GREENWING RESOURCES LTD — Interim / Quarterly Report 2011

Mar 15, 2011

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ABN 31 109 933 995

HALF-YEAR REPORT For the period ended 31 December 2010

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

TABLE OF CONTENTS

Corporate	Directory	3
Directors’	Report	4
Review of	Operations	5
1.	Sustainability	5
2.	Operations	5
3.	Exploration	7
Financial Statements
•	Consolidated Statement of Comprehensive Income	11
•	Consolidated Statement of Financial Position	12
•	Consolidated Statement of Changes in Equity	13
•	Consolidated Statement of Cash Flows	14
•	Notes to the Financial Statements	15
Directors’	Declaration	36
Auditor’s Independence Declaration		37
Independent Review Report to Members		38

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

CORPORATE DIRECTORY

DIRECTORS

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

COMPANY SECRETARY

Susan Hunter

REGISTERED OFFICE

16 Thelma Street West Perth Western Australia 6005

PO Box 1330 West Perth Western Australia 6872

Telephone: (08) 6315 1300 Facsimile: (08) 9481 2846 Website: www.bassmetals.com.au Email: admin@bassmetals.com.au

LEGAL ADVISORS

Blakiston & Crabb 1202 Hay Street West Perth WA 6005

Page Seager Lawyers 162 Macquarie Street Hobart TAS 7000

FINANCIAL RISK ADVISORY

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

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth WA 6000

Telephone: 1300 55 70 10

AUDITORS

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

STOCK EXCHANGE LISTINGS

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

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HALF-YEAR REPORT For the financial period ended 31 December 2010

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DIRECTORS REPORT

Your Directors submit the financial report on the Consolidated Group for the half-year ended 31 December 2010.

Directors

The following were directors of Bass Metals Ltd (“the Company” or “Bass”) during the half-year and until the date of this report:

Mr David Donald Boyer – Independent Non-executive Chairman

Mr Michael Benjamin Rosenstreich – Managing Director

Mr Craig Ian McGown – Independent Non-executive Director

Mr Patrick Anthony Treasure – Non-executive Director

Directors were in office for the entire period unless otherwise stated.

Consolidated Entities

The wholly owned subsidiaries of Bass Metals Ltd during the half-year and until the date of this report are:

Hellyer Mill Operations Pty Ltd.

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HALF-YEAR REPORT For the financial period ended 31 December 2010

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REVIEW OF OPERATIONS

Bass has had a successful half-year with exploration success and development of the new Hellyer Mine Project (HMP) well advanced for first concentrate production in early 2011. The accounts reflect a business in transition with the Que River ore sales programme coming to a close, significant preparations and expenditures related to the establishment of the HMP and ongoing care and maintenance costs for the large scale Hellyer site and plant.

In the past six months there has been a continued increase in the size of the staff related to the HMP and on-going large scale capital development. This has been a significant financial burden but means that the Company is now poised to reap the benefits of the new larger scale HMP production. This transitional process dominates the Company’s accounts; whether it is cessation of the ore sales programme with MMG or “real” cash outlays such as the $1,561,127 care and maintenance costs of the Hellyer site or the “non-cash” charge of $6,513,288 for the substantial hedging contracts in place to underpin HMP production. The following commentary and financial statements reflect Bass’ transformation into an emerging mid-tier diversified mining business.

Operational Results

Ore sales revenue for the half-year was $3,322,299, down on the corresponding period in 2009 (2009: $10,605,982) as the Que River mine plan, based on ore sales to MMG Rosebery, was completed in September 2010.

There was a total loss for the period after tax of $4,249,087 (2009: ($815,806)) with the main components including a $1,629,109 amortisation of the Que River mine property and “other Expenses” of $4,006,244; comprising mainly administration costs and holding charges associated with the Hellyer assets.

1. SUSTAINABILTY

1.1 SAFETY

There was one lost time injury (LTI) related to refurbishment activity in the Hellyer Mill, otherwise the Company’s mining operations and exploration sites were LTI free during the period. The Fossey underground mine operation has an LTI free record since commencement which stands at 343 days to the end of December.

1.2 ENVIRONMENT

There were no material environmental incidents during the period on any Bass managed tenements. At Que River significant progress has been made rehabilitating the site for care and maintenance following the completion of the open pit mining activities.

1.3 HUMAN RESOURCES

The Company currently has approximately 120 employees and contractors on site. The operations are fully staffed; though openings remain for geologists.

2. OPERATIONS

2.1 HELLYER MINE PROJECT

In early 2010 Bass commenced a major capital expenditure programme to develop the Fossey deposit and refurbish the Hellyer Mill to mine and process 400,000 tonnes of ore to produce 55,000 tonnes of zinc concentrate, 27,000 tonnes of lead concentrate and 5,000 tonnes of copper-silver-gold concentrate per year.

2.1.1 Fossey Mine

At the end of 2010 underground development had progressed into the Fossey ore body and a small amount of development ore was hauled to the Run of Mine (ROM) stockpile. Ore production from development continued in January 2011 before stoping production commenced in February 2011.

The Company recently upgraded the Ore Reserve tonnage at Fossey by 34% from 0.82 million tonnes to 1.1 million tonnes as summarised in Table 1 below. The increased tonnage comprises lower grade disseminated mineralisation adjacent to the high-grade massive sulphide mineralisation that comprised the previous Fossey Ore Reserve.

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

Table 1: Fossey Ore Reserve Update*

Location	JORC Classification	Tonnes (kt)	Copper (%)	Lead (%)	Zinc (%)	Silver (g/t)	Gold (g/t)
Fossey	Total Probable	1,102	0.3	4.0	6.8	105	1.9
Fossey	Total Proved	-	-	-	-	-	-
Total		1,102	0.3	4.0	6.8	105	1.9

• Refer Competent Persons statement and technical details at end of Operations Report.

This additional ore can be accessed utilising mine development currently being installed in accordance with the original mine plan. The economics of this additional material has been assessed on an incremental cost basis and contributes positive cash flow. The increased ore tonnage can be extracted with minimal additional work and means that there will be a higher utilisation of the Hellyer Mill each year; i.e. increasing 25% to 0.5Mtpa.

2.1.2 Hellyer Mill Refurbishment

The refurbishment of the Hellyer Mill was completed on schedule in late November 2010. Commissioning of the process circuit was progressed through December 2010 and the first ore processing campaign occurred in January 2011.

2.1.3 Concentrate Sales & Marketing

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

2.1.4 Capital Expenditure

Total capital expenditure and commitments to date for the Hellyer Project is estimated to be $26.5 million versus the budget estimate to the end of December 2010 of $25.2 million. The variance relates primarily to the upgraded water management system and the requirement for increased ground support.

2.2. QUE RIVER MINE

Mining activities ceased in September 2010 and the final ore was delivered to MMG Rosebery in early October 2010, as summarised in Table 2.

Table 2: Mining Summary – 6 months to 31 December 2010

	Tonnes (wmt)	Zinc (%)	Lead (%)	Silver (g/t)	Gold (g/t)	Copper (%)
Opening Stocks at QR	1,331	10.4	6.4	232	4.2	0.3
Ore mined*	8,453	12.4	7.1	214	3.6	0.3
Ore Delivered to MMG	9,784	12.2	7.1	218	3.6	0.3
Remaining Stocks at QR	0	0	0	0	0	0

* "Opening Stocks" and "Mined" are estimates from grade control and therefore average grades may not balance.

Current site activities comprise rehabilitation work associated with placing the site on care and maintenance pending further studies into the feasibility of additional mining and treatment of ore through the Hellyer Mill. Key components of this work comprise relocating approximately 250,000 bcm of potentially acid forming waste to backfill the PQ pit and ameliorating legacy acid mine drainage problems by filling and blocking adits and openings to the historic Que River underground workings. This work is planned to be completed in early 2011.

2.3 SPECIAL PROJECTS

Two studies are in progress; the Hellyer Tailings Re-treatment Study is focussed on fully utilising the 1.5mtpa capacity Hellyer Mill and the Gold Recovery Study is exploring potential technologies to extract additional value through recovering refractory gold from the Hellyer tailings.

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HALF-YEAR REPORT For the financial period ended 31 December 2010

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2.3.1 Hellyer Tailings Re-treatment Project

After meeting with a variety of groups that could potentially be interested in purchasing the bulk lead-zinc concentrate that Bass was evaluating from reprocessing the Hellyer tailings; it was decided that further testwork around suppression of the arsenic or the creation of separate lead and zinc concentrates would better contribute to the potential commercial viability of this project. This additional testwork commenced during November 2010.

2.3.2. Gold Recovery Feasibility Study

Bass considers there is a realistic opportunity to add a significant gold production capability to its Hellyer operations. A $1.7 million Definitive Feasibility study has commenced which is expected to take 12 to 18 months to complete. To the end of December 2010, nearly 2 tonnes of tailings samples have been collected and prepared for metallurgical testwork and pilot studies and a testwork regime formulated which commenced in January 2011.

3. EXPLORATION

3.1 NEAR MINE EXPLORATION

Exploration activities in the period focused on the development and testing of new targets prospective for major new base and precious metal discoveries.

3.1.1 Fossey East

A clear highlight for the period was the discovery of a new lens at Fossey East with the first major intercept of 12.1 metres grading 9.1% zinc, 4.8% lead, 0.6% copper, 76 g/t silver and 1.9 g/t gold. Follow-up intersections such as 20.4 metres at 16.3% zinc, 7.2% lead, 0.6% copper, 104 g/t silver and 2.4 g/t gold confirm the continuity of the high-grade mineralisation and the potential for a resource to be delineated. A particularly positive aspect of this discovery is its close proximity to the Fossey Mine development.

3.1.2 Switchback

The Switchback target also yielded positive results, highlighting its potential to develop into a resource, including 2.25 metres at 8.3% zinc, 4.3% lead, 74 g/t silver and 1.3 g/t gold and 3.95 metres at 5.9% zinc, 2.4% lead, 79 g/t silver and 1.1 g/t gold.

Whilst the clast/boulder horizon could potentially be economic in its own right, the most significant aspect of these intercepts is the close proximity to intensely altered footwall rocks which suggest that the clasts are close to their original source – a potential new zone of massive sulphide mineralisation.

3.1.3 Hellyer Stockwork

An exploration target of between 3 to 5 million tonnes at a combined lead+zinc grade of 4 to 6% with gold, silver and copper credits has been identified immediately beneath the existing Hellyer Mine workings. As several drill intersections have indicated, there is potential for high grade copper stringer mineralisation and larger tonnage low grade lead-zinc (+/copper). Note the potential quantity of the exploration target and the respective grades are conceptual in nature, that there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource.

Bass considers that successful delineation of a major resource comprising stockwork mineralisation in the footwall of the Hellyer zone could add significantly to the HMP mine life. This stockwork zone has not been specifically targeted by the previous mine operators as the grades were regarded as too low. The intercepts recorded are largely “tails” of historic diamond drill holes testing the Hellyer massive sulphide zone.

3.1.4 Other Targets

Other activity during the period included drill testing of a geophysical anomaly (DHEM) at Que River which intersected 2.8 metres at 0.9% copper, downgrading the size and grade potential of this target. Further drilling was also undertaken on targets at Easy Street, Hellyer West, Hellyer Feeder Trend and D-Zone but generally failed to intersect significant alteration or mineralisation though they did add greatly to the overall geological understanding of the area.

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HALF-YEAR REPORT For the financial period ended 31 December 2010

3.2 REGIONAL EXPLORATION

3.2.1 Lake Margaret (EL 28/2009), (Bass 75% Clancy Exploration Limited25 %)

The Lake Margaret tenement is located 5km north of the Mt Lyell copper-gold mine and is considered prospective for highgrade North Lyell style copper-gold mineralisation as well as polymetallic VMS style mineralisation. During the period Bass has completed collection and analysis of 8,777 short-wave-infra-red spectra and 1,398 lithogeochemistry samples.

Preliminary interpretation of both data sets indicates the presence of high-sulphidation epithermal type alteration minerals, consistent with the style of alteration and high-grade copper mineralisation found in the glacial erratic boulders on the tenement and supports the interpretation of a proximal source for the boulders.

Drilling commenced on this tenement in March 2011.

3.2.2 New Tenements

Bass was granted two new Exploration licences during the period:

Sock Creek (EL 20/2010) (Bass 75% Clancy Exploration Limited25 %) - covers interpreted extensions of the Que-Hellyer host horizon and is considered prospective for Que River and Hellyer style mineralisation.

Mackintosh Creek (EL24/2010) (100% Bass) - this tenement was applied for as part of the gold recovery project. The licence covers outcropping and shallow extents of limestone that could potentially be mined and utilised as a neutralising reagent in the process routes proposed.

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

Figure 1: Bass current tenement holdings and Joint Venture interests.

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Note: The data presented in the Endowment Table above refers to historic production and published Mineral Resources as reported from Tasmanian Government Dept public database (MRT). This information should not be construed as compiled Mineral Resources but as an indication of the highly mineralised nature of the region.

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

3.3 COMPETENT PERSONS STATEMENTS

3.3.1 Mineral Resources & Exploration Results

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

3.3.2 Ore Reserves

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

Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 37.

Signed in accordance with a resolution of the directors:

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M Rosenstreich Managing Director

West Perth, Western Australia 16 March 2011

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

Note Sales revenue 2 Cost of sales 3 Gross profit/(loss) Other income 2 Other expenses 3 Share based payment expenses 3 Finance costs 3 (Loss) before income tax Income tax benefit (Loss) after income tax for the period Other comprehensive income/(loss) net of income tax Cash flow hedge taken to equity Total other comprehensive income/(loss) Total comprehensive income/(loss) for the period Profit/(loss) attributed to: Members of the parent entity Total comprehensive income attributed to: Members of the parent entity Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents)	Half-year ended 31 Dec 2010 $ 31 Dec 2009 $ 3,322,299 10,605,982 (4,581,959) (7,476,336)
	(1,259,660) 3,129,646 522,721 136,827 (4,006,244) (4,077,352) (368,773) (232,686) (439,191) (19,695)
	(5,551,147) (1,063,260) 1,302,060 247,454
	(4,249,087) (815,806)
	(6,513,288) -
	(6,513,288) -
	(10,762,375) (815,806)
	(4,249,087) (815,806)
	(10,762,375) (815,806)
	(2.42) (0.78) (2.42) (0.78)

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

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HALF-YEAR REPORT For the financial period ended 31 December 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

Note CURRENT ASSETS Cash and cash equivalents 5 Trade and other receivables Inventories Derivative financial assets Other assets Total Current Assets NON-CURRENT ASSETS Trade and other receivables Plant and equipment Mine properties 11 Capitalised exploration and evaluation 10 Other financial assets Deferred tax assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings 13 Derivative financial liabilities 14 Provisions Contingent consideration Total Current Liabilities NON-CURRENT LIABILITIES Borrowings 13 Derivative financial liabilities 14 Provisions Contingent consideration Deferred tax liabilities Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 4 Reserves Retained profits TOTAL EQUITY	31 Dec 2010 $ 30 June 2010 $ 9,703,667 9,471,543 2,312,251 4,719,522 549,621 527,048 - 148,370 413,621 61,976
	12,979,160 14,928,459
	2,781,892 2,765,392 30,019,070 26,656,530 29,763,113 17,756,958 15,196,590 13,564,128 464,186 179,277 7,460,396 5,444,367
	85,685,247 66,366,652
	98,664,407 81,295,111
	5,811,170 5,064,678 11,460,144 - 3,568,924 - 779,855 1,607,642 758,470 915,928
	22,378,563 7,588,248
	4,578,929 - 2,944,364 - 4,999,090 5,254,460 2,875,841 1,878,485 10,653,862 10,014,208
	26,052,086 17,147,153
	48,430,649 24,735,401
	50,233,758 56,559,710
	40,930,360 37,172,160 (4,662,587) 1,172,478 13,965,985 18,215,072
	50,233,758 56,559,710

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

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

Balance at 01 Jul 2009 Total comprehensive loss for the period Transactions with owners, recorded directly in equity Shares issued during the period 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 31 Dec 2009 Balance at 01 Jul 2010 Total comprehensive loss for the period Transactions with owners, recorded directly in equity Shares issued during the period 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 31 Dec 2010	Issued Capital $ Retained Profits/ (Accumulated Losses) $ Option Reserve $ Hedge Reserve $ Total Equity $
	22,294,441 18,621,106 799,631 - 41,715,178
	- (815,806) - - (815,806) 7,954,019 - - - 7,954,019 (696,630) - - - (696,630) 208,989 - - - 208,989 - - 232,686 - 232,686
	7,466,378 - 232,686 - 7,699,064
	7,466,378 (815,806) 232,686 - 6,883,258
	29,760,819 17,805,300 1,032,317 - 48,598,436
	37,172,160 18,215,072 1,172,478 - 56,559,710
	- (4,249,087) (6,513,288) (10,762,375) 3,831,600 - - - 3,831,600 (247,715) - - - (247,715) 74,315 - - - 74,315 100,000 - 678,223 - 778,223
	3,758,200 - 678,223 - 4,436,423
	3,758,200 (4,249,087) 678,223 (6,513,288) (6,325,952)
	40,930,360 13,965,985 1,850,701 (6,513,288) 50,233,758

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

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HALF-YEAR REPORT For the financial period ended 31 December 2010

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

Note Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Interest received Interest paid Net cash used in operating activities Cash flows from investing activities Purchase of plant and equipment Payments for exploration and evaluation Payments for development of mineral properties Payments for mining lease guarantee Proceeds/(payments) for derivative financial instruments Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayments 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 period Cash and cash equivalents at the end of the period 5	Half-year ended 31 Dec 2010 $ 31 Dec 2009 $ 8,209,274 9,636,040 (9,255,484) (6,204,447) 231,081 127,644 (19,233) (24,552)
	(834,362) 3,534,685 (3,472,744) (137,215) (1,634,764) (1,940,965) (13,808,487) (1,873,873) 70,000 - (62,456) (571,180)
	(18,908,451) (4,523,233) 3,831,600 13,703,581 16,377,552 - 13,500 (128,065) (247,715) (440,000)
	19,974,937 13,135,516 232,124 12,146,968 9,471,543 4,542,837
	9,703,667 16,689,805

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

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

1. Summary of Accounting Policies

(a) Basis of preparation

These general purpose financial statements for the interim half-year reporting period ended 31 December 2010 have been prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standards including AASB134: Interim Financial Reporting. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

This interim financial report is intended to provide users with an update on the latest annual financial statements of Bass Metals Ltd and its controlled entities (“the Group”). As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this financial report be read in conjunction with the annual financial statements of the Group for the year ended 30 June 2010, together with any public announcements made during the half-year.

(b) New or revised Standards and Interpretations that are first effective in the current reporting period

The Group has adopted the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current period. Other than those noted below, the same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements.

Impact of new and revised Standards and amendments thereof and Interpretations effective for the current period that are relevant to the Group include:

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9

In December 2009, the AASB issued AASB 9 Financial Instruments which addresses the classification and measurements of financial assets and is likely to affect the Group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The Group is yet to assess its full impact; however initial indications are that it will have no impact on the Group’s financial statements. The Group has yet to decide when to adopt AASB 9.

Amendments to AASB 5, 8, 101, 107, 117, 118, 136 and 139 as a consequence of AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

AASB 2009-5 introduces amendments to Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its Standards. A number of the amendments are largely technical, clarifying particular terms or eliminating unintended consequences. Other changes are more substantial; such as the current/non-current classification of convertible instruments, the classification of expenditures on unrecognised assets in the statements of cash flows and the classification of leases of land and buildings.

The adoption of these amendments have not resulted in any material changes to the Group’s accounting policies and have no effect on the amounts reported for the current or prior periods.

AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Amends a number of pronouncements as a result of the IASB’s 2008-2010 cycle of annual improvements to provide clarification of certain matters.

The key clarifications include:

• The measurement of non-controlling interests in a business combination;

• Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised AASB 3 Business Combinations (2008); and

• Transition requirements for amendments arising as a result of AASB 127 Consolidated and Separate Financial Statements.

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HALF-YEAR REPORT For the financial period ended 31 December 2010

The adoption of these amendments have not resulted in any material changes to the Group’s accounting policies and have no effect on the amounts reported for the current or prior periods.

(c) Accounting Standards not Previously Applied

The Group has also adopted the following Australian Accounting Standards during the current period.

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)

• 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 and 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.

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities are included as part of the carrying amount of the loans and borrowings.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

16

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

2. Revenue (a) Sales revenue Ore sales Total sales revenue (b) Other income Interest received Joint venture establishment fee Other revenue Total other income	31 Dec 2010 $ 31 Dec 2009 $ 3,322,299 10,605,982
	3,322,299 10,605,982
	231,081 136,827 1,845 - 289,795 -
	522,721 136,827

17

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

3. Expenses

(a) Cost of sales Production costs Amortisation of mine closure and restoration Amortisation of mining properties Royalties Treatment charges Total cost of sales (b) Other expenses Employee benefit expense Contracting and consulting expense Operating lease expense Other administration expense Depreciation – plant and equipment Amortisation – rehabilitation assets Impairment of capitalised exploration and evaluation expenditure Exploration expenditure expensed Hellyer operating infrastructure – care and maintenance Que River mine closure management Net loss on derivative financial instruments Total other expenses (c) Share based payments Share based payments (note 9) (d) Finance costs Finance costs Total expenses	31 Dec 2010 $ 31 Dec 2009 $ 2,467,921 3,618,889 52,401 - 1,629,109 2,193,277 49,012 512,775 383,516 1,151,395
	4,581,959 7,476,336
	487,360 593,731 496,853 359,447 60,619 44,970 722,159 298,948 110,204 59,767 120,821 - 2,302 791,395 117,924 92,081 1,561,127 980,525 116,049 - 210,826 856,488
	4,006,244 4,077,352
	368,773 232,686 439,191 19,695
	9,396,167 11,806,069

18

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

4. Movements in Issued Capital

At the beginning of the financial period Issued during the half-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 07 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 investors issued on 05 November 2010 •Ordinary shares issued at 25 cents in lieu of payment of brokerage fees and investor relations service retainer issued on 05 November 2010 •Ordinary shares issued at 23.9 cents pursuant to the employee share plan on 30 November 2010 •Ordinary shares issued at 22 cents pursuant to the employee share plan on 30 November 2010 Less share issue costs Current and previously unrecognised tax benefit relating to share issue costs Balance at the end of the financial period

31 Dec 2010 Number of Shares $ 30 June 2010 Number of Shares $ 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 - - (247,715) - (721,850) 74,315 - 216,555

186,253,796 40,930,360 170,505,386 37,172,160

5. Cash and Cash Equivalents

Included in cash and cash equivalents is a restricted amount of $623,000 (2010: $1,310,000) on deposit as credit support for short dated forward sales agreements.

19

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HALF-YEAR REPORT For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

6. Operating Segments

Segment Information

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision maker in assessing performance and determining the allocation of resources in accordance with AASB 8.

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; and

• the manufacturing or production processes.

Reportable segments

Tasmanian Operations - Mining

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

Tasmanian Operations- Processing

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

Exploration

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

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

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

Inter-segment transactions

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

Segment assets

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

Segment liabilities

The Group does not report liabilities to the chief operating decision maker that are allocated to the operating segments and consequently has not reported any liabilities in this note.

20

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HALF-YEAR REPORT For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

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).

21

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

(a) Segment Performance Half-year ended 31 December 2010 Revenue Sales to external customers Total segment revenue Reportable segment (loss) before income tax Reconciliation of reportable segment result to Group (loss) before income tax Unallocated items: • Interest revenue • Other profit/(loss) • 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 (loss) before income tax	Tasmanian Operations - Mining Tasmanian Operations - Processing Exploration $ $ $ 3,322,299 - -	Total $ 3,322,299
	3,322,299 - -	3,322,299
	(1,335,494) (1,613,528) (117,924)	(3,066,946) 231,081 291,636 (2,307,091) (210,826) (368,773) (120,228)
		(5,551,147)

22

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

(a) Segment Performance

Half-year ended 31 December 2009 Revenue Sales to external customers Total segment revenue Reportable segment profit/(loss) before income tax Reconciliation of reportable segment result to Group profit/(loss) before income tax Unallocated items: • Interest revenue • Other profit/(loss) • 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	Tasmanian Operations - Mining Tasmanian Operations - Processing Exploration $ $ $ 10,605,982 - -	Total $ 10,605,982
	10,605,982 - -	10,605,982
	3,129,647 (987,509) (874,064)	1,268,074 136,827 - (1,351,456) (856,488) - (232,686) (27,531)
		(1,063,260)

23

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

(b) Segment assets 31 December 2010 Reportable segment assets Segment asset additions during the period: • Plant and equipment • Mine properties • Capitalised exploration and evaluation Reconciliation of segment assets to Group assets Total assets for reportable segments Elimination of inter-segment assets Unallocated assets: • Cash and cash equivalents • Trade and other receivables • Plant and equipment • Derivative financial assets • Other assets • Deferred tax assets Total Group assets	Tasmanian Operations - Mining Tasmanian Operations - Processing Exploration $ $ $ 20,695,189 43,533,787 15,195,452 - 2,887,236 - 13,808,487 - - - - 1,634,764	Total $ 79,424,428 2,887,236 13,808,487 1,634,764
	13,808,487 2,887,236 1,634,764	18,330,487 79,424,428 (81,854) 9,703,667 2,391,985 602,394 - 590,773 6,033,014
		98,664,407

24

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

(b) Segment assets 30 June 2010 Reportable segment assets Segment asset additions during the period: • Plant and equipment • Mine properties • Capitalised exploration and evaluation Reconciliation of segment assets to Group assets Total assets for reportable segments Elimination of inter-segment assets Unallocated assets: • Cash and cash equivalents • Trade and other receivables • Plant and equipment • Derivative financial assets • Other assets • Deferred tax assets Total Group assets	Tasmanian Operations - Mining Tasmanian Operations - Processing Exploration $ $ $ 8,658,191 40,102,887 13,685,336 - 2,181,561 - 11,226,418 - - - - 3,873,326	Total $ 62,446,414 2,181,561 11,226,418 3,873,326
	11,226,418 2,181,561 3,873,326	17,281,305 62,446,414 (10,764) 9,471,543 4,728,166 341,769 148,370 152,628 4,016,985
		81,295,111

25

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

(c) Revenue by geographical region

The Group only operates within Australia.

(d) Major customers

The Group had one customer during the period, MMG Australia Limited.

7. Contingent Liabilities

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

8. Subsequent Events

There has not been any other matter or circumstance subsequent to the half-year that would have a material effect on the half-year report.

9. Share Based Payments

The following options were issued during the half-year:

• (a) On 22 September 2010, 3,000,000 unlisted options exercisable at $0.23 each on or before 22 September 2013 were issued to the Group’s financier as ratified by a resolution passed at the 2010 Annual General Meeting (AGM) of Shareholders.

hareholders.
Number of options	3,000,000
Fair value at grant date1	$0.10315
Share price	$0.215
Exercise price	$0.228
Volatility factor	70.0%
Expiry date of the options	22 September 2013
Risk free interest rate2	4.89%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 2 year Commonwealth Government Bond rate.

26

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

9. Share Based Payments

• (b) On 29 September 2010, 1,260,000 unlisted options exercisable at $0.22 each on or before 05 July 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 Annual General Meeting (AGM) of Shareholders.

eeting (AGM) of Shareholders.
Number of options	1,260,000
Fair value at grant date1	$0.06832
Share price	$0.165
Exercise price	$0.220
Volatility factor	70.0%
Expiry date of the options	5 July 2013
Risk free interest rate2	4.46%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 2 year Commonwealth Government Bond rate.

• (c) On 16 November 2010, 80,000 unlisted options exercisable on or before 05 July 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	80,000
Fair value at grant date1	$0.06832
Share price	$0.275
Exercise price	$0.220
Volatility factor	70.0%
Expiry date of the options	05 July 2013
Risk free interest rate2	4.46%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 3 year Commonwealth Government Bond rate.

• (d) On 16 November 2010, 200,000 unlisted options exercisable on or before 11 October 2014 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

n 16 November 2010,200,000 unlisted options exercisa e Group pursuant to the Group’s employee share option	ble on or before 11 October 2014 were issued t plan approved at the 2007 AGM of Shareholders
Number of options	200,000
Fair value at grant date1	$0.17358
Share price	$0.275
Exercise price	$0.205
Volatility factor	70.0%
Expiry date of the options	11 October 2014
Risk free interest rate2	4.95%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

27

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

9. Share Based Payments

• (e) On 16 November 2010, 200,000 unlisted options exercisable on or before 11 October 2014 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

e Group pursuant to the Group’s employee share option	plan approved at the 2007 AGM of Shareholders
Number of options	200,000
Fair value at grant date1	$0.15154
Share price	$0.275
Exercise price	$0.290
Volatility factor	70.0%
Expiry date of the options	11 October 2014
Risk free interest rate2	4.95%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 3 year Commonwealth Government Bond rate.

• (f) On 16 November 2010, 200,000 unlisted options exercisable on or before 11 October 2014 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

e Group pursuant to the Group’s employee share option	plan approved at the 2007 AGM of Shareholders
Number of options	200,000
Fair value at grant date1	$0.12850
Share price	$0.275
Exercise price	$0.410
Volatility factor	70.0%
Expiry date of the options	11 October 2014
Risk free interest rate2	4.95%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

• (g) On 16 November 2010, 100,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	100,000
Fair value at grant date1	$0.06253
Share price	$0.165
Exercise price	$0.250
Volatility factor	70.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	4.36%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

28

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

9. Share Based Payments

• (h) On 16 November 2010, 100,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	100,000
Fair value at grant date1	$0.04828
Share price	$0.165
Exercise price	$0.350
Volatility factor	70.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	4.36%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 3 year Commonwealth Government Bond rate.

• (i) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.24412
Share price	$0.315
Exercise price	$0.250
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 3 year Commonwealth Government Bond rate.

• (j) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.23027
Share price	$0.315
Exercise price	$0.350
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

29

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

9. Share Based Payments

• (k) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.21717
Share price	$0.315
Exercise price	$0.500
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

• (l) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.24631
Share price	$0.315
Exercise price	$0.250
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model. 2 Based on the 3 year Commonwealth Government Bond rate.

• (m) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.23288
Share price	$0.315
Exercise price	$0.350
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

• 1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

• 2 Based on the 3 year Commonwealth Government Bond rate.

30

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

9. Share Based Payments

• (n) On 11 February 2011, 200,000 unlisted options exercisable on or before 01 September 2013 were issued to employees of the Group pursuant to the Group’s employee share option plan approved at the 2007 AGM of Shareholders.

Number of options	200,000
Fair value at grant date1	$0.21717
Share price	$0.315
Exercise price	$0.500
Volatility factor	110.0%
Expiry date of the options	01 September 2013
Risk free interest rate2	5.110%

1 The basis of measuring fair value of the options was the Black-Scholes Option Pricing Model.

2 Based on the 3 year Commonwealth Government Bond rate.

10. Exploration and Evaluation Expenditure

The Consolidated Group has mineral exploration costs carried forward in respect of areas of interest currently in the phase of exploration and evaluation: Balance at the beginning of the period Expenditure capitalised for the period Write-off resulting from relinquished tenements Transfer to mine properties for development of Que River Write-off of project evaluation expenditure Balance at the end of the period

31 Dec 2010 $ 30 June 2010 $ 13,564,128 11,949,001 1,634,764 3,873,326 - (1,774,624) - (418,508) (2,302) (65,067)

15,196,590 13,564,128

31

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

11. Mine Properties

Consolidated Balance at 01 July 2010 Additions Additions through business combination Transfer from capitalised exploration and evaluation Amortisation expense Balance at 31 December 2010	Hellyer Tailings Dam Hellyer Operating Infrastructure – Mill Closure and Restoration 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 36,500 608,382 1,539,926 11,623,679 13,808,487 0 0 (52,401) (1,629,110) (120,821) (1,802,332)
	9,036,500 995,610 (0) 3,281,247 362,464 16,087,292 29,763,113

12. Capital and Leasing Commitments

There has been no significant change to capital and leasing commitments disclosed in the annual report at 30 June 2010.

32

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

13. Interest Bearing Loans and Borrowings

Current Insurance premium funding $5,000,000 silver loan $12,000,000 secured bank loan Non-current $5,000,000 silver loan $12,000,000 secured bank loan	31 December 2010 246,040 3,046,000 8,168,104 11,460,144 1,511,796 3,067,133 4,578,929	30 June 2010 - - -
		-
		- -
		-

(a) Fair Values

The carrying amount of the Group’s interest bearing loans and borrowings approximate their fair values

• (b) Assets pledged as security

Under the terms of the $12 million secured bank loan, the Group has granted a fixed and floating charge over all of its assets in favour of the financier. The charge remains in effect until Bass has fully discharged its financial indebtedness; including the maturing of outstanding zinc, lead and silver hedges.

(c) Defaults and breaches

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

33

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

14. Derivative Financial Instruments

	31 December 2010	30 June 2010
Current Assets
Forward commodity contracts - at fair value through profit or loss	-	148,370
Non-current Assets
Forward commodity contracts	-
Current Liabilities
Forward commodity contracts - cash flow hedges	3,568,924	-
Non-current Liabilities
Forward commodity contracts - cash flow hedges	2,944,364	-

(a) Instruments used by the Group

Derivative financial instruments are used by the Group in the normal course of business to hedge exposure to exchange rate and price risk associated with metal concentrates sold under US Dollar sales 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 sales of the hedged item.

Cash flows from the sale of lead, silver and zinc are timed to occur over the following two years. The hedge instruments are therefore also timed to mature during this period as outlined below:

Lead Forward Contracts	Tonnes Hedged	Average Price (A$)
0 - 1 years	5,123	2,410
1 - 2 years	3,286	2,410
Silver Forward Contracts	Ounces Hedged	Average Price (A$)
0 - 1 years	335,000	23.96
1 - 2 years	223,000	23.96
Zinc Forward Contracts	Tonnes Hedged	Average Price (A$)
0 - 1 years	8,270	2,459
1 - 2 years	5,386	2,459

These forward contracts have been specifically designated as a cash flow hedge in accordance with AASB 139 and quality for hedge accounting. Under hedge accounting, the proportion of the gain or loss that is 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.

34

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HALF-YEAR REPORT

For the financial period ended 31 December 2010

NOTES TO THE FINANCIAL STATEMENTS

14. Derivative Financial Instruments

(ii) Movement in commodity forward hedge reserve

Opening balance Transferred to gain / loss on derivative financial instruments Charged to other comprehensive income Closing Balance	31 December 2010 - - (6,513,288) (6,513,288)	30 June 2010 - - -
		-

Note . These amounts have not been tax-effected.

35

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HALF-YEAR REPORT For the financial period ended 31 December 2010

DIRECTORS’ DECLARATION

In the opinion of the directors the Consolidated Group:

1. The financial statements and notes set out on pages 11 to 35 are in accordance with the Corporations Act 2001 including:

2. (a) giving a true and fair view of the financial position of the Consolidated Group as at 31 December 2010 and of its performance, as represented by the results of its operations and cash flows for the half-year ended on that date; and,

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

4. There are reasonable grounds to believe that the Consolidated Group will be able to pay its debts as and when they become due and payable.

Dated at Perth, Western Australia this 16[th] day of March 2011.

Signed in accordance with a resolution of the directors:

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M Rosenstreich

Managing Director

36

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

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

T +61 8 9480 2000 F +61 8 9322 7787 E admin.wa@au.gt.com W www.grantthornton.com.au

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

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Bass Metals Ltd for the half-year ended 31 December 2010, I declare that, to the best of my knowledge and belief, there have been:

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

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

==> picture [101 x 45] intentionally omitted <==

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

==> picture [99 x 39] intentionally omitted <==

M J Hillgrove Director - Audit & Assurance

Perth, 16 March 2011

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

Liability limited by a scheme approved under Professional Standards Legislation

37

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

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

T +61 8 9480 2000 F +61 8 9322 7787 E admin.wa@au.gt.com W www.grantthornton.com.au

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

We have reviewed the accompanying half-year financial report of Bass Metals Ltd (“Company”), which comprises the consolidated financial statements being the statement of financial position as at 31 December 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors’ declaration of the consolidated entity, comprising both the Company and the entities it controlled at the half-year’s end or from time to time during the half-year.

Directors’ responsibility for the half-year financial report

The directors of the Company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express a conclusion on the consolidated half-year financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410: Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Bass Metals Ltd, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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Liability limited by a scheme approved under Professional Standards Legislation

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

Independence

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

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Bass Metals Ltd is not in accordance with the Corporations Act 2001, including:

• a giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of it’s performance for the half-year ended on that date; and

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

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Director - Audit & Assurance

Perth, 16 March 2011

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