contains over 500,000t of combined lead and zinc, 800,000oz of gold and 32 million ounces of silver, as presented below in Table 6 (Section 2.4, Mineral Resources and Ore Reserves). Total expenditure on these studies is estimated at approximately $500,000 for the financial year.

2.3.1 Base Metals Recovery Study

This study is focussed on fully utilising the 1.5mtpa capacity Hellyer Mill by reprocessing the Hellyer tailings to recover lead and zinc into separate concentrates. This requires detailed and lengthy testwork, examining lead and zinc recoveries and the resultant concentrate grades at a range of grind sizes. The testwork is ongoing, though preliminary results are not encouraging on the technical capacity to produce two distinct concentrate streams, but the opportunity to produce a bulk lead-zinc concentrate remains. Bass Metals plans to complete a full detailed technical review of this as quickly as practical as a possible means of fully utilising the large Hellyer Mill.

2.3.2 Gold Recovery Study

As highlighted above the Hellyer tailings also contain significant gold and silver. The gold is refractory but several process flow sheets were tested in detail in the 1990’s and confirmed the technical capacity to recover varying levels of gold and silver. However, given the prevailing low precious metals prices at the time the project was regarded as uneconomic. Bass Metals acquired the Hellyer Tailings Mineral Resource in March 2009 and since then has completed a Scoping Study confirming the potential viability of several processes for silver and gold recovery. Indeed, Bass Metals is the first company since the 1990s to examine the application of largely conventional refractory gold processing systems on this resource.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

A Feasibility Study is underway, with the first stage being a major testwork program to validate and update some of the previous test work done. This work is being done on behalf of Bass Metals by metallurgical consulting group BatteryLimits. To date, only preliminary results for the testwork program are available, as this testwork is also being delayed by high demand in the testwork laboratories. The results available are presented in Table 3 below.

Table 3: Preliminary Gold and Silver Recovery Testwork Results.

		Direct Cyanidation (after UFG)	Direct Cyanidation (after UFG)	Albion	Process	Partial Pressure Oxidation	Partial Pressure Oxidation
	Units	Gold	Silver	Gold	Silver	Gold	Silver
Average Resource Grade	g/t	2.6	104	2.6	104	2.6	104
2010 Scoping Study Results
Total Recovery	%	25	40	86	82	37	65
Est. Metal Recovery*	koz/pa	21	1338	72	2742	31	2174
Current Preliminary results (work-in-progress)
Total Recovery	%	32	49	89	87	84	na
Est. Metal Recovery	koz/pa	27	1639	74	2909	70	na

* Estimates of metal recovery assume processing of 1 million tonnes of tails at the average resource grades, which is considered to be a realistic annual tailings recovery and processing rate.

These results are regarded as encouraging for the potential to establish a large scale gold production facility at Hellyer based initially on the 9.5 million tonnes Hellyer tails resource. The next phase of work will involve an assessment of likely operating and capital costs for each process method based on the updated results to enable selection of a single process route for further testwork and engineering studies.

2.4 MINERAL RESOURCES AND ORE RESERVES

Bass Metals has a large, diverse and polymetallic Mineral Resource inventory comprising high grade massive sulphide base and precious metal mineralisation, tailings from the former Hellyer mine operations containing gold, silver and base metals and a shallow, hard-rock gold-silver resource.

2.4.1 Ore Reserves

A revised Ore Reserve has been estimated and is summarised in Table 4 below. The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources used to produce the Ore Reserves. The Ore Reserve is reported in accordance with the JORC code. Competent Persons Statements are provided in Section 2.5.3 below, and details of the estimation technique are provided in Section 2.5.4.

Table 4: Revised Fossey Ore Reserve estimate as at 30 June 2011

(at a 5% lead+ zinc cut-off)

CATEGORY	'000 TONNES	Copper %	Lead %	Zinc %	Silver g/t	Gold g/t
Proven	269	0.5	6.7	12.9	2.6	123
Probable	170	0.2	3.4	5.6	1.5	71
Total	439	0.4	5.4	10.1	2.2	103
Underground Stock(Proven)	37	0.3	3.3	5.7	1.9	83
Surface Stockpiles(Proven)	8	0.3	5.1	9.1	2.3	137
Total Reserve	495	0.4	5.3	9.7	2.2	103

Small rounding errors may occur

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

2.4.2 Mineral Resources

Massive sulphide resources

Bass Metals’ generally high grade, polymetallic massive sulphide resources comprise the; Fossey, Fossey East, Hellyer and Que River resources. These estimates are all reported at a (lead + zinc)>5% grade cut off in Table 5 below in accordance with the JORC Code.

Table 5: Combined Polymetallic Massive Sulphide Mineral Resources estimates as at 30 June 2011, (at a 5% lead + zinc cut-off).


	JORC	'000	Copper	Lead	Zinc	Silver	Gold
Location
	classification	TONNES	%	%	%	(g/t)	(g/t)


Fossey	measured	286	0.6	7.4	14.2	137	2.9
	Indicated	108	0.4	6.8	11	120	1.8
	Inferred	66	0.3	4.7	8.4	94	2.1
	Total	460	0.5	6.9	12.6	127	2.5
Fossey East	Indicated	140	0.5	5.2	11	83	1.9
	Inferred	110	0.3	3.3	6.6	60	1.7
	Total	250	0.4	4.4	9.1	73	1.8
Hellyer Remnants	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* *basemetals*	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 S-lens*	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	0.15
	Total	380	2.0	1.3	3.4	63	0.3
*Total*	Measured	346	0.8	6.4	12.4	127	2.5
	Indicated	1308	0.7	3.9	7.2	86	1.2
	Inferred	486	0.5	3.7	6.7	85	1.4
	Total	2140.0	0.6	4.2	7.8	92	1.4

Rounding errors will occur

Hellyer Tailings Resource Estimate

The Hellyer tailings were produced between 1988 and 2000 as the residue from processing approximately 16 million tonnes of ore from the former Hellyer Mine. They are contained in a purpose built storage facility and submerged beneath water to prevent oxidation and generation of acid mine drainage. This Mineral Resource is summarised in Table 6, in accordance with the JORC Code.

Table 6: Hellyer Tails Combined Mineral Resource Estimate

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

Rounding errors will occur

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Table 6a: Contained metal comprises:

Lead(t)	Zinc(t)	Copper(t)	Silver(Moz)	Gold(Moz)
290,000	240,000	20,000	32	0.8

Rounding errors will occur.

Mt Charter Gold-Silver Resource.

A large tonnage low grade gold-silver mineral resource has been delineated at the Mt Charter prospect. The Mineral Resource is reported above a 0.7 g/t grade gold cut-off and is summarised in Table 7 in accordance with the JORC Code.

Table 7: Mt Charter Mineral Resource estimate at a 0.7 g/t gold cut-off.

JORC classification	Tonnes (Mt)	Zinc %	Silver g/t	Gold g/t
Indicated	1.9	0.7	36	1.2
Inferred	4.2	0.4	35	1.2
Total	6.1	0.5	36	1.2

Rounding errors will occur.

2.5 EXPLORATION

In the 2011 financial year Bass Metals completed a significant exploration program searching for large scale, highgrade volcanogenic massive sulphide (VMS) deposits. The total expenditure for the year was $3.06 million, which included 12,147 metres of diamond drilling from 47 drill holes. It was another successful year with the discovery of the Fossey East Lens and the development of a new exploration model which has generated several new targets and significantly increased the exploration potential on the Company’s leases. In July 2011 the Company announced a very high-grade intercept at a new prospect named McKay which may further validate this new exploration model.

Bass Metals’ current tenements are shown in Figure 6 and the locations of the major prospects on the Mine Leases are shown in Figure 7.

Highlights of exploration work carried out during the year are summarised in the following sections.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Figure 6: Tenement Location Plan

==> picture [408 x 100] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Figure 7: Hellyer Mine Lease, major Prospects:

==> picture [293 x 425] intentionally omitted <==

2.5.1 Hellyer Mine Lease (CML 103M/1987) (100% Bass Metals Ltd).

Exploration activities have focused on the Hellyer mine lease with drilling of the Fossey and Fossey East resources and extensions and the Switchback target. A total of 11,662 metres in 46 holes were completed. The highlight for the period was the discovery of the Fossey East deposit where a total of 6,033 metres was completed from 11 surface and 13 underground holes. A further 10 holes for 3,192 metres were completed looking for Hellyer and Fossey extensions and 7 holes for 2,432 metres were completed at the Switchback target.

Fossey East.

The Fossey East Mineral Resource is immediately adjacent to the Fossey deposit and in proximity to the Fossey Mine development as shown in Figure 8. The deposit was discovered in September 2010 and was drilled to nominal 50 metre centres by mid February 2011, leading to the initial mineral resource estimate presented in Table 5 (Section 2.4.2). An infill drilling program to 25 metre centres has commenced and will be utilised to update the current resource estimate and mine planning.

The Fossey and Fossey East deposits occur as irregular lenses of barite and base metal sulphides that pinch and swell. Each body is closed off by drilling (as shown in Figure 8) however there is potential for new lenses to be developed both down-dip and along strike. Additional drilling is required to test these targets.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Figure 8: Fossey East Long Section showing intersections greater than 5% lead + zinc.

==> picture [252 x 322] intentionally omitted <==

Figure 9: Exploration potential Hellyer to Que River

==> picture [446 x 80] intentionally omitted <==

==> picture [446 x 81] intentionally omitted <==

==> picture [446 x 80] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

McKay Prospect.

The key horizon and focus of exploration in the Hellyer area has been the contact between the alteration zone and the base of unaltered rock – in the case of Hellyer and Fossey this is basalt. However, the Fossey East deposit is located deep within the alteration zone in an area traditionally regarded as not prospective, referred to as “the unconventional target”. Many previous drill holes stopped well short of testing this geological position. This new prospective position was tested by drill hole HLD1030 and lead to the identification of a new mineralised zone, the McKay Prospect, which is totally enclosed in alteration within the unconventional target zone.

The McKay intersection comprises 7.0 metres of high grade massive base metal sulphide mineralisation assaying 22.3 % zinc, 9.9 % lead, 3.4 g/t gold, 181 g/t silver and 0.7% copper and an additional 4.1 metres of barite and base metals mineralisation. The entire 11.1 metre zone assayed 14.9 % zinc, 6.5 % lead, 2.6 g/t gold, 130 g/t silver and 0.7% copper. The McKay prospect is a new discovery with potential for extensions in all directions (Figures 9 and 10). Previous drilling in the area intersected narrow high grade base metal intersections to the north (for example, 1.9 metres 0.6% Cu, 8.4 % Pb, 16.9 % Zn, 141 g/t Ag and 3.0 g/t Au), and these intersections may be related to the same mineralised structure.

This empirical observation opens up significant areas for additional exploration. The D-Zone and South Que targets (Figure 7) were highlighted as very prospective in the 2010 alteration and pathfinder element study, which is now further supported with the identification of the new unconventional target model.

Figure 10: Section 10270mN showing new intersection HLD1030 and relationship to Fossey and Hellyer.

==> picture [292 x 267] intentionally omitted <==

Switchback Prospect.

A further seven holes (2,432 metres) were completed at the Switchback target following up on the significant intersection in HED016; 9.3 metres at 8.5% zinc, 3.3% lead, 69 g/t silver and 1.6 g/t gold. Further sulphide clast zones were intersected with the best result of 0.6 metres at 0.5% Cu, 17.7% Pb, 26.8% Zn, 163 g/t Ag and 1.4 g/t Au in drill hole HED21 from the intersection of a single extremely high grade sulphide clast. The presence of significant hangingwall and footwall alteration is indicative of an active VMS system in this area and the presence of mineralised clasts indicates that it had ore-forming potential.

2.5.2 Regional Exploration.

Bass Metals’ regional exploration focus is for large scale high grade VMS style deposits in the Mt Read Volcanic Belt. The Company’s other regional tenements are considered prospective for granite intrusion related mineralisation.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Lake Margaret EL 28/2009 (Bass Metals 75% and Clancy Exploration 25%)

Three diamond drill holes (LMD2 – LMD4) testing for high-grade, North Lyell style copper mineralisation were completed at Lake Margaret for a total of 449 metres. Diamond drill hole LMD2 was designed to test the locality upslope from the mineralised glacial erratic in a North Lyell-style geological position. The hole intersected the alteration zone but away from the targeted Great Lyell Fault structure that is typically associated with North Lyell mineralisation. Drill holes LMD3 and LMD4 were vertical holes near the high grade glacial erratic to test whether the erratic was in situ or close to source. The two holes indicated relatively shallow glacial cover and that the target position likely occurs further upslope. Further geophysical surveying, geochemistry, mapping and drilling is planned for this prospect.

Iron Tin-Tungsten Joint Venture (Bass Metals 30% and Venture Minerals 70%)

Two skarn tin-tungsten targets have been generated by Venture Minerals on EL31/2003 (Heazlewood tenement). Drilling is planned for the summer. Exploration on EL 36/2003 has moved from an iron ore focus to a tin-tungsten skarn focus.

Other Joint Ventures

During the year Bass Metals entered into an exploration joint venture with Stellar Resources on EL36/2003 Whyte River. Under the terms of the joint venture, Stellar can earn a 75% interest in all commodities apart from tin, tungsten and iron by sole funding the first $500,000 of exploration work over the next three years.

2.5.3 Competent Persons Statements

The information in this Report that relates to exploration results is based on information compiled by Mr Kim Denwer who is a full time employee of Bass Metals. Mr Denwer is a Member of the Australian Institute of Geoscientists. Mr Denwer has 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 as defined in the JORC Code. Mr Denwer consents to the inclusion in this report of this information in the form and context in which it appears.

The information in this report that relates to Mineral Resource estimates is based on information compiled by Mr Kim Denwer who is a full time employee of Bass Metals. Mr Denwer is a Member of the Australian Institute of Geoscientists. Mr Denwer has sufficient experience which is relevant to the style of mineralisation and type of deposit and to the activities currently being undertaken to qualify as a Competent Person as defined in the JORC Code. Mr Denwer consents to the inclusion in this report of this information in the form and context in which it appears.

The information in this report that relates to the Fossey Ore Reserve estimate is based on information compiled by Mr Victor Rajasooriar who is a full time employee of Bass Metals. Mr Rajasooriar is a Member of the Australian Institute of Mining and Metallurgy. Mr Rajasooriar has sufficient experience which is relevant to the style of mineralisation and type of deposit and to the activities currently being undertaken to qualify as a Competent Person as defined in the JORC Code. Mr Rajasooriar consents to the inclusion in this report of this information in the form and context in which it appears.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

2.5.4 Checklist of assessment and reporting criteria.

Fossey Resource and Reserve Estimate	Fossey Resource and Reserve Estimate	Fossey Resource and Reserve Estimate
	Criteria	Comments
		Fossey is a Volcanic Hosted Massive Sulphide deposit comprising a stratiform zone of
Geological Setting		dominantly baritic mineralisation, associated with areas of high-grade Base Metal Sulphide
		(BMS) and underlain by minor stringer and disseminated mineralisation.
Tenement and land		Fossey occurs within Hellyer Mining Lease CML103M/87 and is wholly owned by Bass Metals
status		Ltd.
		The 2009 resource estimate was based on 25m spaced drilling from surface (27 Bass Metals
		and 14 historic holes in mineralisation). The current resource estimate includes an additional 42
		intersections from infill underground drilling and 16 sets of continuous chip samples from
		underground cross-cuts through mineralisation. All Bass Metals Ltd holes were diamond-drilled
		and NTW, NQ or LTK60-sized core recovered (diameters of 56mm, 47.6mm or 45.2mm
Drilling		respectively). Historic 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 drilling with close to 100% recovery in the ore zones. Similar high
		recoveries were achieved by historic drilling. The bulk of the Fossey resource is now drilled out
		on nominal 12.5m spacing – north of 10225N remains to be completed. Surface drilling is on E-
		W sections and underground holes are drilled as skewed fans from three underground sites.

Fossey Resource and Reserve Estimate	Fossey Resource and Reserve 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	The 2009 resource estimate was based on 25m spaced drilling from surface (27 Bass Metals and 14 historic holes in mineralisation). The current resource estimate includes an additional 42 intersections from infill underground drilling and 16 sets of continuous chip samples from underground cross-cuts through mineralisation. All Bass Metals Ltd holes were diamond-drilled and NTW, NQ or LTK60-sized core recovered (diameters of 56mm, 47.6mm or 45.2mm respectively). Historic 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 drilling with close to 100% recovery in the ore zones. Similar high recoveries were achieved by historic drilling. The bulk of the Fossey resource is now drilled out on nominal 12.5m spacing – north of 10225N remains to be completed. Surface drilling is on E- W sections and underground holes are drilled as skewed fans from three underground sites.
Logging	All drill holes have been geologically logged using standard Que-Hellyer logging codes. Wet and dry digital photographs of all Bass Metals 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 onslidefilm were taken.
Sampling	For both Bass Metals and historic drilling half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extended into barren host rocks or sub-grade mineralisation inboththehangingwallandfootwall.
Assaying	Half core samples were submitted for assay, with SG determination conducted by the laboratory on each assay sample. For the current infill drilling program, samples were submitted to ALS Laboratories in Burnie, Tasmania. Samples were analysed for Cu, Pb, Zn, As, Fe, Ba, S and Si (glass fusion XRF), Ag (AAS), Au (fire assay). For the 2007-2009 surface drilling programs samples were assayed for Cu, Pb, Zn, Ag, As and Fe, using a modified aqua regia digest followed by ICP, at Amdel laboratories in Adelaide, South Australia. Au and Ba were assayed at Ammtec (now ALS) laboratories in Burnie, using fire assay and pressed powder XRF respectively. QA-QC involved standards, blanks and duplicates (one of each every 25 samples). Historic assays were carried out on half core at Aberfoyle’s company laboratory (now the ALS 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	Historic drill-hole collar locations were measured by the Hellyer Mine surveyor, Bass surface drill-holes by a contract surveyor and Fossey underground holes by the Fossey Mine surveyor.
Database integrity	The drill-hole database used comprises Bass Metals 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 these were within acceptable limits.
Geological Interpretation	The Fossey deposit strikes grid NNW and has the broad cross sectional form of a folded 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. • _BMS Zone -_Underlying the massive barite zone is banded to massive BMS. The boundary of the footwall of the BMS is a sharp contact. The internal boundary between the BMS and Barite zones is usually a sharp mappable contact but occasionally is a gradational grade boundary. • _Footwall Zone -_Commonly underlying the BMS is low to moderate grade base metal mineralisation as disseminations to stringer veins up to several 10s of centimetres thick.
Estimation and modelling techniques	Elements were estimated using ordinary kriging, restricted to mineralisation domain boundaries. Variography of all elements was studied and grade continuity modelled.
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 can be gradational and a boundary of 5% (Pb+Zn) was chosen as the best grade which provided good continuity between holes and from section to section. Immediately underlying the BMS zone holes usually contain stringer vein and / or disseminated to semi-massive mineralisation. This domain was wireframed at a cutoff of 5%

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

	(Pb+Zn).
Previous Mining	Mining of the Fossey deposit began in December 2010 with development ore being sourced from the 465 level. Longhole open stoping production commenced in March 2011. To 30 June 2011 a total of 158KT of ore has been hauled to the Hellyer Mill ROM grading 0.2% Cu, 3.6% Pb, 6.6%Zn,1.7g/tAu and 95g/tAg.
Mining factors assumptions	Some dilution (<5.0% Pb+Zn) is internal to the ore body and falls within the coherent stope shapes; this is classified as planned dilution. This material is predominantly found between the two main zones of BMS lenses. A portion of planned dilution is also from outside of the Fossey BMS and Stringer Zones where in the lower levels of the mine, stope geometries require some dilution to commence stope blasting. Planned dilution amounts to some 40K tonne, or some 8% of the total reserve tonnage. In general, the unplanned dilution has been included where pillar widths between the two high grade BMS lenses, between the 445 and 495 levels , are too narrow to retain or are required to be extracted to allow for upper level ore extraction. The average grade of this material has been calculated using the data from the geological block model. For the primary and secondary 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) Dilution grade has been assigned a zero grade across all stopes, both primary and secondary. Initial CMS surveys of the 465 level stopes indicate no dilution is occurring. Most dilution is anticipated form the eastern and western contacts in the primary stopes driven by orebody contact structures and rock type changes. Secondary stope dilution will be waste rock or CAF. The total unplanned waste rock dilution which is contained within the stope reserve amounts to approximately 40K tonnes at 0.04% Cu, 0.49% Pb, 0.99% Zn, 9.2g/t Ag and 0.41g/t Au at an average density of 3.0. 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 90% of the diluted resource volumes as both the primary and secondary stopes are expected to be stable. The net result is an overall dilution (stope, pillars and development) of approximately 10% waste for an estimated recovery of 90%. The resource base underpinning the reserve estimate contains some 6.4% by mass (43k 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 production schedule as a Mining Inventory, but is excluded from the Mineral Reserve Estimate (Table 1).
Metallurgical factors	No assumptions have been made about metallurgical treatment.
Bulk density	Where no bulk density measurement was available (414 of 3386 assay samples in the mineralised zones, mostly continuous chip samples) regression equations were developed to estimate bulk density from assay values. Bulk density was interpolated for each block.
Classification	Classification of resources and reserves was undertaken by taking into account data integrity, grade continuity, estimation variance, geologicalconfidence and drill hole spacing.
Audits or reviews	Resource estimate was reviewed byresource consultant specialists, Snowden Group.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Fossey East Resource Estimate.	Fossey East Resource Estimate.
Criteria	Comments
Geological Setting	Fossey East is a Volcanic Hosted Massive Sulphide deposit comprising a zone of dominantly baritic mineralisation, associated with areas of high-grade Base Metal Sulphide (BMS) and underlain by minorstringerand disseminatedmineralisation.
Tenement and land status	Fossey East occurs within Hellyer Mining Lease CML103M/87 and is wholly owned by Bass Metals Ltd.
Drilling	All Bass Metals’ holes were diamond-drilled and NQ or LTK60 - sized core recovered (47.6mm and 45.2mm diameter respectively). >90% core recovery, averaged over the entire hole, was achieved during drilling with close to 100% recovery in the ore zones. The Fossey East resource has been drilled on approximately 25m spaced centres from surface and underground drill sites.
Logging	All drill holes have been geologically logged using standard Que-Hellyer logging codes. Wet and dry digital photographs of all core were taken and RQD measurements were recorded at per drill-run intervals (average of 3.0m).
Sampling	Half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extended into barren host rocks or sub-grade mineralisation in both the hangingwall and footwall.
Assaying	Half core samples were submitted to ALS Minerals Laboratory 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). Check assay samples of most mineralised zone pulps were submitted 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.
Surveying	All drill-hole collar locations have been measured bya contract surveyor.
Database integrity	The drill-hole database used comprises Bass Metals drilling data recorded on Excel spreadsheet and historical data in ASCII format, both stored in an Access database and imported into Datamine software. New assay results together with standard and blank results were checked to ensure these were within acceptable limits.
Geological Interpretation	Fossey East mineralisation occurs as a roughly tabular lens striking grid north and dipping steeply east. At the southern end massive barite joins and continues down-dip from the Fossey deposit but to the north it diverges and occurs east and below the main Fossey body. At its’ northern end current modelling terminates the thickest and highest grades on the Easy St. Fault and to the south and at depth lenses out the mineralisation. As at Fossey the deposit comprises three main styles of mineralisation: • _Massive Barite -_The bulk of the deposit comprises massive barite, but barite also occurs as gangue associated with BMS mineralisation. • _BMS –_Associated with massive barite is banded to massive BMS. Internal boundaries between BMS and barite dominant mineralisation are gradational to sharp. Where drill spacing is closest, correlation of high grade zones appears feasible and this is expected to improve as infill drilling is carried out. • _Stringer Mineralisation -_Commonly “underlying” the BMS is low to moderate grade base metal mineralisation as disseminations to stringer veins up to several centimeters thick, often hosted byintensely chloritic alteration.
Estimation and modelling techniques	Due to the relatively low number of samples in the Fossey East zone, grade was interpolated into the mineralised domains using 3D inverse distance interpolation (power 2).
Cut-off parameters.	The outer boundary of the Fossey East Barite ± BMS zone is based on sharp geological contacts and was modelled as a single domain. Immediately underlying the Barite ± BMS zone (west) most holes contain stringer vein and / or disseminated mineralisation. This domain was wireframed at a cutoff of 1% (Pb+Zn).
Previous Mining	No mininghasyet takenplace at FosseyEast.
Mining factors / assumptions.	No assumptions were made about mining factors.
Metallurgical factors	No assumptions have been made about metallurgical treatment.
Bulk density	Where no bulk density measurement was available (14 of 337 assay samples in the mineralised zone) regression equations developed to estimate bulk density from assay values were used. Bulk density was interpolated for each block.
Classification	Classification of resources was undertaken by taking into account data integrity, grade continuity, geological confidence and drill hole spacing.
Audits or reviews	None to date

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Hellyer Remnants 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 drillholes 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 drillholes and 251 channel samples were used in this resource estimate.
Logging	All drill holes used had been logged usingAberfoyle logcodes.
Sampling	Half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extends into barren or sub-grade mineralisation in both the hangingwall and footwall.
Assaying	No QAQC data was available, and sources suggest that no QAQC work was done apart from internal laboratory checks.
Surveying	All historic holes were surveyed byHellyer Mine surveyors.
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 that was passed to the client for comment before the resource estimation was made.
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. In all 36 separate wireframe solids were 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-calculatedfollowing estimation. Density,Au andAgwas 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 upona combinationofanominal 1% combinedPb +Zngrade andlogged geology.
Mining/ Metal	No assumptions were made about miningor 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 the modelled wireframe volume is 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 in situ 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 take into account the effect of pore 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 significantly to this process

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

Que River Pb-Zn Resource 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 breccia hosted to massive high-grade base metal sulphide mineralisation.
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’ 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 NTW and historic NQ and BQ diamond drilling on a 12.5m by 12.5m spaced pattern. Core recoveries again range from poor in weathered near surface rocks to almost 100% 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 Bass Metals’ 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 core photographs onslidefilm were takenonlyforsomeholes.
Sampling	Half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extendsinto barrenorsub-grademineralisation inboththehangingwallandfootwall.
Assaying	For Bass Metals 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 standardswere the only QA-QCfor historicholes.
Surveying	All Bass drill-hole collar locations have been measured by a contract surveyor and historic holes by QueRiver Mine surveyor.
Database integrity	The drill hole database used comprises historical data in ASCII format and Bass 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 these were within acceptable limits (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 mineralizedzone. InternalgeologicallyloggedhighgradeBaseMetalSulphide podswere alsowire

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

	framed. Resources were tallied using a block cut-off grade of 5% (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 1980s. Details on mined out areas were sourced from an end of mine life report and mine long projections.
Mining factors or assumptions.	No assumptions were made about mining or metallurgical factors for resources. 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 assumptions have been made about metallurgical treatment.
Bulk density	At Nico and QR32 Lenses some assays from early holes do not have density data. Using the available measured density data, a multiple linear regression was developed to estimate density for these 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.

Que River Copper 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.
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 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 spacing is approximately 10-20m along 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 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 onslidefilm were taken forall holes except themostrecent 34 holes.
Sampling	For Bass and historic drilling half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extended into barren or sub-grade mineralisation in both the hangingwallandfootwall.
Assaying	For Bass Metals 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 drill-hole collar locations have been measured by a contract surveyor and historic holes by QueRiver Mine surveyor.
Database integrity	The drill hole database used comprises historical data in ASCII format and Bass 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).
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). An anisotropic search radius was used for each block.
Cut-off	Historically a 5% (Pb+Zn) outline has been used at Que River to correlate mineralised intercepts.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

parameters.	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 stringer and disseminated Cu mineralisation extends into altered volcanics.
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 S Lens.
Mining / Metal assumptions.	No assumptions were made about mining or metallurgical factors for resources. For S Lens 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 been subject to mine design procedures;
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 and Zn grades.
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.

Hellyer Tails 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. The deposit was mined from 1985 to 2000 with production of 16.9 Mt @ 0.4% Cu, 7.2% Pb, 13.8 % Zn, 167 g/t Ag and 2.5 g/t Au. The Hellyer Tails Mineral Resource estimate relates to the tailings from thisproduction.
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, allowing for depletion of tailing for reprocessing since 2005.
Tenement and land status	Hellyer occurs within CML 103M and is 100% owned by Hellyer Mill Operations a wholly owned subsidiary of BassMetalsLtd.
Drilling	Total hole drill samples were collected in June 1998 (61 holes) and July 2000 (53 holes) programmes. Vibracore drilling techniques were used.
Logging	No geological logging of the drill cuttings was undertaken. This is understandable given the type of material in the deposit.
Sampling	Samples were collected at 2 metre intervals in the 1998 programme and 6.5 metre intervals in the 2000 programme. Drillholes were composited to one sample downhole for 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 Ag were determined using XRD determination. Only minor QA-QC was completed.
Database integrity	Routine validation was carried out by AMC.
Estimation and modelling techniques	A block model of the tailings was developed using pre-deposition (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 Arm areas (retreated tailings) were calculated by metallurgicalbalance.
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,76.83 g/tAg and2.28 g/tAu.
Mining / metal assumptions.	No assumptions were made about mining or metallurgical factors
Bulk density	A bulk density of 1.93 tm~~-3~~was assigned to in situ tailings. Tailings that had been retreated were assigned a bulk density of 1.64 tm-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 tailingshaveinundated a shallowcreekand tailingsintheWestern Armdamand ShalePit.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

2. REVIEW OF OPERATIONS (continued)

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.
Drilling	All Bass Metals’ 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 50m along 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 core were systematically takenandRQD measurementswererecorded 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 (every 25 samples) and a selection of samples were analysed by Genalysis (Perth)forcomparison.
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-off parameters.	A cut-off grade of 0.7 g/t Au was 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 5 m by 10 m by 5 m.
Metallurgical factors	No assumptions have been made about metallurgical treatment.
Bulk density	Average bulk density values for stratigraphic domains calculated and applied to estimated blocks.
Classification	Snowden and Bass Metals have completed classification by taking into account data integrity, grade continuity, geologicalconfidence and drill hole spacing.
Audits or reviews	No audits or reviews have been completed.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT

The Directors of Bass Metals Ltd present their report together with the financial statements of the consolidated entity, being Bass Metals Ltd (“Bass Metals” or “Company”) and its controlled entity (“Group”) for the year ended 30 June 2011 and the independent audit report thereon.

Directors

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

Mr David Donald Boyer – Independent Non-executive Chairman BSc (Hons), FAIMM (CP), 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.

Previous directorships (last 3 years):

Midas Resources Ltd – Resigned 23 June 2011

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’ 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 Metals 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.

Previous directorships (last 3 years):

No other directorships have been held during this period.

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

Mr McGown has more than 38 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 Ltd as an Executive Director and as the Executive Chairman of DJ Carmichael Pty Ltd.

Other Current Directorships:

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

Previous Directorships (Last Three Years):

Entek Energy Ltd – Resigned 28 February 2011

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

Mr Patrick Anthony Treasure – Non-executive Director BSc (Hons), MAIMM, 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. Mr Treasure has extensive experience in corporate management, technology development, project evaluation and development.

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

Other Current Directorships:

Mr Treasure is Managing Director of Metals Finance Ltd, a Company of which he was a founding director and primary architect of its business plan.

Previous directorships (last 3 years):

No other directorships have been held during this period.

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

Ms Hunter has nearly 20 years’ experience in the corporate finance industry.

Susan is founder and Managing Director of consulting firm Hunter Corporate Pty Ltd, which specialises in the provision of corporate governance and company secretarial advice to ASX listed entities.

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.

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 other 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 Year

The loss from ordinary activities after income tax expense for the Group was $13,786,165 (2010: $406,034).

Following operational issues late in the financial year, the Directors initiated an extensive review of the Company’s operations, and commenced a fundraising process. Refer to the Events Subsequent to Reporting Date on page 35 of the Directors’ Report for further information.

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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

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 business objectives.

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 $85,000 per annum for the Chairman and $60,000 per annum for Non-executive Directors, inclusive of statutory superannuation contributions effective 1 April 2011. Shareholders approved on 30 November 2010 the aggregate remuneration for all Non-executive Directors at an amount of $350,000 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 Employee Share Loan Scheme and the Bass Metals Ltd Employee Performance Incentive Plan which were both approved by Shareholders at the 2010 Annual General Meeting held on 30 November 2010. Any issue of shares to Directors under the Bass Metals Ltd Employee Share Loan Scheme or options or performance rights under the Bass Metals Ltd Employee Performance Incentive 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 Employee Share Loan Scheme and the Bass Metals Ltd Employee Performance Incentive 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3.DIRECTORS’ REPORT (continued)

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 executive 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 Employee Share Loan Scheme

Information on the Bass Metals Ltd Employee Share Loan Scheme is set out in Note 28.

Bass Metals Ltd Employee Performance Incentive Plan

Information on the Bass Metals Ltd Employee Performance Incentive Plan is set out in Note 28.

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 year the Managing Director was issued with shares and executives of the Company 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 for 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 2011

==> picture [102 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

Compensation of Key Management Personnel for the year ended 30 June 2011

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.

						Short-term	Short-	Post-	Non cash	Term-	Share-based	Total remunera-	Total	Total
						benefits	term	Employ-	benefits	ination	payments	tion represented	remunera-
						(salary and	benefits	ment		benefits	(shares/	by performance	tion repre-
						leave)	(perfor-	benefits			options)	bonus	sented by
							mance	(super-					shares/
							bonus)	annuation)					options
						$	$	$	$	$	$	%	%	$
Executive
Director
Mr M Rosenstreich 1					2011	384,801	50,000	15,199	-	-	144,131	8.4	24.2	594,131
					2010	335,539	50,000	14,461	1,590	-	124,500	9.5	23.7	526,090
Non-Executive Directors
Mr D Boyer	2				2011	77,500	-	-	-	-	-	-	-	77,500
					2010	75,000	-	-	-	-	40,500	-	35.1	115,500
Mr C McGown			3		2011	60,000	-	-	-	-	-	-	-	60,000
					2010	57,500	-	-	-	-	33,750	-	37.0	91,250
Mr P Treasure				4	2011	52,500	-	-	-	-	-	-	-	52,500
					2010	50,000	-	-	-	-	33,750	-	40.3	83,750
Total
Directors					2011	574,801	50,000	15,199	1,590	-	144,131	6.4	18.4	784,131
					2010	518,039	50,000	14,461	1,590	-	232,500	6.1	28.5	816,590
Company Executives
Ms S Hunter		5			2011	84,884	-	-	-	-	5,466	-	6.0	90,350
					2010	99,001	-	-	-	-	20,250	-	-	119,251
Mr K Denwer					2011	170,000	10,000	15,199	-	-	25,628	4.5	11.6	220,827
					2010	152,636	8,000	11,744	2,747	-	49,025	3.6	21.9	224,152
Mr B Burdett					2011	265,000	15,000	15,199	-	-	137,157	3.5	31.7	432,356
					2010	167,026	-	9,641	2,620	-	29,000	-	13.9	208,287
Mr V Rajasooriar 6					2011	181,090	15,000	11,010	-	-	74,820	5.3	26.5	281,920
					2010	-	-	-	-	-	-	-	-	-
Mr B Hamilton 7					2011	249,850	20,000	12,666	-	-	69,693	5.7	19.8	352,209
					2010	213,309	-	11,393	512	-	23,000	-	9.3	248,214
Mr L Henley 8					2011	-	-	-	-	-	-	-	-	-
					2010	124,154	12,000	11,318	546	46,631	-	6.2	-	194,649
Total
Company Executives					2011	950,824	60,000	54,074	-	-	312,764	4.4	22.7	1,377,662
					2010	756,126	20,000	44,096	6,425	46,631	121,275	2.0	12.2	994,553

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

Note 1: Included in 2011 short-term benefits are bonuses paid during the year of $50,000 (2010: $50,000) 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 2011 $77,500 (2010: $75,000) of Mr Boyer's short term benefits were paid to Boyer Exploration and Resource Management Pty Ltd of which Mr Boyer is a Director and employee.

Note 3: During 2011 $60,000 (2010: $20,000) 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. During 2011 nil, (2010: $37,500) 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.

Note 4: During 2011 $52,500 (2010: $50,000) of Mr P Treasure’s short-term benefits were paid to Metals Finance Ltd of which Mr P Treasure is a Director and employee.

Note 5: During the year Ms Hunter’s short-term benefits of $84,884 (2010: $33,440) were paid to Hunter Corporate Pty Ltd of which Ms Hunter is the Managing Director and employee. During the year Ms Hunter’s short term benefits of nil (2010: $65,561) were paid to Norvest Corporate Pty Ltd. Ms Hunter was an associate of Norvest Corporate Pty Ltd but resigned from Norvest Corporate Pty Ltd in November 2009.

Note 6: Mr V Rajasooriar commenced employment as Bass Metals’ Chief Operating Officer on 11 October 2010.

Note 7: Mr B Hamilton’s short-term benefits were paid until his resignation on 16 April 2011.

Note 8: Mr L Henley resigned on 9 April 2010.

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: Related Party Disclosures 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 28. The value disclosed above is a portion of the fair value of the options allocated to this reporting period.

Employment Contracts

The Managing Director, Mr M Rosenstreich, is retained via an employment contract dated 3 August 2011 and is valid to 30 June 2014. This agreement provides for a total package amount inclusive of prescribed superannuation and for participation in the Company’s Employee Share Loan Scheme and Employee Performance Incentive Plan. The cash remuneration inclusive of superannuation paid under the agreement from 1 July 2011 is $400,000 base salary and is subject to review (which includes setting short term incentive milestones) prior to 31 December 2011 and on 30 June thereafter to 30 June 2014.

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 2011

==> picture [101 x 37] intentionally omitted <==

3. 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.

	Vested	Granted	Grant date	Value per	Exercise	First	Last
	number	number		option at	price	exercise	exercise
				grant date		date	date
Executive Director
Mr M Rosenstreich	850,000	850,000	22/12/2006	22.3 cents	27.5 cents	22/12/2006	22/12/2011
Mr M Rosenstreich	300,000	300,000	7/12/2009	14.3 cents	26.0 cents	7/12/2009	31/12/2012
Mr M Rosenstreich	300,000	300,000	7/12/2009	13.8 cents	28.5 cents	31/12/2010	31/12/2012
Mr M Rosenstreich	-	300,000	7/12/2009	13.4 cents	30.5 cents	31/12/2011	31/12/2012
Non-Executive Directors
Mr D Boyer	300,000	300,000	22/12/2006	22.3 cents	27.5 cents	22/12/2006	22/12/2011
Mr D Boyer	300,000	300,000	7/12/2009	13.5 cents	30.0 cents	7/12/2009	31/12/2012
Mr C McGown	225,000	225,000	22/12/2006	22.3 cents	27.5 cents	22/12/2006	22/12/2011
Mr C McGown	250,000	250,000	7/12/2009	13.5 cents	30.0 cents	7/12/2009	31/12/2012
Mr P Treasure	250,000	250,000	7/12/2009	13.5 cents	30.0 cents	7/12/2009	31/12/2012
Company Executives
Ms S Hunter	125,000	125,000	31/12/2006	18.4 cents	37.5 cents	31/12/2007	31/12/2011
Ms S Hunter	100,000	100,000	31/12/2007	16.9 cents	51.0 cents	31/12/2008	31/12/2012
Ms S Hunter	150,000	150,000	7/12/2009	13.5 cents	30.0 cents	7/12/2009	31/12/2012
Ms S Hunter	-	80,000	5/7/2010	6.83 cents	22.0 cents	5/7/2011	5/7/2013
Mr L Henley	100,000	100,000	31/12/2007	16.9 cents	51.0 cents	31/12/2008	31/12/2012
Mr L Henley	125,000	125,000	18/4/2008	9.6 cents	37.5 cents	18/4/2008	2/11/2011
Mr L Henley Mr L Henley1	125,000 -	125,000 100,000	1/5/2009 16/10/2009	4.2 cents 16.8 cents	37.5 cents 42.5 cents	1/5/2009 16/10/2010	2/11/2011 16/10/2012
Mr K Denwer	130,000	130,000	16/10/2009	16.8 cents	42.5 cents	16/10/2010	16/10/2012
Mr K Denwer	100,000	100,000	27/10/2009	18.6 cents	25.0 cents	1/9/2009	1/9/2013
Mr K Denwer	100,000	100,000	27/10/2009	16.3 cents	35.0 cents	1/9/2009	1/9/2013
Mr K Denwer	-	100,000	5/7/2010	6.8 cents	22.0 cents	5/7/2011	5/7/2013
Mr K Denwer	100,000	100,000	1/9/2010	4.8 cents	35.0 cents	1/9/2010	1/9/2013
Mr K Denwer	100,000	100,000	1/9/2010	6.2 cents	25.0 cents	1/9/2009	1/9/2013
Mr V Rajasooriar	-	100,000	11/10/2010	17.4 cents	20.5 cents	11/10/2011	11/10/2014
Mr V Rajasooriar	-	100,000	11/10/2010	17.4 cents	20.5 cents	11/10/2012	11/10/2014
Mr V Rajasooriar	-	100,000	11/10/2011	15.1 cents	29.0 cents	11/10/2011	11/10/2014
Mr V Rajasooriar	-	100,000	11/10/2011	15.1 cents	29.0 cents	11/10/2012	11/10/2014
Mr V Rajasooriar	-	100,000	11/10/2011	12.8 cents	41.0 cents	11/10/2011	11/10/2014
Mr V Rajasooriar	-	100,000	11/10/2011	12.8 cents	41.0 cents	11/10/2012	11/10/2014
Mr B Burdett	100,000	100,000	2/11/2009	24.4 cents	25.0 cents	2/11/2009	1/9/2013
Mr B Burdett	-	100,000	2/11/2009	24.4 cents	25.0 cents	17/9/2011	1/9/2013
Mr B Burdett	100,000	100,000	2/11/2009	23.0 cents	35.0 cents	2/11/2009	1/9/2013
Mr B Burdett	-	100,000	2/11/2009	23.0 cents	35.0 cents	17/9/2011	1/9/2013
Mr B Burdett	100,000	100,000	2/11/2009	21.7 cents	50.0 cents	2/11/2009	1/9/2013
Mr B Burdett	-	100,000	2/11/2009	21.7 cents	50.0 cents	17/9/2011	1/9/2013
Mr B Burdett	-	100,000	5/7/2010	6.8 cents	22.0 cents	5/7/2011	5/7/2013
Mr B Hamilton	100,000	100,000	17/9/2009	2.5 cents	25.0 cents	17/9/2009	1/9/2013
Mr B Hamilton2	-	100,000	17/9/2009	2.5 cents	25.0 cents	17/9/2011	1/9/2013
Mr B Hamilton	100,000	100,000	17/9/2009	2.3 cents	35.0 cents	17/9/2009	1/9/2013
Mr B Hamilton2	-	100,000	17/9/2009	2.3 cents	35.0 cents	17/9/2011	1/9/2013
Mr B Hamilton	100,000	100,000	17/9/2009	2.2 cents	50.0 cents	17/9/2009	1/9/2013
Mr B Hamilton2	-	100,000	17/9/2009	2.2 cents	50.0 cents	17/9/2011	1/9/2013
Mr B Hamilton2		100,000	5/7/2010	6.8 cents	22.0 cents	5/7/2011	5/7/2013

Note 1: Mr L Henley’s interest lapsed when he resigned on 9 April 2010.

Note 2: Mr B Hamilton’s interests lapsed when he resigned on 16 April 2011.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

None of the above 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 Date of expiry Exercise price	Number under option
22 December 2006 22 December 2011 27.5 cents 31 December 2006 31 December 2011 37.5 cents 31 December 2007 31 December 2012 51.0 cents 18 April 2008 2 November 2011 37.5 cents 1 May 2009 2 November 2011 37.5 cents 1 September 2009 1 September 2013 25.0 cents 1 September 2009 1 September 2013 35.0 cents 17 September 2009 1 September 2013 25.0 cents 17 September 2009 1 September 2013 35.0 cents 17 September 2009 1 September 2013 35.0 cents 16 October 2009 16 October 2012 42.5 cents 2 November 2009 1 September 2013 25.0 cents 2 November 2009 1 September 2013 35.0 cents 2 November 2009 1 September 2013 50.0 cents 7 December 2009 31 December 2012 30.0 cents 7 December 2009 31 December 2012 26.0 cents 7 December 2009 31 December 2012 28.5 cents 7 December 2009 31 December 2012 30.5 cents 5 July 2010 5 July 2013 22.0 cents 22 September 2010 22 September 2013 22.8 cents 11 September 2010 1 September 2013 25.0 cents 11 October 2010 11 October 2014 20.5 cents 11 October 2010 11 October 2014 29.0 cents 11 October 2010 11 October 2014 41.0 cents 31 January 2011 31 January 2015 43.5 cents 31 January 2011 31 January 2015 61.0 cents 31 January 2011 31 January 2015 88.0 cents 20 May 2011 27 May 2014 31.8 cents 27 August 2011 27 August 2015 26 cents 27 August 2011 27 August 2015 36.5 cents 27 August 2011 27 August 2015 52.5 cents 30 September 2011 30 September 2014 22 cents	1,375,000 225,000 425,000 125,000 125,000 100,000 100,000 100,000 100,000 100,000 1,055,000 100,000 100,000 200,000 950,000 300,000 300,000 300,000 1,090,000 3,000,000 100,000 200,000 200,000 200,000 150,000 150,000 150,000 5,900,000 200,000 200,000 200,000 28,666,667
	46,486,6671

Grant Date
Date of expiry
Exercise price

Number under
**option **

22 December 2006
22 December 2011
27.5 cents
31 December 2006
31 December 2011
37.5 cents
31 December 2007
31 December 2012
51.0 cents
18 April 2008
2 November 2011
37.5 cents
1 May 2009
2 November 2011
37.5 cents
1 September 2009
1 September 2013
25.0 cents
1 September 2009
1 September 2013
35.0 cents
17 September 2009
1 September 2013
25.0 cents
17 September 2009
1 September 2013
35.0 cents
17 September 2009
1 September 2013
35.0 cents
16 October 2009
16 October 2012
42.5 cents
2 November 2009
1 September 2013
25.0 cents
2 November 2009
1 September 2013
35.0 cents
2 November 2009
1 September 2013
50.0 cents
7 December 2009
31 December 2012
30.0 cents
7 December 2009
31 December 2012
26.0 cents
7 December 2009
31 December 2012
28.5 cents
7 December 2009
31 December 2012
30.5 cents
5 July 2010
5 July 2013
22.0 cents
22 September 2010
22 September 2013
22.8 cents
11 September 2010
1 September 2013
25.0 cents
11 October 2010
11 October 2014
20.5 cents
11 October 2010
11 October 2014
29.0 cents
11 October 2010
11 October 2014
41.0 cents
31 January 2011
31 January 2015
43.5 cents
31 January 2011
31 January 2015
61.0 cents
31 January 2011
31 January 2015
88.0 cents
20 May 2011
27 May 2014
31.8 cents
27 August 2011
27 August 2015
26 cents
27 August 2011
27 August 2015
36.5 cents
27 August 2011
27 August 2015
52.5 cents
30 September 2011
30 September 2014
22 cents

1,375,000
225,000
425,000
125,000
125,000
100,000
100,000
100,000
100,000
100,000
1,055,000
100,000
100,000
200,000
950,000
300,000
300,000
300,000
1,090,000
3,000,000
100,000
200,000
200,000
200,000
150,000
150,000
150,000
5,900,000
200,000
200,000
200,000
28,666,667

46,486,6671

Note 1: Subsequent to 30 June 2011, 28,666,667 options were issued to Convertible and Loan Note holders as approved by shareholders at a general meeting held on 26 September 2011; 600,000 options were issued to an employee subject to the terms and conditions of the Bass Metals Ltd Employee Performance Incentive Plan; and 390,000 employee options lapsed pursuant to the terms and conditions of the Bass Metals Ltd Employee Performance Incentive Plan.

Convertible Notes

At the date of this report the Company has 3.3 million convertible notes on issue which are convertible into ordinary shares at a conversion price of $0.15 per share and expire on 8 August 2014 with interest payable at 11% per annum. These convertible notes were issued on 8 August 2011 subsequent to reporting date.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. 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 Treasure1	Ordinary Shares Options Direct Indirect Direct Indirect
	3,072,224 216,779 2,266,667 - 1,887,307 - 1,750,000 - 18,337 3,300,676 - 2,141,667 - 29,746,778 - 3,583,333

Note 1: These Shares and Options are held by Metals Finance Ltd, major shareholder of the Company. Mr Treasure, Non-Executive Director of Bass Metals, is the Managing Director and a shareholder in Metals Finance Ltd and the Metals Finance Ltd nominee on the Board of Bass Metals.

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 completed open pit mining operations at Que River and 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.

During the year the Group completed the refurbishment of the Hellyer Mill and commenced concentrate production. Extraction of ore at the Fossey deposit for processing at the Hellyer Mill began mining and mine development continues.

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 and concentrate production activities;
Maintain a strategic land position in Tasmania incorporating a full spectrum of targets from advanced prospects to conceptual large scale anomalies; and
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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

Meetings of Directors

The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2011 and the number of meetings attended by each Director.

Director	Directors’	Meetings	Audit	Committee	Remuneration	Remuneration		Hedge
					Committee		Committee
	A	B	A	B	A	B	A	B
Mr D Boyer	11	10	3	2	1	1	-	-
Mr M Rosenstreich	11	11	-	-	-	-	2	2
Mr C McGown	11	10	3	3	1	1	2	2
Mr P Treasure	11	9	3	2	1	1	-	-

A: Number of meetings entitled to attend B: Number of meetings attended

The full Board met as the Nomination Committee on an as required basis during the year ended 30 June 2011. The Board formed a separate Remuneration Committee on 10 November 2010 comprising the three non-executive Directors, Mr McGown (Chairman of the Committee), Mr Boyer and Mr Treasure. The full Board met as the Remuneration Committee prior to this date on an as required basis. 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, former Chief Financial Officer, also attended all the Hedge Committee meetings.

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

Fundraising

Following an ASX announcement on 7 June 2011 advising of the Group’s operational issues, the Directors initiated an extensive review of the Company’s operations. On 11 July 2011 the Company announced to ASX its objective to raise $25 million in a staged process to recapitalise itself.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

On 8 August 2011, the Company announced to ASX it had raised a total of $4.3 million (before costs) in its first tranche of fundraising through the issue of 3.3 million Convertible Notes and $1 million of Loan Notes on arm’s length terms from Director-related entities. Each Convertible Note and Loan Note has a face value of $1.00, a conversion price of $0.15 per share and a free attaching option exercisable at $0.20 each expiring three years from the date of issue. The 3.3 million Convertible Note issue was completed under the Company’s available 15% capacity to professional and sophisticated investors with the attached options being subject to shareholder approval. The Loan Notes were convertible into ordinary shares, at $0.15 per share, subject to shareholder approval with the attached options also being subject to shareholder approval. At a general meeting of shareholders held on 26 September 2011, shareholders approved the issue of 22 million options to the Convertible Note holders, the conversion of the Loan Notes at $0.15 per share and the issue of a total of 6,666,667 options to Director-related entities. The issue of the 22 million options to the Convertible Note Holders, the conversion of the Loan Notes and the issue of a total of 6,666,667 options to Director-related entities occurred on 30 September 2011.

On 12 September 2011, the Company announced to ASX details of a $13 million extension to its existing project financing arrangements with RMB Australia Holdings Ltd. The increase in the facility is conditional on standard conditions precedent, such as completion of documentation and includes a requirement for the Company to raise a minimum of $8 million in new equity prior to 31 October 2011 and the issue to RMB Australia Holdings Ltd of up to a total of 86.7 million options (“Lender Options”) which shall be subject to shareholder approval. On 27 September 2011, the Company sent a Notice of General Meeting to shareholders for the approval of issue of these Lender Options at a general meeting of shareholders to be held on 31 October 2011. On 30 September 2011 the Company drew $9 million of the $13 million RMB Australia Holdings Ltd project finance facility extension.

On 15 September 2011, the Company announced to ASX it had lodged a prospectus with ASIC to raise a minimum of $8 million (before costs) and, if fully subscribed, a maximum of $10.7 million (before costs) through a nonrenounceable entitlements offer to subscribe for one new share plus one free attaching new option for every three existing shares held at the record date of 5.00pm (Perth time) on 23 September 2011 (“Offer”). The price for each new share is $0.15 and the free attaching new option, which is planned to be listed on ASX, will have an exercise price of $0.20 each and will expire on 30 September 2014. The Offer opened on 29 September 2011 and is scheduled to close on 18 October 2011.

Refer to Note 1(s) for further details.

Issue of Shares and Options to Directors

The issue of shares on conversion of the Loan Notes and the issue of 6,666,667 options to Director-related entities occurred on 30 September 2011 following approval received at a general meeting held on 26 September 2011. The following table summarises the number of ordinary shares and options issued to Director-related entities on 30 September 2011:

Director	Number of Ordinary shares Number of Options
Mr D Boyer Mr C McGown Mr P Treasure	1,666,667 1,666,667 1,666,667 1,666,667 3,333,333 3,333,333
	6,666,667 6,666,667

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

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 APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

3. DIRECTORS’ REPORT (continued)

The following fees were paid/payable to Grant Thornton for non-audit services provided during the year ended 30 June 2011:

Amounts received or due and receivable by Grant Thornton for: Consulting - Taxation services	2011 $ 30,349
	30,349

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 2011. 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.

Signed in accordance with a resolution of Directors.

==> picture [108 x 59] intentionally omitted <==

M Rosenstreich Managing Director

West Perth, Western Australia 30 September 2011

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Note Continuing Operations Sales revenue 2 Cost of sales 3 Gross profit/(loss) Net gain on acquisition of Hellyer operating infrastructure & mining lease 2 Other income 2 Other expenses 3 Share-based payments 3 Finance costs 3 Loss before income tax Income tax benefit 4 Loss after income tax for the year Cash flow hedge taken to equity Other comprehensive income for the year, net of income tax Total comprehensive loss for the year Loss attributed to: Members of the parent entity Total comprehensive loss attributed to: Members of the parent entity Basic earnings (loss) per share (cents) 5 Diluted earnings (loss)per share (cents) 5	Consolidated 2011 $ 2010 $ 22,530,518 18,193,121 (28,863,442) (14,060,325)
	(6,332,924) 4,132,796 - 1,249,853 538,954 1,045,400 (6,652,592) (6,932,354) (461,682) (372,847) (2,179,981) (79,890)
	(15,088,225) (957,042) 1,302,060 551,008
	(13,786,165) (406,034)
	(1,204,315) -
	(1,204,315) -
	(14,990,480) (406,034)
	(13,786,165) (406,034)
	(14,990,480) (406,034)
	(7.49) (0.30) (7.49) (0.30)

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

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 7 Inventories 8 Derivative financial assets 19 Other assets 9 Total Current Assets NON-CURRENT ASSETS Trade and other receivables 7 Plant and equipment 10 Mine properties 11 Capitalised exploration and evaluation 13 Other financial assets 15 Deferred tax assets 21 Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 16 Borrowings 17 Derivative financial liabilities 18 Provisions 19 Contingent consideration 20 Total Current Liabilities NON-CURRENT LIABILITIES Borrowings 17 Provisions 19 Contingent consideration 20 Deferred tax liabilities 21 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 22 Reserves 23 Retained profits TOTAL EQUITY	Consolidated 2011 $ 2010 $ 6,355,450 9,471,543 2,862,577 4,719,522 5,333,510 527,048 - 148,370 217,404 61,976
	14,768,941 14,928,459
	2,836,683 2,765,392 30,008,117 26,656,530 32,165,670 17,756,958 16,910,948 13,564,128 720,251 179,277 11,641,495 5,444,367
	94,283,164 66,366,652
	109,052,105 81,295,111
	10,446,341 5,064,678 14,821,254 - 1,204,315 - 167,674 1,607,642 943,038 915,928
	27,582,622 7,588,248
	2,585,282 - 5,006,787 5,254,460 2,754,566 1,878,485 14,834,961 10,014,208
	25,181,596 17,147,153
	52,764,218 24,735,401
	56,287,887 56,559,710
	50,357,997 37,172,160 1,500,983 1,172,478 4,428,907 18,215,072
	56,287,887 56,559,710

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

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

Consolidated Balance at 1 July 2009 Total comprehensive loss for the year 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 Balance at 1 July 2010 Total comprehensive loss for the year 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 2011	Issued Capital Retained Profits/ (Accumulated Losses) Option Reserve Hedge Reserve Total Equity $ $ $ $ $ 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
	37,172,160 18,215,072 1,172,478 - 56,559,710
	- (13,786,165) - (1,204,315) (14,990,480) 13,825,000 - - - 13,825,000 (857,078) - - - (857,078) 74,315 - - - 74,315 143,600 - 1,532,820 - 1,676,420 13,185,837 - 1,532,820 - 14,718,657 13,185,837 (13,786,165) 1,532,820 (1,204,315) (271,823)
	50,357,997 4,428,907 2,705,298 (1,204,315) 56,287,887

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

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011

Note Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Receipts of security deposits Interest received Interest paid Net cash (used in)/provided by operating activities 26(a) Cash flows from investing activities Purchase of plant and equipment Payments for exploration and evaluation Payments for development of mineral properties Payments for Hellyer mining lease guarantee Payments for derivative financial instruments Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Borrowings (net of transaction costs) Repayment of borrowings Costs of share issues Net cash provided by 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 2011 $ 2010 $ 24,672,075 21,728,748 (28 287,327) (13,556,013) 18,209 - 413,930 475,798 (954,856) (44,270)
	(4,137,969) 8,604,263 (4,057,760) (2,519,086) (3,346,822) (3,873,326) (22,404,053) (10,324,624) - (1,005,560) - (416,983)
	(29,808,635) (18,139,579) 13,968,600 15,331,015 20,118,987 - (2,400,000) (146,643) (857,078) (721,850)
	30,830,509 14,462,522 (3,116,093) 4,927,206 9,471,543 4,544,337
	6,355,450 9,471,543

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

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 (“AASB”) 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 35 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)/benefit for the year comprise current income tax (expense)/benefit and deferred tax (expense)/benefit.

Current income tax (expense) charged to the Statement of Comprehensive Income 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 2011

==> picture [101 x 37] intentionally omitted <==

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 rates 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.

Net realisable value tests are performed at least bi-annually and represent the estimated future sales price of the product based on prevailing spot metals prices at the reporting date, less estimated costs to complete production and bring the product to sale.

Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of metal tonnes based on assay data, and the estimated recovery percentage based on the expected processing method.

Stockpile tonnages are verified by periodic surveys.

(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 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Classification and Subsequent Measurement

Financial 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.

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 financial instruments and hedging

The Group uses Australian dollar commodity derivative financial instruments to hedge exchange rate and commodity price risks associated with US dollar commodity sales. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at each reporting date.

Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. The fair value of a derivative changes in response to changes in the underlying foreign exchange rate or commodity price; for example, increasing commodity prices will lower the fair value of the Group’s forward commodity contracts. Derivative assets and liabilities are classified as non-current when the remaining term to maturity is more than 12 months, or current when the remaining term to maturity is less than 12 months.

Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the year. For the purposes of hedge accounting, hedges are classified as:

1) Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (the Group does not currently have any fair value hedges);

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2) Cash flow hedges when they hedge the exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction (Bass Metals Ltd currently has cash flow hedges attributable to lead, silver and zinc forward contracts);
3) Hedges of a net investment in a foreign operation (the Group does not currently have any hedges of a net investment in a foreign operation).

The Group’s cash flow hedges meet the strict criteria for hedge accounting and are accounted for in accordance with AASB 139: Financial Instruments: Recognition and Measurement as summarised below.

The Group tests each of the designated cash flow hedges for effectiveness at each reporting date both retrospectively and prospectively by comparing the cash flow, or fair value for unrealised hedge movements, of the hedge and the hedged item. Where the difference between the two is within a range of 80% to 125%, the hedge is considered highly effective and continues to be designated as a cash flow hedge.

The effective portion of the gain or loss on the hedging instrument is recognised directly in equity while the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs.

If the forecast transaction is no longer expected to occur, the hedge would no longer be considered effective and amounts recognised in equity are transferred immediately to the statement of comprehensive income.

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.

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% Computer equipment: 33⅓% Exploration equipment: 20%

Ore processing equipment is depreciated on a units-of-production basis consistent with the equipments’ consumption pattern. 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, other than for ore processing equipment.

Leased assets utilised in ore processing are depreciated on a units of production basis consistent with the equipments’ consumption.

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.

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 includes any cost to dismantle and remove 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 Note 1(j) 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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 ordinary 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. The value so calculated of the options issued to employees is 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(ii) Concentrate Sales

Contract terms for the Group’s sale of metal concentrates allows for a price adjustment based on final assay results by the customer to determine the final metal contents. Recognition of sales revenue for these commodities is based on the most recently determined estimate of metal concentrates (based on initial assay results) and the spot price at the date of shipment, with a subsequent adjustment made upon final determination and presented as part of “Other Income”.

The terms of concentrate sales contracts with third parties contain provisional pricing arrangements whereby the selling price is based on prevailing spot prices on a specified future date after shipment to the customer (“quotation period”). Adjustments to the sales price occur based on movements in quoted market prices up to the date of final settlement. The period between provisional invoicing and final settlement can be between one and six months.

The provisionally priced sales of metal concentrates contain an embedded derivative, which is required to be separated from the host contract for accounting purposes. The host contract is the sale of metal concentrates and the embedded derivative is the forward contract for which the provisional sale is subsequently adjusted. Accordingly the embedded derivative, which does not qualify for hedge accounting, is recognised at fair value, with subsequent changes in the fair value recognised in profit or loss each period until final settlement, and presented as “Concentrate sales”. Changes in fair value over the quotation period and up until final settlement are estimated by reference to forward market prices.

(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.

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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

Impairment of Non-financial Assets other than Goodwill and Indefinite Life Intangibles

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. Refer to Note 11 for further details.

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

The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to inflation rates, and changes in discount rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. Changes to estimated future costs are recognised in the statement of financial position by either increasing or decreasing the rehabilitation liability and rehabilitation asset if the initial estimate was originally recognised as part of an asset measured in accordance with AASB 116: Property, Plant and Equipment . Any reduction in the rehabilitation liability and therefore any deduction from the rehabilitation asset may not exceed the carrying amount of that asset. If it does, any excess over the carrying value is taken immediately to profit or loss.

If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to the carrying value of the asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole and test for impairment in accordance with AASB 136: Impairment of Assets . If, for mature mines, the revised mine assets net of rehabilitation provisions exceeds the recoverable value, that portion of the increase is charged directly to expense. For closed sites, changes to estimated costs are recognised immediately in profit or loss. Also, rehabilitation obligations that arose as a result of the production phase of a mine, should be expensed as incurred.

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 the 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 2011

==> picture [101 x 37] intentionally omitted <==

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 non-strategic assets that have been abandoned or sold.

Units-of-production Amortisation and Depreciation

Estimated recoverable reserves are used in determining the depreciation and amortisation of mine specific assets. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Each item’s life, which is assessed annually, has regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure. Numerous units-of-production (UOP) depreciation methodologies are available to choose from. The Group adopts a Run-of-the-Mine (ROM) tonnes of ore produced methodology for mining costs and tonnes of metal produced methodology for post mining costs. Changes are accounted for prospectively.

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.

Judgment is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.

Long Service Leave Provision

As discussed at Note 1(m)(i), 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) Going Concern

The financial statements for the year ended 30 June 2011 have been prepared on the basis of going concern, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

During the year the consolidated entity incurred a loss after tax of $13,786,165 (2010: loss of $406,034). Net cash outflows from operations during the period were $4,137,969 (2010: net cash inflows of $8,604,263) and at reporting date current liabilities exceeded current assets by $12,813,681.

The Directors consider the basis of going concern to be appropriate for the following reasons:

1. Project

Following the operational issues experienced by the Company during May and June 2011 (announced to ASX on 7 June 2011), the Directors initiated an extensive review of the Company’s operations, including a revision of the Fossey mine plan. The revised plan allows for additional expenditure to be allocated to ground support and dewatering services, and assumes a less aggressive ore production rate. The Company had its revised mine plan reviewed and approved by a leading Australian mining consultancy.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2. Recapitalisation

On 11 July 2011 the Company announced its objective to raise $25 million in a three-stage process to recapitalise itself. The stages are:

(i) A “bridge” funding of at least $4 million;
(ii) A $13 million extension to its existing banking facilities; and
(iii) A minimum equity raising of $8 million.

The funds from the recapitalisation process will be used to: (i) manage the short-term working capital requirements largely associated with the Company’s Hellyer Mine Project; (ii) maintain an appropriate working capital position; and (iii) sustain a large scale exploration and refractory gold recovery feasibility study programme.

At the date of this report two of the three stages has been completed or approved for completion:

On 8 August 2011 the Company announced to ASX details of the “bridge” funding raising a total of $4.3 million (before costs) through the issue of Convertible and Loan Notes; and
On 12 September 2011 the Company announced to ASX details of a $13 million extension to its existing project financing arrangements with RMB Australia Holdings Ltd. The facility increase is conditional on the Company successfully raising a minimum of $8 million in new equity by 31 October 2011.

On 15 September 2011 the Company announced to ASX it had lodged a prospectus with ASIC to raise a minimum of $8 million (before costs), to a maximum of $10.7 million (before costs), through the issue of new shares and free attaching new options through a non-renounceable entitlements offer. The offer opened on 29 September 2011, and is scheduled to close on 18 October 2011.

On 30 September 2011 the Company drew $9 million of the $13 million RMB Australia Holdings Ltd project finance facility extension.

The Directors will continue to monitor the capital requirements on a go forward basis. This may include additional capital raisings in future periods or debt funding.

Should the Company be unable to raise the funding referred to above, there is a material uncertainty whether the Company will be able to continue as a going concern, and therefore, whether it will be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from these stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

The ability of the Company to continue as a going concern is also dependent upon the continued successful exploitation of its mineral tenements and its mine operations sustaining profitability.

The Directors recognise that the above factors represent a material uncertainty as to the Company’s ability to continue as a going concern. Whilst continued growth is dependent on the Company successfully obtaining new funding in what are challenging capital markets, the Directors are confident that the Company will be able to continue its operations into the foreseeable future.

(t) Carbon Tax

In July 2011 the federal government announced the “Securing a Clean Energy Future – The Australian Government‘s Climate Change Plan”. Whilst the announcement provides further details of the framework for a carbon pricing mechanism, uncertainties continue to exist on the impact of any carbon pricing mechanism on the Group as legislation must be voted on and passed by both houses of Parliament. In addition, as the Group will not fall within the “Top 500 Australian Polluters”, the impact of the Carbon Scheme will be through indirect effects of increased prices on many production inputs and general business expenses as suppliers subject to the carbon pricing mechanism are likely to pass on their carbon price burden to their customers in the form of increased prices. Directors expect that this will not have a significant impact upon the operational costs within the business, and therefore will not have an impact upon the valuation of assets and/or going concern of the business.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) New Accounting Standards for Application in Future Periods

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows:

AASB 9: Financial Instruments (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2013).
This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The Group has not yet determined any potential impact on the financial statements.
The key changes made to accounting requirements include:
simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
simplifying the requirements for embedded derivatives;
removing the tainting rules associated with held-to-maturity assets;
removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument;
requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and
requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss.
AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013).
AASB 1053: Application of Tiers of Australian Accounting Standards establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements:
Tier 1: Australian Accounting Standards; and
Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.
Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements.
The following entities are required to apply Tier 1 reporting requirements (ie: full IFRS):
for-profit private sector entities that have public accountability; and
the Australian Government and state, territory and local governments.
Since the Group is a for-profit private sector entity that has public accountability, it does not qualify for the reduced disclosure requirements for Tier 2 entities.
AASB 2010–2 makes amendments to Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities. It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specific “RDR” disclosures.
AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).
This Standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. The Standard also amends AASB 8: Operating Segments to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. The amendments are not expected to impact the Group.
AASB 2009–14: Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).
This Standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan. This Standard is not expected to impact the Group.
AASB 2010–4: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] (applicable for annual reporting periods commencing on or after 1 January 2011).

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

This Standard details numerous non-urgent but necessary changes to Accounting Standards arising from the IASB’s annual improvements project. Key changes include:

clarifying the application of AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors prior to an entity’s first Australian-Accounting-Standards financial statements;
adding an explicit statement to AASB 7: Financial Instruments: Disclosures that qualitative disclosures should be made in the context of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments;
amending AASB 101: Presentation of Financial Statements to the effect that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income is required to be presented, but is permitted to be presented in the statement of changes in equity or in the notes;
adding a number of examples to the list of events or transactions that require disclosure under AASB 134: Interim Financial Reporting ; and
making sundry editorial amendments to various Standards and Interpretations.
This Standard is not expected to impact the Group.
AASB 2010–5: Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] (applicable for annual reporting periods beginning on or after 1 January 2011).
This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. However, these editorial amendments have no major impact on the requirements of the respective amended pronouncements.
– AASB 2010–6: Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7] (applicable for annual reporting periods beginning on or after 1 July 2011).
This Standard adds and amends disclosure requirements about transfers of financial assets, especially those in respect of the nature of the financial assets involved and the risks associated with them. Accordingly, this Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards , and AASB 7: Financial Instruments: Disclosures , establishing additional disclosure requirements in relation to transfers of financial assets.
This Standard is not expected to impact the Group.
AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applies to periods beginning on or after 1 January 2013).
This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9: Financial Instruments .
As noted above, the Group has not yet determined any potential impact on the financial statements from adopting AASB 9: Financial Instruments .
– AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012).
This Standard makes amendments to AASB 112: Income Taxes .
The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model under AASB 140: Investment Property .
Under the current AASB 112: Income Taxes , the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.
The amendments brought in by this Standard also incorporate Interpretation 121 into AASB 112: Income Taxes . The amendments are not expected to impact the Group.
AASB 2010–9: Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters [AASB 1] (applies to periods beginning on or after 1 July 2011).
This Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards .
The amendments brought in by this Standard provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.
Furthermore, the amendments brought in by this Standard also provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian Accounting Standards financial statements or to present Australian Accounting Standards financial statements for the first time.
This Standard is not expected to impact the Group.
AASB 2010–10: Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009–11 & AASB 2010–7] (applies to periods beginning on or after 1 January 2013).
This Standard makes amendments to AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9 , and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010).

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The amendments brought in by this Standard ultimately affect AASB 1: First-time Adoption of Australian Accounting Standards and provide relief for first-time adopters from having to reconstruct transactions that occurred before their transition date.

[The amendments to AASB 2009–11 will only affect early adopters of AASB 2009–11 (and AASB 9: Financial Instruments that was issued in December 2009) as it has been superseded by AASB 2010–7.] This Standard is not expected to impact the Group.

AASB 2011-1: Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132, AASB 134, Interpretation 2, Interpretation 112, Interpretation 113]
This Standard amendments many Australian Accounting Standards, removing the disclosures which have been relocated to AASB 1054 (applicable for annual reporting periods beginning on or after 1 July 2011).
- AASB 10: Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 27: Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and SIC-12: Consolidation – Special Purpose Entities .

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group (applicable for annual reporting periods beginning on or after 1 January 2013).

AASB 11: Joint Arrangements AASB 11 replaces AASB 131: Interests in Joint Ventures and SIC-13: Jointly-controlled Entities – Non-monetary Contributions by Ventures . AASB 11 uses the principle of control in IFRS 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangements held by the group (applicable for annual reporting periods beginning on or after 1 January 2013).
- AASB 12: Disclosures of Interests in Other Entities AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether the control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests 1 January 2013
- AASB 13: Fair Value Measurement AASB 13 establishes a single source of guidance under AASB for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provide guidance on how to determine fair value under AASB when fair value is required or permitted by AASB. Application of this definition may result in different fair values being determined for the relevant assets.
AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined (applicable for annual reporting periods beginning on or after 1 January 2013).

The impact of the adoption of these new and revised standards and interpretations has not been determined by the Company.

==> picture [101 x 37] intentionally omitted <==

ANNUAL REPORT

For the year ended 30 June 2011

2. Revenue

Note (a) Sales revenue Ore sales Concentrate sales1 Total sales revenue (b) Net gain on acquisition of Hellyer operating infrastructure and mining lease 12 (c) Other income Interest received Joint venture establishment fee Realised foreign currency losses Mill operations extension fee Other revenue Total other income	Consolidated 2011 $ 2010 $ 3,320,749 18,193,121 19,209,769 -
	22,530,518 18,193,121
	- 1,249,853
	384,980 526,038 - 2,686 (147,811) - - 50,220 301,785 466,456
	538,954 1,045,400

Note 1: Included within the total is an amount of $608,056 representing the recognised loss on hedge settlements that have occurred during the year. Further details of cash flow hedges entered during the year are contained in Note 18.

3. Loss for the Year

The loss for the year is stated after taking into account the following:

Expenses (a) Cost of sales Production costs Milling costs Inventory write down Amortisation of mine closure & restoration Amortisation of mining properties Royalties Treatment charges – ore Other costs Smelter charges Mining contractor net profit incentive Total cost of sales (b) Other expenses Employee benefits expense Employee superannuation expense Contracting & consulting expenses Finance lease expenses Operating lease expenses Other administration expenses Depreciation – plant & equipment Impairment of capitalised exploration & evaluation expenditure Exploration expenditure expensed Development expenditure expensed Hellyer operating infrastructure – care & maintenance Net loss on derivative financial instruments Total other expenses (c) Share-based payments Share-based payments (d) Finance costs Finance costs Total expenses	Consolidated 2011 $ 2010 $ 3,014,543 5,734,869 4,142,649 - 1,415,649 - 242,882 95,274 7,752,459 4,299,118 250,000 541,531 338,080 2,165,426 8,008,517 - 3,698,663 - - 1,224,107
	28,863,442 14,060,325
	2,259,759 1,233,590 246,345 111,023 826,945 458,600 19,624 - 125,040 130,358 1,705,600 900,616 706,173 126,254 - 1,839,691 245,640 194,526 354,221 - - 1,715,847 163,245 221,849
	6,652,592 6,932,354
	461,682 372,847 2,179,981 79,890
	38,157,697 21,445,416

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

4. Income Tax Expense

The prima facie tax on loss before income tax is reconciled as follows:

(a) The components of tax expense comprise: Deferred tax Under provision in respect of prior years (b) The prima facie tax on loss before income tax at 30% (2010: 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: Deferred Tax Asset not brought to account Under provision in respect of prior years Income tax (benefit) attributable to loss from ordinary activities before tax The applicable weighted average effective tax rates are as follows: Recognised Deferred Tax Balance Deferred tax asset Deferred tax liability Net Deferred Tax Liability	Consolidated 2011 $ 2010 $ (1,302,060) (552,175) - 1,167
	(1,302,060) (551,008)
	(4,526,467) (287,113)
	252,672 11,751 219,780 111,854 - (13,710) - (374,957)
	(4,054,015) (552,175) 2,751,955 - - 1,167
	(1,302,060) (551,008)
	8.63% 25.00% 11,641,495 5,444,367 (14,834,961) (10,014,209)
	(3,193,466) (4,569,842)

Unrecognised temporary differences

At 30 June 2011, there are no unrecognised temporary differences associated with the Group's investments in subsidiaries, associate or joint venture, as the Group has no liability for additional taxation should unremitted earnings be remitted (2010: $Nil).

(c) Unrecognised deferred tax balances

The following deferred tax assets and liabilities have not been brought to account:

Unrecognised deferred tax assets comprise: Losses available for offset against future taxable income Capital raising costs	2,586,254 365,061
	2,951,314

The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the company can utilise the benefits from.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

4. Income Tax Expense (continued)

The potential deferred tax assets will only be obtained if:

(i) the company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised in accordance with Division 170 of the Income Tax Assessment Act 1997;

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

(iii) no changes in tax legislation adversely affect the company in realising the benefits.

The tax effect of components of other comprehensive income, being the loss on cash-flow hedge is $365,061. Refer to (c) above.

5. Earnings Per Share

(a) Basic Earnings Per Share (Loss) for the year Weighted average number of ordinary shares used in the calculation of basic earnings per share Basic earnings (loss) per share (cents) (b) Dilutive Instruments Weighted average number of ordinary shares used in the calculation of basic earnings per share Weighted average share options on issue Weighted average number of ordinary shares (diluted) at 30 June	Consolidated 2011 $ 2010 $ (13,786,165) (406,034) 183,945,251 136,692,409
	(7.49) (0.30)
	2011 $ 2009 $ 183,945,251 136,692,409 10,480,822 5,025,543
	194,426,073 141,717,952

There is no dilutive potential for ordinary shares as the exercise of options to ordinary shares would have the effect of decreasing the loss per ordinary share and would therefore be non-dilutive.

6. Cash and Cash Equivalents

Cash at bank and in hand Short-term bank deposit	Consolidated 2011 $ 2010 $ 6,328,134 69,731 27,316 9,401,812
	6,355,450 9,471,543

The effective interest rate on short-term bank deposits at 30 June 2011 was 2.62% (2010: 5.16%). These deposits have an average maturity of 146 days.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. Trade and Other Receivables

Current Trade receivables Other receivables Operating lease bonds GST receivable Non-current Tenement security deposits1 Operating lease bonds Hellyer operating infrastructure guarantees1 Loans to key management personnel2	Consolidated 2011 $ 2010 $ 2,182,722 4,062,664 19,925 9,498 2,120 2,120 657,810 645,240
	2,862,577 4,719,522
	2,561,000 2,626,340 100,183 18,652 14,000 48,400 161,500 72,000
	2,836,683 2,765,392

Note 1: Tenement security deposits and Hellyer operating infrastructure guarantees are held in fixed term deposits. Included in the tenement security deposits for the Group is a $2 million 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 32.

Further information relating to the maturity analysis of trade and other receivables is set out in Note 31(b(ii)).

8. Inventories

Current Ore on hand – at cost Concentrate on hand – at cost Stores – Hellyer Mill – at cost	Consolidated 2011 $ 2010 $ 3,261,123 269,967 963,135 - 1,109,252 257,081
	5,333,510 527,048

9. Other Assets

Current Prepayments	Consolidated 2011 $ 2010 $ 217,404 61,976
	217,404 61,976

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

10. Plant & Equipment

Plant & Equipment – Ore Processing At cost Accumulated depreciation Plant & Equipment – Hellyer Mill Refurbishment At cost Accumulated depreciation Plant & Equipment – Other At cost Accumulated depreciation Leased Plant & Equipment At cost Accumulated depreciation Total Plant & Equipment	Consolidated 2011 $ 2010 $ 24,094,797 24,094,797 (341,648) (576)
	23,753,149 24,094,221
	5,257,368 2,142,907 (74,339) -
	5,183,029 2,142,907
	1,626,789 782,264 (637,168) (362,862)
	989,621 419,402
	98,773 - (16,455) -
	82,318 -

	30,008,117 26,656,530

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 Balance at 1 July 2009 Additions Disposals Depreciation expense Balance at 30 June 2010 Consolidated Balance at 1 July 2010 Additions Disposals Depreciation expense Balance at 30 June 2011	Plant & Equipment Ore Processing Plant & Equipment Hellyer Mill Refurbishment Plant & Equipment – Other Leased Plant & 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
	Plant & Equipment Ore Processing Plant & Equipment Hellyer Mill Refurbishment Plant & Equipment – Other Leased Plant & Equipment Total
	$ $ $ $ $ 24,094,221 2,142,907 419,402 - 26,656,530 3,114,461 844,525 98,773 4,057,759 - - - - - (341,072) (74,339) (274,306) (16,455) (706,172)
	23,753,149 5,183,029 989,621 82,318 30,008,117

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

10. Plant & Equipment (continued)

Property, plant and equipment pledged as security for liabilities

Under the terms of the secured bank loans, the Group has granted a fixed and floating charge over all of its assets in favour of RMB Australia Holdings Ltd. The charge remains in effect until Bass Metals Ltd has fully discharged its financial indebtedness; including the maturing of outstanding zinc, lead and silver hedges.

11. 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 2011 $ 2010 $ 9,000,000 9,000,000 - -
	9,000,000 9,000,000
	1,143,285 1,143,285 (200,075) (95,274)
	943,210 1,048,011
	663,273 663,273 (663,273) (663,273)
	- -
	1,118,930 1,118,930 (1,118,930) (1,118,930)
	- -
	13,060,366 12,451,984 (13,060,366) (11,431,256)
	- 1,020,728
	3,229,317 1,741,321 (803,229) -
	2,426,088 1,741,321
	483,285 483,285 (138,081) -
	345,204 483,285
	24,771,288 4,463,613 (5,320,120) -
	19,451,168 4,463,613
	32,165,670 17,756,958

ANNUAL REPORT For the year ended 30 June 2011

==> picture [102 x 37] intentionally omitted <==

11. 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 Balance at 1 July 2009 Additions Transfer from capitalised exploration and evaluation Amortisation expense Balance at 30 June 2010 Balance at 1 July 2010 Additions Transfer from capitalised exploration and evaluation Amortisation expense Balance at 30 June 2011	Hellyer Tailings Dam Hellyer Operating Infrastructure – Mill Closure and Restoration Que River Capital Infra- structure Que River Mine Development Fossey Capital Infrastructure Fossey Mine Closure and Restoration Fossey Mine Development 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
	Hellyer Tailings Dam Hellyer Operating Infrastructure – Mill Closure and Restoration Que River Capital Infra- structure Que River Mine Development Fossey Capital Infrastructure Fossey Mine Closure and Restoration Fossey Mine Development Total
	$ $ $ $ $ $ $ $ 9,000,000 1,048,011 - 1,020,728 1,741,321 483,285 4,463,613 17,756,958 - - - 608,382 1,487,996 - 20,307,675 22,404,053 - - - - - - - - (104,801) - (1,629,110) (803,229) (138,081) (5,320,120) (7,995,341)
	9,000,000 943,210 - - 2,426,088 345,204 19,451,168 32,165,670

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

11. Mine Properties (continued)

Impairment Testing

Impairment Testing
Cash Generating Unit: Mine Properties Property, Plant & Equipment	Consolidated 2011 $ 2010 $ 32,165,670 16,736,230 29,598,096 26,487,391
	61,763,766 43,223,621

In assessing whether impairment is required against the carrying value of an asset, its carrying value is compared with its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value-inuse. Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, unless indicated otherwise, the recoverable amount used in assessing whether an impairment charge needs to be recognised is its value-in-use. The Group generally estimates value in use using a discounted cash flow model.

The calculation of value-in-use is most sensitive to the following assumptions:

Production Volumes and Metal Grades:	Management has based the expected production volumes and
	grades on the current Fossey mine plan.
Commodity Pricing:	Management has applied the following commodity prices:
	Copper: USD 9,031/Mt; Lead: USD 2,577/Mt; Zinc: USD 2.293/Mt;
	Silver: USD 37/Oz; and Gold: USD 1,538/Oz
Foreign Exchange Rate:	Management has applied a AUD/USD foreign exchange rate of
	$1.06
Operating Expenditure:	Management has based expected production costs on the current
	Fossey mine plan

Estimated production volumes and metal grades are based on a detailed life of mine plan for the Fossey ore body. It is estimated that, if all production revenues were to be reduced by 10% for the whole of the two years, this would not be sufficient to reduce the excess of recoverable amount over the carrying amounts of the individual cash generating unit to zero. Consequently, management believes no reasonably possible change in the various production assumptions would cause the carrying amount of non-current assets to exceed their recoverable amount.

The Group generally estimates value-in-use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 15%.

Management also believes that currently there is no indication that a possible change in the discount rate, estimated long term metal prices, foreign exchange rates and future operating costs which would reduce the Group’s headroom excess of recoverable amount over the carrying amounts of the individual cash generating units to zero.

12. Business Combinations

Prior period acquisition

On 10 December 2008, Hellyer Mill Operations Pty Ltd, a wholly-owned entity, entered into a binding 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

12. Business Combinations (continued)

Note Cost of Acquisition Cash consideration paid to Intec Ltd Contingent consideration recognised at the present value of the probable future royalty payments 20	Fair Value $ (4,010,000) (3,697,604)
	(7,707,604)

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 & equipment – ore processing 10 Inventory 8 Mine properties 11 Mining lease Total value of assets acquired Deduct : Liabilities assumed or created: Provisions 19 Deferred income tax liabilities 21 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	Fair Value $ 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 AASB 3: Business Combinations . 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

13. 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 year 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 Balance at the end of the year	Consolidated 2011 $ 2010 $ 13,564,128 11,949,001 3,363,063 3,873,326 (1,831) (1,774,624) - (418,508) (14,412) (65,067)
	16,910,948 13,564,128

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 year
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
Balance at the end of the year

Consolidated
2011
$
2010
$
13,564,128
11,949,001
3,363,063
3,873,326
(1,831)
(1,774,624)
-
(418,508)
(14,412)
(65,067)

16,910,948
13,564,128

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.

14. Interests in Tenements

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

Partner Licence Venture Minerals Ltd EL31/2003 Heazlewood Venture Minerals Ltd EL36/2003 Whyte River Stellar Resources Ltd EL36/2003 White River Clancy Exploration Ltd have a 20% free carry interest in the following tenements: Clancy Exploration Ltd ELA20/1010 Clancy Exploration Ltd ELA20/1010	Interest
	70% 70% 75% 75% 75%

Venture Minerals Ltd has an entitlement to a 70% earn-in interest in the above mentioned exploration areas by sole funding 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 within three years of the date of satisfaction of the conditions precedent in the agreements. Bass Metals Ltd retains a 100% right to all other commodities on the tenements. Pioneer Resources Ltd retains a 2% net smelter royalty.

Stellar Resources Ltd has the right to a 75% earn in interest in the abovementioned exploration area by sole funding or incurring a total expenditure of not less than $500,000 in connection with the exploration for all commodities other than tin, tungsten and iron on the Joint Venture Tenements on or before the third anniversary of the date of the letter agreement.

15. Other Financial Assets

Note Non-current Capitalised finance costs Borrowing costs incurred at cost Accumulated amortisation 18	Consolidated 2011 $ 2010 $ 1,071,140 179,277 (350,889) -
	720,251 179,277

During the year Bass Metals secured a $12 million project finance facility with RMB Australia Holdings Ltd for the development of the Hellyer Mine Project. A further $4 million corporate finance facility was secured with RMB Australia Holdings Ltd. The loans are offered on standard commercial and banking terms for facilities of this type with the $12 million project finance facility to be fully repaid by 30 June 2012 with five principal repayments, and the $4 million corporate loan facility to be fully repaid by 31 December 2012 with three principal repayments. Capitalised finance costs represent transaction costs incurred in establishing the loan facilities. Refer to Notes 17 and 29 for further details.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

16. Trade and Other Payables

Current Unsecured liabilities: Trade payables Sundry payables and accrued expenses	Consolidated 2011 $ 2010 $ 8,795,704 3,203,761 1,650,637 1,860,917
	10,446,341 5,064,678

(a) Fair value

Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

(b) Related party payables

For terms and conditions relating to related party payables refer to Note 32.

(c) Interest rate, foreign exchange and liquidity risk

Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note 31.

17. Borrowings

Note Current Lease liability 24 Insurance premium funding1 Secured bank loans2 Silver loan3 Non-Current Lease liability 24 Secured bank loans2	Consolidated 2011 $ 2010 $ 58,873 - 35,148 - 10,886,534 - 3,840,699 -
	14,821,254 -
	Consolidated 2011 $ 2010 $ 212,769 - 2,372,513 -
	2,585,282 -

Note 1: Loan provided by Hunter Premium Funding Ltd for payment of insurance premiums for a fixed amount repayable in full by August 2011. The debt is secured by insurance policies purchased under the agreement.

Note 2: A $16 million loan, comprising a $12 million project finance facility and a $4 million corporate finance facility, was provided by RMB Australia Holdings Ltd for the development of the Hellyer Mine Project. The loan is offered on standard commercial and banking terms with six principal repayments to be fully repaid by 31 December 2012.

The following table provides a reconciliation of net borrowings:

Current Secured bank loans Borrowing costs – refer Note 15 Non-current Secured bank loans Total net secured bank loans	2011 $ 10,886,534 (720,251)
	10,166,283 2,372,513
	12,538,796

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

17. Borrowings (continued)

Note 3: A $5 million silver loan was provided by RMB Australia Holdings Ltd. The loan is interest free with five principal repayments to be fully repaid by 30 June 2012.

(a) Fair values:

Unless disclosed, the carrying values of the Group’s current and non-current borrowings approximated their fair values. The fair values have been calculated by discounting the expected future cash flows at prevailing market interest rates varying from 9.3% to 9.9%(2010: Nil%) depending on the nature of the borrowing.

(b) Assets pledged as security:

(1) Under the terms of the lease all risks and rewards incidental to legal ownership are transferred to the Group whilst the lessor has security over the assets until the final payments have been made. See Note 24 for further information.
(2) Under the terms of the secured bank loans, the Group has issued a fixed and floating charge over all of its assets in favour of the financier. The charge remains in effect until Bass Metals has fully discharged its indebtedness; including the settlement of outstanding zinc, lead and silver hedging.
(c) Defaults and breaches

During the year there were no defaults or breaches against any of the Group’s interest-bearing loans and borrowings.

18. Derivative Financial Instruments

Current Assets Forward commodity contracts – at fair value through profit or loss Current Liabilities Forward commodity contracts – cash flow hedges	Consolidated 2011 $ 2010 $ - 148,370
	1,204,315 -

(a) Instruments used by the Group

Derivative financial instruments are used by the Group in the normal course of business to hedge exposure to price and currency risk associated with metal concentrates sold under US dollar off-take agreements.

(i) Forward Commodity Derivatives – Cash flow Hedges

The Group has entered into forward commodity contracts to hedge the price and currency risk of highly probable metal sales. The hedge instruments are timed to mature in line with the estimated delivery of the hedged production. Cash flows from the sale of lead, silver and zinc are timed to occur over the following 12 months:

Lead Forward Contracts Less than 12 months Silver Forward Contracts Less than 12 months Zinc Forward Contracts Less than 12 months	Tonnes Hedged Average Price (AUD) 6,437 2,410
	Ounces Hedged Average Price (AUD) 451,000 23.96
	Tonnes Hedged Average Price (AUD) 10,739 2,459

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

18. Derivative Financial Instruments (continued)

These forward contracts have been specifically designated as a cash flow hedge in accordance with AASB 139: Financial Instruments: Recognition and Measurement . Under hedge accounting, the proportion of the gain or loss determined to be an effective hedge shall be recognised in other comprehensive income. The forward commodity contracts are considered to be highly effective hedges as they are aligned with the sale of physical metal and any gain or loss attributed to the settlement of the forward contract will be off-set by a gain or loss on the sale of the physical metal.

(ii) Movement in commodity forward hedge reserve

Opening balance Charged to other comprehensive income Closing Balance	2011 $ 2010 $ - - (1,204,315) -
	(1,204,315) -

These amounts have not been tax-effected.

Gains or losses on cash flow hedge settlements are recognised in the Statement of Comprehensive Income.

19. Provisions

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

Consolidated Balance at 1 July 2009 Additions Amounts used during the period (Decrease) in the discounted amount arising because of time and the effect of a change in the discount rate Balance at 30 June 2010 Balance at 1 July 2010 Additions Additions through business combination Amounts used during the period (Decrease) in the discounted amount arising because of time and the effect of a change in the discount rate Balance at 30 June 2011 Analysis of total provisions Current Non-current	Hellyer Operating Infrastructure Closure & Restoration Que River Mine Closure & Restoration Fossey Mine Closure & Restoration Short-term Employee Benefits Long-term Employee Benefits	Mine Contractor Incentive Payment Total
	$ $ $ $ $ 5,224,395 1,118,930 483,285 43,486 9,676 - - - 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
	4,757,939 1,118,930 483,285 96,807 13,236 - - 22,447 70,867 19,675 - - - - - - (1,118,930) - - - (289,795) - - - -	391,905 6,862,102 - 112,989 - - (391,905) (1,510,835) - (289,795)
	4,468,144 - 505,732 167,674 32,911	- 5,174,461
		2011 $ 2010 $ 167,674 1,607,642 5,006,787 5,254,460
		5,174,461 6,862,102

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

19. Provisions (continued)

Provision for Infrastructure Closure & Restoration

A provision has been recognised for the costs to be incurred for restoration of the Hellyer Mill site used for the milling of ore. It is anticipated that the Mill site will require restoration within 11 years. A discount rate adjusted to reflect the risk inherent in the mining operations has been applied to calculate a present value, in accordance with AASB 137: Provisions, Contingent Liabilities & Contingent Assets .

Provision for Mine Closure & Restoration – Fossey

The provision recognises the costs to be incurred in restoration of the Fossey mine site used for the extraction and exploration of base metals. It is anticipated that the mine will require restoration within two years. A discount rate adjusted to reflect the risk inherent in the mining operations has been applied to calculate a present value, in accordance with AASB 137: Provisions, Contingent Liabilities & Contingent Assets .

Provisions for Mine Closure & Restoration – Que River and Mine Contractor Incentive Payments

During the year the Que River mine site was closed and rehabilitated resulting in the depletion of the provisions.

20. Contingent Consideration

Current Note Contingent consideration 12 Non-current Contingent consideration 12	Consolidated 2011 $ 2010 $ 943,038 915,928
	2,754,566 1,878,485

The contingent consideration represents the present value of expected royalties payable on the probable quantity of ore to be processed through the Hellyer Mill. Further evaluation of the Fossey deposit has resulted in an addition to the expected volume of ore to be processed through the Hellyer Mill. As a result the contingent consideration has been increased. During the year 55,447 tonnes of ore was processed through the Hellyer Mill resulting in royalty payments of $138,618.

21. Tax

Consolidated Deferred Tax Assets Provisions Transaction costs on equity issue Plant and equipment Other Unused tax losses Balance at 30 June 2010 Deferred Tax Liability Property, plant and equipment Future income tax benefit attributable to Capitalised exploration expenditure Mine Properties Inventories Other Balance at 30 June 2010	Opening Balance Charged to Income Charged to Equity Business Combination 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

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

21. Tax (continued)

Consolidated Deferred Tax Assets Provisions Transaction costs on equity issue Plant and equipment Other Unused tax losses Balance at 30 June 2011 Deferred Tax Liability Property, plant and equipment Future income tax benefit attributable to Capitalised exploration expenditure Mine Properties Inventories Other Balance at 30 June 2011	Opening Balance Charged to Income Charged to Equity Business Combination Closing Balance $ $ $ $ $ 1,577,966 (150,353) - - 1,427,613 231,485 - 74,315 - 305,800 25,198 13,785 - - 38,983 87,158 (62,404) - - 24,754 3,522,560 6,321,785 - - 9,844,345
	5,444,367 6,122,813 74,315 - 11,641,495
	4,122,734 43,492 - - 4,166,226 4,055,601 1,004,047 - 5,059,647 1,725,715 3,496,541 - - 5,222,256 47,117 118,112 - - 165,229 63,041 158,561 - - 221,602
	10,014,208 4,820,753 - - 14,834,961

22. Issued Capital

Consolidated

Consolidated 213,430,823 (2010: 170,505,386) fully paid ordinary shares	2011 $ 2010 $ 50,357,997 37,172,160

Ordinary shares

The Group has 213,430,823 (2010: 170,505,386) 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

Refer to Note 28 for information relating to the Company employee option plan, including details of options issued, exercised and lapsed during the financial year.
Refer to Note 32 for information relating to share options issued to key management personnel during the financial year.

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.

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.

There are no externally reported capital requirements, except those disclosed in Note 17.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

22. 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 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
•Ordinary shares issued at 25 cents to sophisticated
and professional shareholders on 5 November 2010
•Ordinary shares issued at 25 cents in lieu of
payment of brokerage fees and investor relations
service retainer issued on 5 November 2010
•Ordinary shares issued at 23.9 cents to pursuant to
the employee share plan on 30 November 2010
•Ordinary shares issued at 22 cents pursuant to
employee share on 30 November 2010
•Ordinary shares issued at 26 cents pursuant to the
employee loan scheme on 28 February 2011
•Ordinary shares issued at 22 cents pursuant to the
employee share plan on 4 April 2011
•Ordinary shares issued at 37 cents to sophisticated
and professional shareholders on 27 April 2011
•Ordinary shares issued at 37cents to sophisticated
and professional investors on 30 May 2011
Less share issue costs
Current and previously unrecognised tax benefit relating
to share issue costs
Balance at the end of the year

2011
Number of
Shares
2011
$
2010
Number of
Shares
2010
$

170,505,386
37,172,160
103,648,803
22,294,441
-
-
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
14,400,000
3,600,000
-
-
900,000
225,000
-
-
418,410
100,000
-
-
30,000
6,600
-
-
100,000
26,000
-
-
50,000
11,000
-
-
10,000,000
3,700,000
-
-
17,027,027
6,300,000
-
-
-
(857,078)
-
(721,850)
-
74,315
-
216,555

213,430,823
50,357,997
170,505,386
37,172,160

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

23. Reserves

Hedge Reserve

The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged transactions that have not yet occurred.

	Consolidated 2011 $ 2010 $ (1,204,315) -

Hedge reserve
	(1,204,315) -

Option Reserve

The option reserve records items recognised as expenses on valuation of employee share options and as consideration for loans received and 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 2011 $ 2010 $ 2,705,298 1,172,478
	2,705,298 1,172,478

Further information in relation to the option reserve is set out in Note 28.

24. Capital and Leasing Commitments

(i) Finance Lease Commitments Payable – minimum lease payments Not later than 12 months Between 12 months and five years Minimum lease payments Less future finance charges Present value of future lease payments	Consolidated 2011 $ 2010 $ 73,901 - 267,083 -
	340,984 - (69,343) -
	271,641 -

The Group leases various plant and equipment with a carrying value of $189,752 (2010: $Nil) under finance leases expiring within five years. Under the terms of leases the Group has the option to acquire the leased assets on expiry of the leases.

The Group has entered into the following financing leases:

(a) A non-cancellable finance lease for sub-station equipment located at the Fossey mine site. The lease has a five-year term expiring on the 29 February 2016. Under the terms of the lease the Group has the option to acquire the leased assets on expiry of the lease.
(b) A non-cancellable finance lease for vehicles located at the Fossey mine site. The leases have a five-year term expiring on the 29 February 2016. Under the terms of the lease the Group has the option to acquire the leased assets on expiry of the lease.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

24. Capital and Leasing Commitments (continued)

(ii) 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 2011 $ 2010 $ 159,272 151,274 302,523 318,196
	461,795 469,470

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 30 June 2014, with rent payable monthly 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 1 July 2011.
(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 24 August 2010. 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.
(d) A non-cancellable equipment lease for waste management services at the Hellyer Mill site. The lease has a three year term expiring on 30 May 2014.

During 2011 the Group’s total operating lease expenditure was $125,040 (2010, $112,891).

(iii) 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	Consolidated 2011 $ 2010 $ 482,000 546,000 1,073,400 1,780,000
	1,555,400 2,326,000

25. 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.

Tasmanian Operations – Mining

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

25. Operating Segments (continued)

Tasmanian Operations – Processing

The Tasmanian Operations – Processing segment includes the Hellyer Mill and associated infrastructure and treats ore generated by the Group’s mining operations.

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 disclosed in Note 1.

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.

Segment liabilities

Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings.

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;
derivatives;
income tax expense; and
deferred tax assets (except for those relating to the closure provision for the Hellyer Mill).

Operating Segments 2010 Revenue Sales to external customers Total segment revenue Depreciation and amortisation Reportable segment profit/(loss) before income tax Reportable segment assets Additions to non-current assets: Plant and equipment Mine properties Capitalised exploration and evaluation Reportable segment liabilities	Tasmanian Operations – Mining Tasmanian Operations – Processing Exploration Total $ $ $ $ 18,193,121 - - 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
	- 2,181,561 - 2,181,561 11,226,418 - - 11,226,418 - - 3,873,326 3,873,326
	1,994,120 13,441,652 - 15,435,772

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

25. Operating Segments (continued)

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) before income tax 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 Liabilities Total liabilities for reportable segments Elimination of inter-segment assets Unallocated amounts: Trade and other payables Borrowings Deferred tax liabilities Consolidated total liabilities	2010 $ 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
	15,435,772 (10,764) 5,075,442 110,043 4,124,908
	24,735,401

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

25. Operating Segments (continued)

Operating Segments 2011 Tasmanian Operations – Mining Tasmanian Operations – Processing $ $ Revenue Sales to external customers 23,138,574 - Other revenue from external customers - - Total segment revenue 23,138,574 - Depreciation and amortisation 7,890,540 675,823 Reportable segment profit/(loss) before income tax (4,426,337) (4,183,881) Reportable segment assets 27,166,969 42,376,993 Additions to non-current assets: Plant and equipment - 3,681,725 Mine properties 22,404,053 - Capitalised exploration and evaluation - - Reportable segment liabilities 777,374 14,248,462 Reconciliation of reportable segment revenues, profit or loss, and assets Revenues Total revenue for reportable segments Unallocated amounts: Other revenue Interest revenue Consolidated revenue Profit or loss Total profit/(loss) before income tax for reportable segments Unallocated amounts: Other profit/(loss) Other corporate expenses Net gain/(loss) on derivative financial instruments 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 Other assets Deferred tax assets Consolidated total assets	Tasmanian Operations – Mining Tasmanian Operations – Processing $ $ 23,138,574 - - -	Exploration Total $ $ - 23,138,574 - - - 23,138,574 - 8,566,363 - (8,610,218) 17,546,818 87,090,780 - 3,681,726 - 22,404,053 3,363,063 3,363,063 - 15,025,836 2011 $ 23,138,574 301,785 237,169
	23,138,574 -
	7,890,540 675,823
	(4,426,337) (4,183,881)
	27,166,969 42,376,993
	- 3,681,725 22,404,053 - - -
	777,374 14,248,462
		23,677,528
		(8,610,218) 538,954 (6,146,394) (163,245) (461,682) (245,640)
		(15,088,225)
		87,090,780 6,355,450 2,860,457 624,836 479,087 11,641,495
		109,052,105

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

25. Operating Segments (continued)

Total

Liabilities

Total liabilities for reportable segments

Total liabilities for reportable segments Unallocated amounts: Trade and other payables Borrowings Derivative financial liabilities Deferred tax liabilities Other Liabilities Consolidated total liabilities	15,025,836 10,446,341 200,585 1,204,315 8,752,247 17,134,894
	52,764,218

(a) Geographical Region

The Group operates within one geographical region in Australia.

(b) Major Customers

The Group supplies two external customers in the mining segment who account for 99% (2010: 95%) of external revenue.

26. Cash Flow Information

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

Operating (loss) after income tax
Non-cash flows:
Depreciation & amortisation
Provisions
Borrowing costs
Contingent consideration
Decrease in the discounted amount for infrastructure closure &
restoration
Write-off of non-current assets
Share-based payments expense
Amortisation of deferred tax assets relating to share issue costs
Gain on acquisition of Hellyer operating infrastructure & mining
lease
(Increase) in deferred tax assets relating to items affecting the
income statement
Decrease in deferred tax assets relating to items affecting the
income statement
Net loss on derivative financial instruments
Unrealised gain on derivatives

Consolidated
2011
$
2010
$
(13,786,165)
(406,034)
8,701,513
4,520,646
(1,420,293)
(150,705)
350,889
-
-
38,094
(289,795)
(466,456)
-
1,840,651
461,682
372,847
74,315
216,555
-
(1,249,853)
(2,016,029)
(1,263,762)
639,654
496,199
163,245
416,983
(148,051)
(195,134)

(7,269,035)
4,170,031

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

26. Cash Flow Information (continued)

Change in operating assets and liabilities net of the effects of
business combination acquisition:
Decrease in trade and other receivables
(Increase)/decrease in inventories
Decrease on other assets – closure & restoration
(Increase) on other financial assets
Decrease in provision for restoration
Increase in trade and other payables
(Decrease) in provisions
Net cash provided by operating activities

Consolidated
2011
$
2010
$
1,045,238
1,187,707
(4,806,462)
530,589
-
(483,285)
(137,219)
(179,277)
22,447
483,285
7,007,062
2,974,208
-
(78,995)

(4,137,969)
8,604,263

(b) Non-cash financing and investment transactions

Issue of 418,410 shares to Mr M Rosenstreich for $100,000 through the granting of a loan by the Company under the Employee Share Loan Scheme.
Issue of 100,000 shares to Mr V Rajasooriar for $26,000 through the granting of a loan by the Company under the Employee Share Loan Scheme.
Issue of 8,900,000 options to RMB Australia Holdings Ltd valued at $1,071,140 for project funding.

27. Contingent Liabilities

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

28. Share-based Payments

The following share-based payment arrangements existed at 30 June 2011.

(i) Bass Metals Ltd Employee Share Loan Scheme

The Bass Metals Ltd Employee Share Loan Scheme (“Scheme”) was approved by shareholders at an annual general meeting held on 30 November 2010. 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 Employee Share Loan Scheme shall for the time being apply. Shares may not be issued to a Director (or associate) except where the relevant shareholder approval is provided pursuant to the Corporations Act 2001 and the ASX Listing Rules. 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 Employee Share Loan Scheme.

Participation is optional and subject to the Rules of the Scheme. Offers made under the Scheme are not renounceable. Shares offered under the Scheme are offered at with regard to the market value of the Company’s shares where the market value of a share subscribed for or acquired under the Scheme 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 offer 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 arm’s length value assessed by an independent registered company auditor or otherwise calculated in a manner approved by the Commissioner of Taxation.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

28. Share-based Payments (continued)

There are currently 818,410 shares issued under this Scheme.

(ii) Bass Metals Ltd Employee Performance Incentive Plan

The Bass Metals Ltd Employee Performance Incentive Plan (“Plan”) was approved by shareholders at an annual general meeting held on 30 November 2010. The Directors of the Company administer the Employee Performance Incentive Plan and in their absolute discretion determine to whom the securities will be offered, the number to be offered and any performance criteria in relation to the options or performance rights issued under the Plan.

Options or performance rights may not be issued to a Director (or associate) except where the relevant shareholder approval is provided pursuant to the Corporations Act 2001 and the ASX Listing Rules.

No consideration is payable by an eligible person for a grant of an option or a performance right, 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 or performance rights to any eligible person at such times and on such terms as the Board considers appropriate. Options and performance rights issued under the Plan may be exercised or vest at any time during the period commencing on the issue date and ending no later than five years from the date of issue. Options or performance rights which have vested and have been issued under the Plan will automatically lapse in three months from the date of departure or such longer period as the Board determines in the event that an eligible person either resigns voluntarily from employment with the Company or is dismissed in certain circumstances.

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

On vesting of performance rights, shares will automatically be issued to the eligible person subject to compliance with the Company’s Policy for Trading in Company Securities and the insider trading provisions of the Corporations Act 2001. Unless otherwise provided in the invitation to receive performance rights, no amount shall be payable by the eligible person on the automatic exercise of performance rights.

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, expiring 2 November 2011) Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 37.5 cents, expiring 31 December 2012) Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 51.0 cents, expiring 31 December 2012) Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 42.5 cents, expiring 16 October 2012) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 25.0 cents, expiring 1 September 2013) Granted Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 35.0 cents, expiring 1 September 2013) Granted Outstanding at the end of the year	2011 Number of Options 2010 Number of Options 250,000 250,000
	250,000 250,000
	225,000 350,000 - (125,000)
	225,000 225,000
	425,000 525,000 - (100,000)
	425,000 425,000
	1,275,000 - - 1,455,000 (130,000) (180,000)
	1,145,000 1,275,000
	100,000 - - 100,000
	100,000 100,000
	100,000 - - 100,000
	100,000 100,000

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

28. Share-based Payments (continued)

Outstanding at the beginning of the year (exercise price 22.0 cents, expiring 5 July 2013) Granted Forfeited Exercised Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 20.5 cents, expiring 11 October 2014) Granted Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 29.0 cents, expiring 11 October 2014) Granted Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 41.0 cents, expiring 11 October 2014) Granted Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 25.0 cents, expiring 1 September 2013) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 35.0 cents, expiring 1 September 2013) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 50.0 cents, expiring 1 September 2013) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 43.5 cents, expiring 31 January 2015) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 61.0 cents, expiring 31 January 2015) Granted Forfeited Outstanding at the end of the year Outstanding at the beginning of the year (exercise price 88.0 cents, expiring 31 January 2015) Granted Forfeited Outstanding at the end of the year	2011 Number of Options 2010 Number of Options - - 1,260,000 - (90,000) - (80,000) -
	1,090,000 -
	- - 200,000 -
	200,000 -
	- - 200,000 -
	200,000 -
	- - 200,000 -
	200,000 -
	- - 500,000 - (100,000) -
	400,000 -
	- - 500,000 - (100,000) -
	400,000 -
	- - 400,000 - (100,000) -
	300,000 -
	- - 300,000 - (150,000) -
	150,000 -
	- - 300,000 - (150,000) -
	150,000 -
	- - 300,000 - (150,000) -
	150,000 -

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

28. Share-based Payments (continued)

(iii) Total Unlisted Options

Outstanding at the beginning of the year Granted Forfeited Exercised Outstanding at the end of the year Exercisable at the end of the year	2011 2010 Number of Options Weighted Average Exercise Price$ Number of Options Weighted Average Exercise Price$
	5,600,000 0.342 2,500,000 0.350 13,060,000 0.314 3,505,000 0.348 (970,000) 0.488 (405,000) 0.431 (80,000) 0.220 - -
	17,610,000 0.313 5,600,000 0.342
	14,570,000 0.309 3,775,000 0.322

Options outstanding at 30 June 2011 had a weighted average exercise price of $0.313 (2010: $0.342) and a weighted average remaining contractual life of 2.2 years (2010: 2.1 years). Exercise prices range from $0.220 to $0.880 in respect of options outstanding at year end. The Company share price at year end was $0.225.

The weighted average fair value price for options granted during the year was $0.314 (2010: $0.348). 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 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 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 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 Options issued Grant date Expiry date Weighted average exercise price

3,000,000 22/09/2010 22/09/2013 $0.228 2.2 years $0.215 70.0% 4.89% 1,260,000 7/12/2009 5/07/2013 $0.220 2.0 years $0.165 70.0% 4.46% 200,000 11/10/2010 11/10/2014 $0.205 3.28 years $0.275 70.0% 4.95% 200,000 11/10/2010 11/10/2014 $0.290 3.3 years $0.27.5 70.0% 4.95% 200,000 11/10/2010 11/10/2014 $0.41

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

28. Share-based payments (continued)

Weighted average life of the option	3.3 years
Underlying share price	$0.275
Expected share price volatility	70.0%
Risk free interest rate	4.95%
Options issued	100,000
Grant date	1/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.250
Weighted average life of the option	2.2 years
Underlying share price	$0.165
Expected share price volatility	70.0%
Risk free interest rate	4.36%
Options issued	100,000
Grant date	1/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.350
Weighted average life of the option	2.2 years
Underlying share price	$0.165
Expected share price volatility	70.0%
Risk free interest rate	4.36%
Options issued	200,000
Grant date	2/11/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.250
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%
Options issued	200,000
Grant date	2/11/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.350
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%
Options issued	200,000
Grant date	17/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.500
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%
Options issued	200,000
Grant date	17/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.250
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

28. Share-based payments (continued)

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


Options issued	200,000
Grant date	17/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.350
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%
Options issued	200,000
Grant date	17/09/2010
Expiry date	1/09/2013
Weighted average exercise price	$0.500
Weighted average life of the option	2.2 years
Underlying share price	$0.315
Expected share price volatility	110.0%
Risk free interest rate	5.11%
Options issued	300,000
Grant date	31/01/2011
Expiry date	31/01/2015
Weighted average exercise price	$0.435
Weighted average life of the option	3.6 years
Underlying share price	$0.36
Expected share price volatility	60.0%
Risk free interest rate	5.21%
Options issued	300,000
Grant date	1/01/2011
Expiry date	1/01/2015
Weighted average exercise price	$0.610
Weighted average life of the option	3.6 years
Underlying share price	$0.360
Expected share price volatility	60.0%
Risk free interest rate	5.21%
Options issued	300,000
Grant date	1/01/2011
Expiry date	1/01/2015
Weighted average exercise price	$0.880
Weighted average life of the option	3.6 years
Underlying share price	$0.36
Expected share price volatility	60.0%
Risk free interest rate	5.21%
Options issued	5,900,000
Grant date	20/05/2011
Expiry date	27/05/2014
Weighted average exercise price	$0.318
Weighted average life of the option	2.9 years
Underlying share price	$0.305
Expected share price volatility	59.0%
Risk free interest rate	4.92%

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 $461,282 (2010: $372,847) and relates, in full, to equity-settled share-based payment transactions.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

29. Events Subsequent To Reporting Date

The financial report was authorised for issue on 30 September 2011 by the Board of Directors.

Fundraising

On 8 August 2011, the Company announced to ASX it had raised a total of $4.3 million (before costs) in its first tranche of fundraising through the issue of 3.3 million Convertible Notes and $1 million of Loan Notes on arm’s length terms from Director-related entities. Each Convertible Note and Loan Note has a face value of $1.00, a conversion price of $0.15 per share and a free attaching option exercisable at $0.20 each expiring three years from the date of issue. The 3.3 million Convertible Note issue was completed under the Company’s available 15% capacity to professional and sophisticated investors with the attached options being subject to shareholder approval. The Loan Notes were convertible into shares, at $0.15 per share, subject to shareholder approval with the attached options also being subject to shareholder approval. At a general meeting of shareholders held on 26 September 2011, shareholders approved the issue of 22 million options to the Convertible Note holders, the conversion of the Loan Notes at $0.15 per share and the issue of a total of 6,666,667 options to Director-related entities. The issue of the 22 million options to the Convertible Note Holders, the conversion of the Loan Notes and the issue of a total of 6,666,667 options to Director-related entities occurred on 30 September 2011.

On 12 September 2011, the Company announced to ASX details of a $13 million extension to its existing project financing arrangements with RMB Australia Holdings Ltd. The increase in the facility is conditional on standard conditions precedent, such as completion of documentation and includes a requirement for the Company to raise a minimum of $8 million in new equity prior to 31 October 2011 and the issue to RMB Australia Holdings Ltd of up to a total of 86.7 million options (“Lender Options”) which shall be subject to shareholder approval. On 27 September 2011, the Company sent a Notice of General Meeting to shareholders for the approval of issue of these Lender Options at a general meeting of shareholders to be held on 31 October 2011. On 30 September 2011, the Company drew $9 million of the $13 million RMB Australia Holdings Ltd project finance facility extension.

Refer to Note 1(s) for further details.

Issue of Shares and Options to Directors

The issue of shares on conversion of the Loan Notes and the issue of a total of 6,666,667 options to Director-related entities occurred on 30 September 2011. The following table summarises the number of ordinary shares and options issued to Director-related entities on 30 September 2011:

Director	Number of Shares Number of Options
Mr D Boyer Mr C McGown Mr P Treasure	1,666,667 1,666,667 1,666,667 1,666,667 3,333,333 3,333,333
	6,666,667 6,666,667

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

30. Related Party Transactions

Transactions between related parties are as follows:

(a) Key Management Personnel

(i) Boyer Exploration and Resource Management Pty Ltd, an entity related to Mr D Boyer, was paid $23,448 (2010: $16,721) for exploration and management consulting, and was reimbursed at cost for expenditure made on behalf of the Group.
(ii) Resource Investment Capital Advisors Pty Ltd, an entity related to Mr C McGown, was paid $64 (2010: $Nil) and was reimbursed at cost for expenditure made on behalf of the Group.
(iii) Metals Finance Corporation, an entity related to Mr P Treasure, was paid $6,440 (2010: $9,510) and was reimbursed at cost for expenditure made on behalf of the Group.

No balance is outstanding at 30 June 2011 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 32 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 2011 is $18,671,026 (2010: $10,688,726). Loans provided to subsidiaries are interest free and have no fixed payment term.

31. 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, zinc and silver 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 Hedge 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 31(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 31(b)(i) for further details.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31. Financial Risk Management

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 2011.

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 2011 are detailed below:

Trade and other receivables Trade receivables – counterparties not rated1 Other receivables – counterparties not rated2	Consolidated 2011 $ 2010 $ 2,182,722 4,062,664 3,516,538 3,422,250
	5,699,260 7,484,914

Note 1: Bass Metals Ltd currently only has trade receivables with Nyrstar Sales & Marketing AG ($1,226,587) and LN Metals International Ltd ($956,135).

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
	- 148,370
	(1,204,315) -
	(1,204,315) -

The above are based on long term Fitch ratings as at 30 June 2011.

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 Hellyer Mine Project operations. The Group manages this risk by entering into AUD denominated lead, silver and zinc forward sales contracts. The amount and nature of the hedging has been determined and administered by the Company’s Hedge Committee, in line with the Company’s Financial Risk Management Policy Statement.

(b) Financial Instruments

(i) Derivative Financial Instruments

Derivative financial instruments are used by the Group to hedge exposure to commodity price and exchange rate risks associated with the sale of metal concentrates under the off-take agreements with Nyrstar Sales & Marketing AG and LN Metals International Ltd. The counterparty to the Group’s derivative financial instruments is RMB Australia Holdings Ltd.

ANNUAL REPORT

For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31. Financial Risk Management

Consolidated AUD Zinc forward sales contracts Settlements Less than 6 months AUD Lead forward sales contracts Settlements Less than 6 months AUD Silver forward sales contracts Settlement Less than 6 months Total commodity price options Total options	2011 Average Commodity Price $ 2010 Average Commodity Price $ (1,898,845) AUD 2,460/t 104,317 AUD 2,108/t (984,725) AUD 2,410/t 44,054 AUD 2,064/t 1,679,255 AUD 26.20 ox - - (1,204,315) 148, 371
	(1,204,315) 148,371

The Group uses short-dated Australian dollar denominated lead, silver and zinc forward sales for hedging.

( 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.

Consolidated 30 June 2010 Financial Assets: Cash & cash equivalents Trade and other receivables Derivative financial instruments Total Financial Assets Financial Liabilities: Trade and other payables Total Financial Liabilities	Weighted Average Effective Interest Rate	Fixed Interest Rate Maturing Floating Interest Rate Within 1 Year 1 to 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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31.Financial Risk Management

30 June 2011 Financial Assets: Cash & cash equivalents Trade and other receivables Total Financial Assets Financial Liabilities: Trade and other payables Short-term borrowings Long-term borrowings Derivative financial instruments Total Financial Liabilities	Weighted Average Effective Interest Rate	Fixed Interest Rate Maturing Floating Interest Rate Within 1 Year 1 to 5 Years Non- interest bearing Total
	2.62% 3.74% 7.30% 9.91%	$ $ $ $ $ 6,355,450 - - - 6,355,450 - - 2,677,303 3,021,957 5,699,260
		6,355,450 - 2,677,303 3,021,957 12,054,710
		- - - 10,446,341 10,446,341 - 14,821,254 - - 14,821,254 - - 2,585,282 - 2,585,282 - - - 1,204,315 1,204,315
		- 14,821,254 2,585,282 11,650,656 29,057,192

The above weighted average effective interest rates are as at 30 June 2011.

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

Less than 6 months 6 months to 1 year 1 to 5 years	Consolidated 2011 $ 2010 $ 2,840,532 4,717,402 22,045 2,120 2,836,683 2,765,392
	5,699,260 7,484,914

There are no balances within trade and other receivables that contain assets that have been impaired and are past due. The Company’s sales to Nyrstar Sales and Marketing AG and LN Metals International Ltd make up the majority of trade and other receivables and are 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	Consolidated 2011 $ 2010 $ 10,446,341 5,064,678
	10,446,341 5,064,678

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31. Financial Risk Management

(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 Financial Assets Cash and cash equivalents Loans and receivables Derivative financial instruments	2011 2010 Carrying Amount Carrying Amount $ $ 6,355,450 9,471,543 5,699,260 7,484,914 - 148,370
	12,054,710 17,104,827

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

Consolidated Financial Liabilities At amortised cost: Trade and other payables Borrowings Derivative financial instruments	2011 2010 Carrying Amount Carrying Amount $ $ 10,446,341 5,064,678 17,406,536 - 1,204,315 -
	29,057,192 5,064,678

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 2010 Financial Assets: Financial assets at fair value through profit or loss: Derivative instruments Consolidated 2011 Financial Liabilities: Financial liabilities at fair value through profit or loss: Derivative instruments	Level 1 Level 2 Level 3 Total $ $ $ $ 148,370 - - 148,370
	148,370 - - 148,370
	Level 1 Level 2 Level 3 Total $ $ $ $ 1,204,315 - - 1,204,315
	1,204,315 - - 1,204,315

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31. Financial Risk Management

(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.

Interest Rate Sensitivity Analysis

At 30 June 2011, the effect on profit and equity as a result of changes in the interest rate in relation to financial assets with all other variables remaining constant would be as follows:

	Consolidated
	2011	2010
	$	$
Change in profit
Increase in interest rate by 1% (100 bps)	68,215	119,826
Decrease in interest rate by 1% (100 bps)	(68,215)	(119,826)
Change in equity
Increase in interest rate by 1% (100 bps)	68,215	119,826
Decrease in interest rate by 1% (100 bps)	(68,215)	(119,826)

At 30 June 2011, the effect on profit and equity as a result of changes in the interest rate in relation to financial liabilities with all other variables remaining constant would be as follows:

	Consolidated
	2011	2010
	$	$
Change in profit
Increase in interest rate by 1% (100 bps)	(129,600)		-
Decrease in interest rate by 1% (100 bps)	129,600		-
Change in equity
Increase in interest rate by 1% (100 bps)	(129,600)		-
Decrease in interest rate by 1% (100 bps)	129,600		-

Foreign Currency Risk Sensitivity Analysis

At 30 June 2011, 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
	2011	2010
	$	$
Change in profit
Increase in AUD/USD by 5%	(1,217,820)	(951,918)
Decrease in AUD/USD by 5%	1,217,820	951,918
Change in equity
Increase of AUD/USD by 5%	(1,217,820)	(951,918)
Decrease in AUD/USD by 5%	1,217,820	951,918

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

31. Financial Risk Management

Price Risk Sensitivity Analysis

At 30 June 2011, 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
	2011	2010
	$	$
Change in profit
Increase in zinc price by USD 200/tonne	1,230,276	705,499
Increase in lead price by USD 200/tonne	684,185	486,017
Increase in copper price by USD 200/tonne	20,094	-
Decrease in zinc price by USD 200/tonne	(1,230,276)	(705,499)
Decrease in lead price by USD 200/tonne	(684,185)	(486,017)
Decrease in copper price by USD 200/tonne	(20,094)	-
Change in equity
Increase in zinc price by USD 200/tonne	1,230,276	705,499
Increase in lead price by USD 200/tonne	684,185	486,017
Increase in lead price by USD 200/tonne	20,094	-
Decrease in zinc price by USD 200/tonne	(1,230,276)	(705,499)
Decrease in lead price by USD 200/tonne	(684,185)	(486,017)
Decrease in lead price by USD 200/tonne	(20,094)	-

32. Key Management Personnel

This note should be read in conjunction with the remuneration report included in the Directors’ Report.

(i) Details of Key Management Personnel

Chairman – Non-executive

Mr D Boyer – Appointed 2 August 2004

Executive Director

Mr M Rosenstreich – Appointed 15 December 2004

Non-executive Directors

Mr C McGown – Appointed 7 July 2004 Mr P Treasure – Appointed 2 December 2008

Other Key Management Personnel:

Ms S Hunter – Company Secretary – Appointed 28 September 2006 Mr K Denwer – Exploration Manager – Appointed 1 September 2008

Mr B Burdett – General Manager Operations – Tasmania – Appointed 3 November 2009 Mr V Rajasooriar – Chief Operating Officer – Appointed 11 October 2010 Mr B Hamilton – Chief Financial Officer – Resigned 16 April 2011

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 2011.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

32. Key Management Personnel (continued)

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 2011 $ 2010 $ 1,525,625 1,274,165 110,000 70,000 69,272 45,686 - 8,015 - 46,631 456,895 353,775
	2,161,792 1,811,143

(ii) Shareholdings of Key Management Personnel

Shares held directly and indirectly in the Company:

2010 Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Dr T Murphy1 Mr L Henley2 Mr B Hamilton Ms S Hunter Mr K Denwer Mr B Burdett 2011 Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Mr B Hamilton3 Ms S Hunter Mr K Denwer Mr B Burdett Mr V Rajasooriar	Balance at the Start of the Year On Exercise of Options On market Transaction s Employee Share Purchase Plan Balance at the End of the Year 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
	Balance at the Start of the Year On Exercise of Options On market Transaction s Employee Share Purchase Plan Balance at the End of the Year 1,622,336 - - - 1,622,336 1,468,897 - - 418,410 - 1,887,307 1,652,346 - - - 1,652,346 26,413,445 - - - 26,413,445 100,000 - - - 100,000 17,500 - - - 17,500 50,000 - - - 50,000 100,000 - - - 100,000 - - - 100,000 100,000
	31,424,524 - - 518,410 31,942,934

Note 1: These were Dr T Murphy’s relevant interest when he resigned from the Company on 16 June 2010

Note 2: These were Mr L Henley’s relevant interest when he resigned on 9 April 2010.

Note 3: These were Mr B Hamilton’s relevant interest when he resigned from the Company on 16 April 2011.

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

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

32. Key Management Personnel (continued)

(iii) Loans to Key Management Personnel

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

2010	Balance at the	Additional	Repayment of	Balance at the
	Start of the Year	loans	loans	End of the Year
	$	$	$	$
Mr L Henley	9,625	-	(9,625)	-
Dr T Murphy	13,500	-	-	13,500
Mr K Denwer	6,500	-	-	6,500
Mr B Burdett	-	29,000	-	29,000
Mr B Hamilton	-	23,000	-	23,000
	29,625	52,000	(9,625)	72,000
2011	Balance at the	Additional	Repayment of	Balance at the
	Start of the Year	loans	loans	End of the Year
	$	$	$	$
Dr T Murphy	13,500	-	(13,500)	-
Mr B Hamilton	23,000	-	(23,000)	-
Mr K Denwer	6,500	-	-	6,500
Mr B Burdett	29,000	-	-	29,000
Mr M Rosenstreich	-	100,000	-	100,000
Mr V Rajasooriar	-	26,000	-	26,000
	72,000	126,000	(36,500)	161,500

Under the terms of the Employee Share Loan Scheme no interest is payable in respect of the above loans. Based on fringe benefits tax benchmark interest rate of 6.65% (2010: 5.85%) the following amounts would have been charged on an arm’s length basis for the period outstanding during the year.

	2011	2010
	$	$
Mr L Henley	-	437
Dr T Murphy	-	759
Mr B Hamilton	-	844
Mr K Denwer	432	380
Mr B Burdett	1,928	1,064
Mr M Rosenstreich	3,862	-
Mr V Rajasooriar	606	-

All loans granted under this scheme 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.

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

32. Key Management Personnel (continued)

(iv) Options held by Key Management Personnel

Details of options over 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.

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 2011 Directors Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Company Executives Ms S Hunter Mr K Denwer Mr B Burdett Mr V Rajasooriar Mr B Hamilton	Balance at Start of the Year Issued during the Year Exercised during the Year Lapsed during the Year Balance at the End of the Year Vested and Exercisable at the End of the Year
	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
	Balance at Start of the Year Issued during the Year Exercised during the Year Lapsed during the Year Balance at the End of the Year Vested and Exercisable at the End of the Year
	600,000 - - - 600,000 600,000 1,750,000 - - - 1,750,000 1,450,000 475,000 - - - 475,000 475,000 250,000 - - - 250,000 250,000
	3,075,000 - - - 3,075,000 2,775,000
	375,000 80,000 - - 455,000 375,000 330,000 300,000 - - 630,000 530,000 - 700,000 - - 700,000 300,000 - 600,000 - - 600,000 - - 600,000 - (300,000) 300,000 300,000
	705,000 2,280,000 - (300,000) 2,685,000 1,505,000

33. Remuneration of Auditors

Amounts received or due and receivable by Grant Thornton Audit Pty Ltd for: Audit and review of the financial report Consulting – Taxation services	Consolidated 2011 $ 2010 $ 53,744 57,035 30,349 18,750
	84,093 75,785

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

34. 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 Hedge reserve 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	2011 $ 2010 $ 13,169,596 14,414,123 67,671,030 35,945,048
	80,840,626 50,359,171
	24,461,576 5,635,350 11,876,172 4,538,012
	36,337,748 10,173,362
	50,357,997 37,172,160 (7,356,102) 1,841,171 (1,204,315) - 2,705,298 1,172,478
	44,502,878 40,185,809
	(13,786,165) (662,257) (1,204,315) -
	(14,990,480) (662,257)
	482,000 546,000 1,073,400 1,780,000
	1,555,400 2,326,000

35. Controlled Entity Bass Metals Ltd subsidiary for the financial year is:

Hellyer Mill Operations Pty Ltd, which is incorporated in Australia – 100% interest (2010: 100%).

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

Directors’ Declaration

In the opinion of the Directors of Bass Metals Ltd (“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 27 to 34 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 2011 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 2011.

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

==> picture [114 x 64] intentionally omitted <==

M Rosenstreich Managing Director

West Perth, Western Australia 30 September 2011

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

4. INDEPENDENT AUDIT REPORT TO THE MEMBERS OF THE BASS METALS LTD

==> picture [450 x 581] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

4. INDEPENDENT AUDIT REPORT TO THE MEMBERS OF THE BASS METALS LTD (continued)

==> picture [450 x 581] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

4. INDEPENDENT AUDIT REPORT TO THE MEMBERS OF THE BASS METALS LTD (continued)

==> picture [449 x 581] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

5. AUDITOR’S INDEPENDENCE DECLARATION

==> picture [449 x 581] intentionally omitted <==

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

6. ADDITIONAL INFORMATION

The following additional information is required by the Australian Securities Exchange. The information is current as at 20 September 2011.

(a) Distribution schedule and number of holders of equity securities as at 20 September 2011

Security	1 –	1,001 –	5,001 –	10,001 –	100,001 –	Total
	1,000	5,000	10,000	100,000	and over
Fully Paid Ordinary Shares (BSM)	127	344	290	891	231	1,883
Unquoted Options – 27.5c 22/12/11	-	-	-	-	3	3
Unquoted Options – 26c 31/12/12	-	-	-	-	1	1
Unquoted Options – 28.5c 31/12/12	-	-	-	-	1	1
Unquoted Options – 30.5c 31/12/12	-	-	-	-	1	1
Unquoted Options – 37.5c 31/12/11	-	-	-	-	2	2
Unquoted Options – 51c 31/12/12	-	-	-	5	-	5
Unquoted Options – 37.5c 2/11/11	-	-	-	-	1	1
Unquoted Options – 22c 5/7/13	-	-	-	17	-	17
Unquoted Options – 25c 1/9/13	-	-	-	2	1	3
Unquoted Options – 35c 1/9/13	-	-	-	2	1	3
Unquoted Options – 20.5c 11/10/14	-	-	-	-	1	1
Unquoted Options – 29c 11/10/14	-	-	-	-	1	1
Unquoted Options – 41c 11/10/14	-	-	-	-	1	1
Unquoted Options – 50c 1/9/13	-	-	-	-	1	1
Unquoted Options – 31.8c 27/5/14	-	-	-	-	1	1
Unquoted Options – 26c 27/8/15	-	-	-	2	-	2
Unquoted Options – 36.5c 27/8/15	-	-	-	2	-	2
Unquoted Options – 52.5c 27/8/15	-	-	-	2	-	2
Unquoted Options – 42.5c 16/10/12	-	-	-	15	1	16
Unquoted Options – 30c 31/12/12	-	-	-	-	3	3
Unquoted Options – 22.8c 22/9/13	-	-	-	-	1	1
Unquoted Options – 43.5c 31/1/15	-	-	-	3	-	3
Unquoted Options – 61c 31/1/15	-	-	-	3	-	3
Unquoted Options – 88c 31/1/15	-	-	-	3	-	3

The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 20 September 2011 is 226.

100

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

6. ADDITIONAL INFORMATION (continued)

(b) 20 Largest holders of quoted equity securities as at 20 September 2011

The names of the twenty largest holders of fully paid ordinary shares (ASX Code: BSM) as at 20 September 2011 are:

Rank	Name	Units	% of Units
1	METALS FINANCE LTD	26,413,445	12.38
2	JP MORGAN NOMINEES AUSTRALIA LTD	25,386,752	11.89
3	CITICORP NOMINEES PTY LTD	10,062,917	4.71
4	HSBC CUSTODY NOMINEES LTD	8,876,790	4.16
5	DENMAN INCOME LTD	4,450,000	2.08
6	MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LTD 1 ACCOUNT>	3,903,313	1.83
7	JP MORGAN NOMINEES AUSTRALIA LTD	3,667,593	1.72
8	ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD A/C>	3,452,545	1.62
9	BELL POTTER NOMINEES LTD	3,265,625	1.53
10	FORSYTH BARR CUSTODIANS LTD A/C>	2,727,087	1.28
11	REMOND HOLDINGS PTY LTD	2,626,911	1.23
12	UBS NOMINEES PTY LTD	2,058,920	0.96
13	NATURAL RESOURCES GROUP PTY LTD	2,000,000	0.94
14	PIAT CORP PTY LTD	2,000,000	0.94
15	DAMPLIN INVESTMENTS PTY LTD	1,927,777	0.90
16	MR MICHAEL AND WENDY ROSENSTREICH	1,816,033	0.85
17	NATIONAL NOMINEES LTD	1,674,079	0.78
18	DBS VICKERS SECURITIES (SINGAPORE) PTE LTD ACCOUNT>	1,634,000	0.77
19	NEFCO NOMINEES PTY LTD	1,599,036	0.75
20	IONIKOS PTY LTD	1,560,673	0.73
	TOTAL	111,103,496	52.05

Stock Exchange Listing: Listing has been granted for 213,430,823 ordinary fully paid ordinary shares of the Company on issue on the Australian Securities Exchange. The Company’s ordinary fully paid shares are also quoted on the Deutsche Börse (R2F-Ber (Berlin) and R2F-FRA (Frankfurt)).

The unquoted securities on issue as at 20 September 2011 are detailed below in part (d).

(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:

	No. Shares	% of Issued
	Held	Capital
METALS FINANCE LTD	26,413,445	12.38

101

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

6. ADDITIONAL INFORMATION (continued)

(d) Unquoted Securities

The number of unquoted securities on issue as at 20 September 2011:

Security	Number on Issue
Unquoted Director Options – exercisable at $0.275 on or before 22/12/11	1,375,000
Unquoted Director Options – exercisable at $0.26 on or before 31/12/12	300,000
Unquoted Director Options – exercisable at $0.285 on or before 31/12/12	300,000
Unquoted Director Options – exercisable at $0.305 on or before 31/12/12	300,000
Unquoted Employee Options – exercisable at $0.375 on or before 31/12/11	225,000
Unquoted Employee Options – exercisable at $0.51 on or before 31/12/12	425,000
Unquoted Employee Options – exercisable at $0.375 on or before 2/11/11	250,000
Unquoted Employee Options – exercisable at $0.22 on or before 5/7/13	1,090,000
Unquoted Employee Options – exercisable at $0.25 on or before 1/9/13	400,000
Unquoted Employee Options – exercisable at $0.35 on or before 1/9/13	400,000
Unquoted Employee Options – exercisable at $0.205 on or before 11/10/14	200,000
Unquoted Employee Options – exercisable at $0.29 on or before 11/10/14	200,000
Unquoted Employee Options – exercisable at $0.41 on or before 11/10/14	200,000
Unquoted Employee Options – exercisable at $0.50 on or before 1/9/13	200,000
Unquoted Lender Options – exercisable at $0.318 on or before 27/5/14	5,900,000
Unquoted Employee Options – exercisable at $0.26 on or before 27/8/15	200,000
Unquoted Employee Options – exercisable at $0.365 on or before 27/8/15	200,000
Unquoted Employee Options – exercisable at $0.525 on or before 27/8/15	200,000
Unquoted Employee Options – exercisable at $0.425 on or before 16/10/12	1,055,000
Unquoted Director/Employee Options – exercisable at $0.30 on or before 31/12/12	950,000
Unquoted Lender Options – exercisable at $0.228 on or before 22/9/13	3,000,000
Unquoted Employee Options – exercisable at $0.435 on or before 31/1/15	150,000
Unquoted Employee Options – exercisable at $0.61 on or before 31/1/15	150,000
Unquoted Employee Options – exercisable at $0.88 on or before 31/1/15	150,000
Total	17,820,000

102

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

6. ADDITIONAL INFORMATION (continued)

(e) Names of persons holding more than 20% of a given class of unquoted securities (other than employee options) as at 20 September 2011

Security	Name	Number of Securities
Unquoted Lender Options –
exercisable at 31.8c on or before	RMB Australia Holdings Ltd	5,900,000
27/5/14
Unquoted Lender Options –
exercisable at 22.8c on or before	RMB Australia Holdings Ltd	3,000,000
22/9/13
Unquoted Director/Employee	D. Boyer	300,000
Options – exercisable at 30c on or	Ionikos Pty Ltd	250,000
before 31/12/12	Metals Finance Ltd	250,000
Unquoted Director Options –	D. Boyer	300,000
exercisable at 27.5c on or before	M. & W. Rosenstreich	850,000
22/12/11
Unquoted Director Options –	M. & W. Rosenstreich	300,000
exercisable at 26c on or before
31/12/12
Unquoted Director Options –	M. & W. Rosenstreich	300,000
exercisable at 28.5c on or before
31/12/12
Unquoted Director Options –	M. & W. Rosenstreich	300,000
exercisable at 30.5c on or before
31/12/12

(f) Restricted Securities as at 20 September 2011

The Company has 668,410 fully paid ordinary shares under voluntary escrow which have been issued to the Managing Director and certain senior employees of the Company pursuant to the Company’s Employee Share Loan Scheme. These shares will remain under voluntary escrow until such time as the employee repays the loan related to the ordinary shares or the Company forgives the loan in accordance with the terms and conditions of the Company’s Employee Share Loan Scheme.

There are no other restricted securities on issue as at 20 September 2011.

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 Level 1, 91 Havelock Street, West Perth WA 6005.

(j) Share Registry

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

103

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

6. 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 Company’s 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 Lease1	100%
ML 68M/1984 Que River Mine Lease	100%
Hellyer 10W/1980 Access Easement to QRML	100%
RL11/1997 Mt Charter Retention	100%
EL 24/2010 Mackintosh Creek	100%

Note 1: Tenement held through a sub-lease between Bass Metals Ltd and Hellyer Mill Operations Pty Ltd which entitles the Company to all the sub-surface mining rights.

104

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. CORPORATE GOVERNANCE

Corporate Governance Statement

Bass Metals Ltd (“Bass Metals” 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 2nd Edition which were updated in June 2010 in relation to diversity, remuneration, trading policies and briefings (“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 at 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;
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;

105

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. CORPORATE GOVERNANCE (continued)

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 assets;
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%; and

106

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. 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.

107

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. CORPORATE GOVERNANCE (continued)

Remuneration Committee

On 10 November 2010, the Board established a Remuneration Committee which comprised the three non-executive Directors, Craig McGown (chair of the Remuneration Committee), Don Boyer (Chairman of the Board) and Tony Treasure (Non-executive Director). Prior to this date, the whole Board acted as the Remuneration Committee.

The Remuneration Committee is chaired by an independent Non-Executive Director, who is not the chair of the Board.

To assist the Committee to fulfil its function as the Remuneration Committee, the Board has adopted a Remuneration Committee Charter. All matters of remuneration are determined by the Committee and 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

On 1 July 2010, the Board established an Audit Committee which is comprised of Mr Craig McGown (Chairman of the Committee and Non-Executive Director), Mr Don Boyer (Chairman of the Board), Mr Tony Treasure (Non-Executive Director) and Ms Susan Hunter (Company Secretary). 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.

A formal Audit Committee Charter has been adopted, a copy of which is available on the Company's website.

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 entity for the financial year ended 30 June 2011 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.

108

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. 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 program 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 the Chief Financial Officer. Mr McGown is an independent Non-executive Director, Mr Rosenstreich is the Managing Director and Mr Brazier 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.

109

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. 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:

110

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

7. CORPORATE GOVERNANCE (continued)

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.

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.

Diversity Policy

The Company has not adopted a formal Diversity Policy. The Company encourages workplace diversity and recognises the benefits arising from employee and Board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent however the Company has only informal procedures in place regarding diversity.

The Board will re-consider establishing a formal Diversity Policy as the Company's workforce and operations grow.

The Company provides the proportion of women employees in the Company, in senior executive positions and on the Board below.

Board Senior Executives Other Employees	Female Male
	- 4 1 4 9 12
	10 20

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 nominationcommittee,	Given the present size of the Company, the whole Board acts as a nominationcommittee,if required. The

111

ANNUAL REPORT For the year ended 30 June 2011

==> picture [101 x 37] intentionally omitted <==

		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.	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.
3.2 and 3.3	The Company should establish a Diversity Policy and disclose the measurable objectives for achieving gender diversity.	The Board has not adopted a formal Diversity Policy.	The Board encourages diversity but has only informal procedures in place regarding diversity. Given the present size of the Company and its workforce, the Board believes that no efficiencies or other benefits could be gained through adoption of a formal Diversity Policy. The Board will re- consider establishing a formal Diversity Policy as the Company's workforce and operations grow.
4.2	The Company’s audit committee should consist only of non-executive Directors.	The Audit Committee consists of the Company’s three non-executive Directors and the Company Secretary.	The Board considers the composition of the Audit Committee is appropriate and adequate given the Company Secretary’s accounting qualifications and experience which are noted in the Directors’ Report.

112

AI assistant

GREENWING RESOURCES LTD — Annual Report 2011

65029_rns_2011-09-29_43917c27-f0bb-44dd-bf89-e35f9f5cec59.pdf

Table of Contents

1. CORPORATE DIRECTORY

DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

LEGAL ADVISORS

SHARE REGISTRY

AUDITORS

STOCK EXCHANGE LISTINGS

1. CHAIRMANS LETTER

Dear Fellow Shareholder

Production Milestones

Exploration Success

Growth Potential

Funding

1. CHAIRMANS LETTER (continued)

Future

2. REVIEW OF OPERATIONS

2.1 SUSTAINABILITY

2.1.1Safety

2.1.2 Environment

2.2. OPERATIONS

2.2.1 HMP

2. REVIEW OF OPERATIONS (continued)

2.2.2 Mine Production

2. REVIEW OF OPERATIONS (continued)

2.2.3 Hellyer Concentrator Operations

2. REVIEW OF OPERATIONS (continued)

Figures 2 to 5: Graphical Summaries of Mill Performance per Campaign

Figure 2: Processed Tonnes and Grade

2. REVIEW OF OPERATIONS (continued)

2.2.4 Concentrate Sales & Marketing

2.2.5 Que River Mine

Table 2: Que River Production Summary

2.3 SPECIAL PROJECTS

2.3.1 Base Metals Recovery Study

2.3.2 Gold Recovery Study

2. REVIEW OF OPERATIONS (continued)

Table 3: Preliminary Gold and Silver Recovery Testwork Results.

2.4 MINERAL RESOURCES AND ORE RESERVES

2.4.1 Ore Reserves

2. REVIEW OF OPERATIONS (continued)

2.4.2 Mineral Resources

Massive sulphide resources

Hellyer Tailings Resource Estimate

2. REVIEW OF OPERATIONS (continued)

Table 6a: Contained metal comprises:

Mt Charter Gold-Silver Resource.

2.5 EXPLORATION

2. REVIEW OF OPERATIONS (continued)

Figure 6: Tenement Location Plan

2. REVIEW OF OPERATIONS (continued)

Figure 7: Hellyer Mine Lease, major Prospects:

2.5.1 Hellyer Mine Lease (CML 103M/1987) (100% Bass Metals Ltd).

Fossey East.

2. REVIEW OF OPERATIONS (continued)

2. REVIEW OF OPERATIONS (continued)

McKay Prospect.

Switchback Prospect.

2.5.2 Regional Exploration.

2. REVIEW OF OPERATIONS (continued)

Other Joint Ventures

2.5.3 Competent Persons Statements

2. REVIEW OF OPERATIONS (continued)

2.5.4 Checklist of assessment and reporting criteria.

2. REVIEW OF OPERATIONS (continued)

2. REVIEW OF OPERATIONS (continued)

Hellyer Remnants Resource Estimate

2. REVIEW OF OPERATIONS (continued)

Que River Copper Resource Estimate

Hellyer Tails Mineral Resource Estimate

2. REVIEW OF OPERATIONS (continued)

Mt Charter Mineral Resource estimate

3. DIRECTORS’ REPORT

Directors

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

Previous directorships (last 3 years):

GREENWING RESOURCES LTD Annual Report 2011