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ANNUAL REPORT 2008

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

CORPORATE INFORMATION

This annual report covers both Carpentaria Exploration Limited (“Company” or “Carpentaria”) as an individual entity and the consolidated entity comprising Carpentaria Exploration Limited and its subsidiaries (‘the Consolidated Entity”). A description of the operations and of the principal activities is included in the directors’ report and the review of operations. The directors’ report is not part of the financial report.

Corporate Directory	Contents
Principal and Registered Office	Page
55 Little Edward Street	Number
Ground Level, Boundary Court
Spring Hill Qld 4000	Corporate Information	2
	Report of the Directors	3 – 19
PO Box 1019	Auditor Independence Declaration	20
Spring Hill QLD 4004	Shareholder Information and Mining Tenements	21 - 23
	Corporate Governance Statement	24 - 26
Telephone: +61 7 3161 3801	Income Statement	27
Facsimile: +61 7 3161 3786	Balance Sheet	28
Email: [email protected]	Statement of Changes in Equity	29
Website: www.carpentariaex.com.au	Statement of Cash flows	30
	Notes To and Forming Part of the Financial Statements	31 - 50
Directors	Declaration by Directors	52
Nick Sheard (Executive Chairman)	Independent Auditor’s Report to the Members	53 - 54

Nick Sheard ( Executive Chairman ) Mike Chester ( Non-Executive Director ) Bob Hair ( Non-Executive Director ) Stan Macdonald ( Non-Executive Director )

Company Secretary

Chris Powell

Solicitors

TressCox Lawyers Level 39, Central Plaza One 345 Queen Street Brisbane Qld 4000

Auditor

PKF Chartered Accountants Level 6, 10 Eagle Street Brisbane Qld 4000

Share Registry

Link Market Services Limited Level 12, 300 Queen Street Brisbane Qld 4000

Investor enquires

Nick Sheard – Executive Chairman; or - Chris Powell – Company Secretary Phone: 07 3161 3801 Fax: 07 3161 3786 E-mail: [email protected]

ASX Code

Shares: CAP Options: CAPO

Independent Accountants BDO Kendall Level 18, 300 Queen Street Brisbane Qld 4000

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

REPORT OF THE DIRECTORS

The directors present their report for the year ended 30 June 2008.

Executive Chairman’s Report

Since listing in November 2007 Carpentaria has maintained a very active exploration program in NSW and Queensland. We have continued to fill our project pipeline with quality projects in areas with known mineralised systems through either direct 100% tenement acquisitions or farm-in deals and an acquisition of one company that holds strategic tenements and a letter of intent to purchase another company, which upon completion of due diligence will deliver to Carpentaria 100% ownership of six coal tenement applications on the northern boundary of the Galilee Basin in Queensland (FTB (Qld) Pty Ltd).

In excess of 2500m of drilling has been undertaken at the Glen Isla Project and the Combaning Project in NSW, and through a joint venture at the Redbank Project in Queensland. A major airborne electromagnetic (VTEM) survey was flown over part of the Combaning tenement, and a significant number of rock chip and soil sampling and geophysics has been undertaken across the portfolio.

The initial drilling has confirmed the presence of gold at Glen Isla, and follow up drilling has been completed, with assays awaiting. At Combaning, on the Merri Hill prospect, recent drilling is currently underway to confirm the presence of quartz veining below known gold intercepts. Also at this target drilling will be undertaken to obtain bulk samples for metallurgical testing of a nickel oxide target previously noted on this prospect.

Our substantial geological, sampling and geophysical program has defined gold targets for drilling at the Panama Hat joint venture, lead, zinc, silver targets at Laing’s Lode, and tin, tungsten and gold targets at Euriowie. These targets will be followed up in the upcoming year.

Carpentaria has been successful in achieving a Queensland Government Assistance Grant under the Collaborative Drilling Initiative (CDI) to test two high priority targets at the Mt Agate Project in Queensland. The award of this grant is an endorsement of our targets and will allow our drilling dollars to go further. A drill contract has been awarded to start drilling early 2009.

The Company has followed our stated strategy of exploring in areas with known mineralised systems, and we have expanded our search criteria to include strategic minerals such as tin, tungsten, rare earth metals, and the bulk commodities, coal and iron ore. For example, through a joint venture Carpentaria has 100% interests in the Euriowie tin field north of Broken Hill in NSW, a known tin producing area that has had little exploration done since the early 1900s and no documented drill holes. This is an exciting play for our Company.

With this same strategy Carpentaria has applied for nine coal tenements in the northern Galilee Basin contiguous to the six coal exploration applications of FTB (Qld) Pty Ltd. These tenements have coal intersections documented in water bores, and it is the Company’s intent to better define these intercepts and coal quality through drilling either on sole funded basis or with a partner.

It is intended to continue this strategy with an active program in order to facilitate rapid discovery and build shareholder value.

In June 2008, the Company undertook a loyalty option placement that raised $211,384, which was used to supplement working capital for our exploration campaign.

In our first year of operation, Carpentaria has established itself as a serious exploration company, successfully defining and acquiring quality projects. In the coming year the company intends to maintain this aggressive exploration strategy and successfully establishing resources in at least one of these projects.

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Nick Sheard Executive Chairman

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Profile of Directors and Senior Management

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

Name

Stuart Nicholas Sheard Stanley Alan Macdonald Rodney Michael Joyce Robert William Hair Michael Peter Chester

Nick Sheard

Experience

Other current directorships

Special Responsibilities

Interest in shares and options

Period of directorship Executive Chairman Appointed March 2007 Non-Executive Director Appointed April 2007 Non-Executive Director Appointed October 2004, Resigned 6 Sept 2007 Non-Executive Director Appointed August 2007 Non-Executive Director Appointed January 2008

Executive Chairman

— Nick has over 30 years experience in the industry – most recently Vice President -Exploration for Inco Limited, formerly the world's second largest producer of nickel. Prior to that Nick was the Global Exploration Manager for M.I.M. Holdings Limited, after initially being employed by MIM as Chief Geophysicist. Nick developed the novel MIMDAS electrical survey system currently being used commercially as a deep seeking quality EM and IP system. He is a member of ASEG and AIG and is Registered Professional Geoscientist – Mineral Exploration and Geophysics.

— Director of Mirabela Nickel Ltd since March 2007 Apart from this he has not been a director of a listed company for the last 3 years.

Company operations, promotion and project acquisition.
1,000,000 Options exercisable 30 June 2010 @ A$0.30c

Stanley A Macdonald

Experience

Other current directorships

Non Executive Director

— Stan Macdonald has been associated with the mining and exploration industry for over 20 years.

Director of Giralia Resources NL since April 1991.

Apart from this he has not been a director of a listed company for the last 3 years

Special Responsibilities

Company promotion and project acquisition
Interest in shares and options — 1,176,819 ordinary shares

1,088,410 Options exercisable at 30 cents expiring 30 June 2010 Creekwood Nominees Pty Ltd (Stan Macdonald is a director of Creekwood Nominees Pty Ltd) 247,850 ordinary shares

123,925 Options exercisable at 30 cents expiring 30 June 2010

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Mike Chester — Non Executive Director Experience — Mike is currently a director of Axiom Advisory Pty Ltd, an independent boutique corporate advisory firm specialising in capital raisings, corporate advisory, IPOs, investor relations and seed capital transactions for small to medium sized companies in the industrial and natural resources sectors. He has extensive past experience in investment banking and corporate finance at County NatWest/Salomon Smith Barney and as a mining analyst. Other current directorships — No other listed directorship, Mike has not been a director of another listed company in the last 3 years. Special Responsibilities — Company promotion Interest in shares and options — 86,401 ordinary shares 43,201 Options exercisable at $0.30 cents expiring 30 June 2010 Bob Hair — Non Executive Director Experience — Bob is by background a lawyer with over 19 years’ experience in the resources sector. Previously a lawyer, director of subsidiary companies and Commercial Manager and General Manager in the MIM group in Australia, Asia, Europe, North America, South America, and GM Commercial for the ASX listed Highlands Pacific Limited. Mr Hair is Company Secretary of Washington Resources Limited Other current directorships — Non-executive director of Washington Resources Limited (since 7 March 2007) and Northern Uranium Limited. (since 22 June 2006) Apart from these he has not been a director of a listed company for the last 3 years. Special Responsibilities — Company promotion, corporate governance Interest in shares and options — 20,000 ordinary shares 510,000 Options exercisable at 30 cents expiring 30 June 2010

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Senior Management

The names and details of the Company’s key personnel during the financial year and until the date of this report are as follows.

Doug Brewster Exploration Manager

Doug is a career geologist with 20 years Australian and International mineral exploration experience, and is considered an Eastern Australian exploration specialist. He has worked with major companies (including Rio Tinto and Delta Gold) and numerous exploration companies. He has considerable experience in gold, base metal diamond, and mineral sands exploration and in value-adding acquisition experience. Doug was responsible for acquiring the Brown’s Creek exploration tenement in the Cadia district of NSW, which led to the Cadia discovery.

Chris Powell

Company Secretary

Chris has had previous experience across a number of industries in similar roles. He has a wealth of administration and financial knowledge and has assisted the Company through the listing process.

Bruce Acutt

Joint Company Secretary

Bruce trained and worked as an accountant with major accounting firms in the audit and resources sector. He has been associated with the mining and exploration sector for over 20 years. He is currently company secretary of Giralia, PacMag Metals Limited, U3O8 Limited and Elemental Minerals Limited. (Resigned as Joint Company Secretary of Carpentaria Exploration Limited on 21 July 2008)

Corporate Information

Corporate Structure

Carpentaria is a company limited by shares and incorporated and domiciled in Australia whose shares are publicly traded on the Australian Stock Exchange (ASX). Carpentaria has prepared a consolidated financial report encompassing the entities that it controlled or had significant influence over during the financial year:

Carpentaria had the following investments in controlled companies throughout the financial year:

Willyama Prospecting Pty Ltd

Nature of operations and principal activities

The principal activity of the Company during the course of the financial year was mineral exploration. Following listing on ASX on 17 November 2007, the Company has commenced exploration activity on its projects in Queensland and New South Wales.

There was no significant change in the nature of the activity of the consolidated entity during the year.

Operating and Financial Review

	Consolidated	Consolidated	Parent	Entity
	2008	2007	2008	2007
	$	$	$	$
Operating Results
Operating loss after tax from continuing activities	835,470	2,464	834,918	2,464
Operating loss after tax from discontinued activities	-	-	-	-
Operating loss after income tax attributable to members	835,470	2,464	834,918	2,464

During the year, Carpentaria Exploration Limited commenced mineral exploration activities in Australia.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Review of Financial Position

Capital structure

Significant changes in the state of affairs of Carpentaria during the financial period ended 30 June 2008 were as follows:

An increase in share capital of $8,474,443 as a result of the following:

a) Carpentaria was admitted to the Official List of the Australian Securities Exchange on 14 November 2007 and the issue of 30,000,000 ordinary shares at $0.25c per share
b) Pro-rata entitlements issue of 1 new option, exercisable at $0.30c on or before 30 June 2010, for every 2 ordinary shares held by shareholders at an issue price of $0.01. 21,131,384 options were allotted.
c) Net cash received from the increase in share capital was principally invested in term deposits, and used for mineral exploration activities in Australia.

Treasury policy

The Board controls the funds which are handled on a day to day basis by the Company Secretary.

Liquidity and funding

Cash includes cash on hand and at call and term deposits with banks readily convertible to cash and is used in the cash management function on a day to day basis.

Dividends

No dividends were paid during the financial year ended 30 June 2007 and no dividend is recommended for the current year.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

REVIEW OF OPERATIONS

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Figure 1. Carpentaria’s tenements and JV interests

Summary

Carpentaria has had nearly one full year of operation. During the year drilling, sampling, geological and geophysical investigations have advanced the portfolio considerably. At Glen Isla second stage drilling to define high grade feeder zones has been completed (results awaited). At Combaning drill testing is underway to test for gold mineralisation and obtain some bulk samples for metallurgical testing of a nickel oxide at the Merri Hill prospect. In the Broken Hill region, gold, lead/zinc and tin/tungsten targets are being followed up. A grant from the Queensland Government to assist drilling two targets on the Mt Agate tenement has been awarded. Drilling will commence early next year.

During the year Carpentaria purchased a company, Bulldozer Prospecting Pty Ltd., which holds tenements in NSW with areas of known mineralisation.

The continuous search for quality opportunities has lead to Carpentaria into agreeing to purchase a company, FTB (Qld) Pty Ltd which holds six EPC applications in the northern part of the Galilee Basin with documented coal intersections. A letter of intent to purchase has been signed and a sales agreement should be signed in October. Although this is “greenfield” coal exploration areas it is considered that potential may exist for large tonnage thermal coal or in-seam liquification or gasification.

In the coming year Carpentaria plans to continue its aggressive exploration campaign undertaking, mapping, sampling, geophysics and drilling.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Glen Isla (Gold) - CAP 100%

This tenement is located in the Lachlan Fold Belt (LFB), approximately 15 km NNE of the Peak Hill Gold Mine, about 50 kms southwest of the major regional centre of Dubbo and near the township of Tomingley. It lies within a north south belt of lode quartz, porphyry and epithermal gold deposits that extend from Forbes in the south through North Parkes (Goonumbla), Peak Hill and to Tomingley.

In March / April 2008 a four hole 650m diamond drilling program was directed to identifying feeder structures to the large Glen Isla epithermal gold system with the potential for higher grade gold mineralisation. A new target zone centred around and intersection of 8m at 0.56g/t Au from 10.5m in DD08GIA29 in a zone of structural complexity was identified. A six hole, 993m reverse circulation (RC) drilling program was completed in September 2008. The drilling was targeting previously untested gold, antimony and silver soil anomalies and interpreted mineralised structural traps derived from Carpentaria’s previous drilling program. Results from this program are awaited.

An additional tenement adjacent to the Glen Isla, EL 6931 (Tanners Creek), was acquired during the quarter via purchase of Bulldozer Prospecting Pty Ltd. EL 6931 covers extensions of the volcanic sequence hosting the Glen Isla gold mineralised system and consolidates Carpentaria’s control of this geological prospective unit.

Combaning (Gold, Nickel) - CAP 100%

The Combaning tenement, EL 3077, covers parts of the Temora and Springdale Goldfields, which have been significant past gold producers. The tenement is located 40 kms northeast of Wagga Wagga.

A helicopter borne electromagnetic (EM) survey – VTEM – was conducted to define gold, nickel and other base metal targets. 1848 line kms of both electromagnetic and magnetic data was collected to assist in mapping the prospective areas and defining targets.

A number of targets have been identified including the Merri Hill Prospect which is associated with a discrete magnetic anomaly (figure 2) where prior drilling had encountered significant high-grade gold intersections including 2.0m from 42m at 9g/t gold in SMRC017 and 4m from 54m at 4.18g/t gold. A zone of oxide nickel mineralisation (best 8m from 20m at 1.45% nickel) was also located over at least 200m of strike above the ultramafic unit. The past drilling was shallow, with few holes penetrating below 60m vertical depth below surface. An RC drilling program is currently underway to further test both the gold and nickel targets.

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Figure 2. Airborne magnetic data with expanded three dimensional airborne magnetic data view

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Combaning (Gold, Nickel) - CAP 100% (continued)

The Ingola target as shown in figure 2 is also considered a priority target as it is a discrete elongate magnetic anomaly very similar to Merri Hill. The system has poor bedrock exposure and has not been drill tested. An RC program is being undertaken to test this anomaly.

The RC program is anticipated to be completed in early October and assay results about one month later. Another priority target known as Wave Hill (see figure 2) comprises of several airborne electromagnetic (AEM) targets identified near a high amplitude sub-circular aeromagnetic anomaly. The AEM anomalies have been interpreted as shallow weakly conductive features possibly sourced by tourmaline-quartz-topaz breccia and have potential for intrusion related tin-tungsten mineralisation. This will be drill tested when access is available. Elsewhere in the Combaning tenement significant gold intersections have been recorded by previous explorers. These intersections will be followed up as access permits.

Kallara (Gold, Tin, Tungsten) - CAP 100%

This tenement ELA 3470 was applied for to secure ground north of the Wave Hill anomaly (described above) and is contiguous to the Combaning tenement. A magnetic signature, evident in the regional magnetic data, somewhat weaker than the Wave Hill anomaly but of similar dimensions has been covered. Work will be undertaken on this when the tenement is granted.

Laing’s Lode (Lead, Zinc, Silver) - CAP 100%

The Laing’s Lode EL is located approximately 30km due north of Broken Hill and was applied for to investigate the potential of the LL prospect which was previously investigated by CRAE. A program of 276 rock chip samples from quartz-gahnite exposures was undertaken. The results confirm the previous CRAE work over “LL” prospect where elevated lead and zinc were noted. Unfortunately structural mapping would suggest that mineralisation would be poddy and limited in extent so no drilling is anticipated on the LL prospect.

Elsewhere in the tenement however sampling of quartz-gahnite and related rock type exposures has revealed highly anomalous geochemistry results including previously unknown elevated silver and lead concentrations. Examples include sample 2731: 14.1 g/t Ag; 2.89% Pb and 1.94% Zn, and sample 2732: 19 g/t Ag; 2.58% Pb and, 0.98% Zn. It is intended to follow up this work with additional sampling, geophysics and drilling in the coming year.

Panama Hat (Gold) - Farm-in

An agreement was signed with Stellar Resources Ltd. early in the June Quarter for an option to enter a joint venture on that company’s Panama Hat EL6656. This option was triggered and a Farm-in commenced such that upon successful exploration Carpentaria can earn initially 51% of the project and increase to 91% of the project depending upon Stellar’s participation. (with Stellar free carried till the completion of a bankable feasibility study). If Stellar does not participate in mining Carpentaria can purchase the Stellar’s free carried 9%.

In order to confirm previous high grade gold results from early explorers and better identify the extent of gold in this poorly exposed area, a total of 42 grab and rock chip samples was taken in the vicinity of small pits and workings within EL 6556. A sub-audio magnetic (SAM) electrical geophysical survey was also undertaken to assist map and identify structures that may be associated with these gold anomalies. Results from this work are shown on figure 3.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

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Figure 3. Panama Hat EL 6556 - sample locations with peak gold results on a regional and detailed (SAM) magnetics (inserted) image base plan.

The rock samples returned highly elevated gold, silver, bismuth and copper (Au, Ag, Bi, Cu) geochemistry. A peak gold analysis of 34.7 g/t Au, 13.9 g/t Ag, 329 ppm Bi and 514 ppm Cu was returned from a ferruginous quartz rock sampled at the Mulculca Telephone Prospect. A number of other rock samples from both the Mulculca Telephone and Panama Hat locations returned Au concentrations exceeding 5 g/t Au. Twelve of the 42 samples taken returned Au concentrations exceeding 1.0 g/t and the average gold concentration for the entire 42 rock samples was an encouraging 0.32 g/t.

Further work on this tenement will include auger sampling to map the extents of the gold anomalies under the extensive cover and then drilling to test the elevated gold.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Euriowie (Tin, Tungsten, Gold) – JV

In December 2007, Carpentaria entered into a joint venture with Sunrise Minerals Pty Ltd on EL6936. Carpentaria has the right to earn a 100% interest in all base and precious metals (other than lithium) and will pay Sunrise a 1% NSR on any future mine production.

The tenement is considered prospective for tin, tungsten and rare metals. It encloses the bulk of the Euriowie Pegmatite Tin (Sn) field. The field contains a large number of pits and was primarily worked between 1884 and 1900 although sporadic production occurred up until the middle of the twentieth century. Historic estimates suggest approximately 185 t of cassiterite (approximately 140 t of Sn metal) was produced during the pre 1907 mining phase. (Carne1911 The Tin-mining Industry and Distribution of Tin Ores in New South Wales. Mineral Resources. Geological Survey of New South Wales, 14, 378 pp.). It is important to note that no modern exploration has been undertaken and no drilling has been recorded on this tenement.

A field visit to assess the tin / tungsten and gold potential of this tenement was undertaken in August. A total of 66 samples were taken. Of these 2 samples returned 17g/t Au, 2.3 g/t Ag, 0.13 % Cu & 0.21% Pb; 10.95 g/t Au, 5.3 g/t Ag, 0.38% Cu, and 0.46 % Pb. Results for the remaining 64 samples that concentrated on the tin/tantalum potential are being awaited.

An exploration program for this year will be formulated once the assay results are returned.

Lady Inez (Copper, Gold) - CAP 100%

The Lady Inez tenement is located in rugged terrain 120 km WNW of Bundaberg. Land owner access has been completed and data compiled to assess the potential for copper/ gold skarn mineralisation. A reconnaissance field visit has been made assess access to target areas. Geological investigations are due to commence and will include mapping, sampling and drilling.

Burta (Copper, Gold) - CAP 100%

Carpentaria has been recently granted the EL 3467 which is 65 km west of Broken Hill in NSW. The project has potential for copper and gold. No work has yet been undertaken on the tenement.

Redbank (Nickel) - CAP 100%

The Redbank nickel laterite project was farmed out to GBM Resources Ltd (ASX:GBZ). As part of the farmout conditions drilling was undertaken to test for near surface nickel laterite. Unfortunately the results were negative and GBM withdrew from the project. No further work is planned.

Cargoon (Nickel) - CAP 100%

A data compilation has been undertaken and a field review is anticipated.

Mt Agate (Copper, Gold) - CAP 100%

At the Mt Agate Tenement (EPM 14955) Carpentaria has been successful in achieving a Queensland Government Assistance Grant under the Collaborative Drilling Initiative (CDI) to test two high priority geophysical targets, QMH and Mt Shelia. These targets are considered to have potential for iron-oxide copper gold (IOCG) mineralisation analogous to the Ernest Henry deposit. A secondary but very closely related target is precious and base metal mineralised massive sulfide magnetic skarns hosted by contact metamorphosed primary iron-rich or calcareous sedimentary units.

Other potential drill targets in this EPM include the Mt Devoncourt Prospect which has past reported drill intersections of 30.5 metres @ 1.25 % copper, and 12 metres @ 2.55% copper (See Figure 5). A drill contract has been awarded for early next calendar year.

Waterford (Uranium) - CAP 100%

This tenement was granted in March 2008. Data compilation has been undertaken and a work program to test for roll front uranium is being constructed.

Matters Subsequent to the End of the Financial Year

In August 2008 Carpentaria entered into an agreement to purchase 100% of FTB (Qld) Ltd.. FTB has six EPC (Exploration Permits Coal) applications near Hughenden in Queensland. Once granted these assets will allow Carpentaria to explore for coal in this underexplored region. Given the current global coal market it is considered that Carpentaria could attract a farm-in deal on these tenements which would essentially include a substantial drilling program sponsored by the third party. This will give Carpentaria shareholders an exposure to coal exploration and potential rewards at a limited financial cost.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Carpentaria also took out nine (9) further EPC contiguous with the FTB applications, see figure 4. All bar one of the tenements have water bore data that suggesting that coal has been intersected at varying depths. Only limited exploration has been undertaken in this area and it is interpreted that the coal intercepts in the southern part of the area are in the Betts Beds of the Galilee basin and the shallower intercepts in the northern part of the EPC’s are in the Blantyre Sandstone of the Eromanga Basin and considered to be the equivalent of the Walloon coal measures of the Surat Basin.

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Figure 4. FTB and CAP EPC applications with respect to other applications as of September 20th 2008.

The tenement application areas are considerable but the data is sparse. There is potential for large tonnage open cut thermal coal particularly in the northern parts of the area. To the south the coal could have potential for in- seam processing for either gas or liquids. A data compilation is underway to establish a drilling program to confirm the presence of coal, obtain an estimate of coal quality and extent.

Likely Developments and Expected Results of Operations

In late August and September drilling has been undertaken at Glen Isla and Combaning. Assay results are pending. Favourable results on either prospect will considerably enhance the prospect and would lead to follow up drilling designed to outline potential resources.

Environmental Regulation and Performance

The Company’s operations are subject to environmental regulations in relation to its exploration activities. The Directors are not aware of any significant breaches during the period covered by this report.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

REMUNERATION REPORT

This report outlines the remuneration arrangements in place for the directors and key management personnel of Carpentaria Exploration Limited (the Company).

Remuneration Policy

The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives.

The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash, equity and fringe benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Company. Further details on the remuneration of directors and executives are set out in this Remuneration Report.

The Company aims to reward the executive directors and key management personnel with a level and mix of remuneration commensurate with their position and responsibilities within the Company. The Board’s policy is to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering long-term incentives.

In accordance with best practice corporate governance, the structure of non-executive director and executive director and key management personnel remuneration is separate and distinct except that non-executive directors, as well as executives, participate in incentives involving the issue to them of securities in the Company.

Non-Executive Director Remuneration

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

The Company’s specific policy for determining the nature and amount of emoluments of board members of the Company is as follows:

In accordance with the Constitution, the existing Shareholders of the Company have determined in general meeting the maximum non-executive director remuneration to be $220,000 per annum.

The Directors have resolved that each non-executive director is entitled to receive fees of $30,000 per annum (plus superannuation) and the Chairman of Directors is entitled to receive $50,000 per annum (plus superannuation). Payments of fees will be in addition to any payments to directors in any employment capacity. A Director will not be entitled to receive Directors’ fees if he or she is employed by the Company in a full-time executive capacity.

A Director may also be paid fees or other amounts as the Directors determine if a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties.

The remuneration of non-executive directors for the year ending 30 June 2008 is detailed in Table 1 of this Remuneration Report.

Executive Chairman and Key Management Personnel Remuneration

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

The remuneration of the Executive Chairman and key management personnel for the period ending 30 June 2008 is detailed in Tables 1 and 2 and details of options issued are set out in Table 3.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Employment Contracts

Agreement with Executive Chairman

On 17 August 2007, the Company and Mr Nick Sheard entered into an agreement containing the terms and conditions under which he will provide his services as chief executive officer of the Company. The agreement came into effect upon the Company’s listing on the Australian Stock Exchange, which occurred on 14 November 2007.

The agreement:

has a term of three years;
involves the payment to Mr Sheard of an annual salary of $220,000 plus superannuation payments as required by the Governments Superannuation Guarantee Levy, currently 9% (increasing by reference to the consumer price index each year) and reimbursement of all reasonable business expenses;
has provision for three months’ notice for termination. The Company may terminate this employment agreement by providing 12 months written notice or providing payment in lieu of the notice period (being $220,000, based on the fixed component of Mr Sheard’s remuneration); and
otherwise contains standard terms relating to confidentiality, conflicts of interest and representations and warranties.

Agreement with Company Secretary

On 1 June 2007, the Company and Mr Chris Powell entered into an agreement containing the terms and conditions under which the services of Company Secretary are provided to the Company. The agreement came into effect upon the Company’s listing on the Australian Stock Exchange, which occurred on 14 November 2007.

The agreement:

has a term of three years;
involves the payment to the Mr Powell an annual salary of $120,000 plus superannuation payments as required by the Governments Superannuation Guarantee Levy, currently 9% (increasing by reference to the consumer price index each year) and reimbursement of all reasonable business expenses;
has provision for two months’ notice for termination; and
otherwise contains standard terms relating to leave, confidentiality, conflicts of interest and representations and warranties.

Agreement with Exploration Manager

On 9 August 2007, the Company and Mr Doug Brewster entered into an agreement containing the terms and conditions under which the services of Exploration Manager are provided to the Company. The agreement came into effect upon the Company’s listing on the Australian Stock Exchange, which occurred on 14 November 2007.

The agreement:

has a term of three years;
involves the payment to the Mr Brewster an annual salary of $192,500 plus superannuation payments as required by the Governments Superannuation Guarantee Levy, currently 9% (increasing by reference to the consumer price index each year) and reimbursement of all reasonable business expenses;
has provision for one months notice for termination. The Company may terminate this employment agreement by providing one month’s written notice and providing payment in lieu of the notice period (being $48,125, three months’ salary based on the fixed component of Mr Brewster’s remuneration); and
otherwise contains standard terms relating to confidentiality, conflicts of interest and representations and warranties.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Details of Directors and Key Management Personnel

Name

Stuart Nicholas Sheard Executive Chairman Stanley Alan Macdonald Non-Executive Director Rodney Michael Joyce Non-Executive Director Robert William Hair Non-Executive Director Michael Peter Chester Non-Executive Director

Detail

Appointed March 2007 Appointed April 2007 Appointed October 2004 Resigned 6 September 2007 Appointed August 2007 Appointed January 2008

Key Management Personnel 2008 Name Detail Stuart Nicholas Sheard Executive Chairman Commenced 14 November 2007 Doug Brewster Exploration Manager Commenced 14 November 2007 Chris Powell Company Secretary Commenced 14 November 2007 Bruce Acutt Joint Company Secretary Commenced April 2004 Resigned 21 July 2008

Key management personnel are those directly accountable and responsible for the operational management and strategic direction of the company and the consolidated entity.

Table 1: Director remuneration

2008 Directors Nick Sheard Stan Macdonald Robert Hair Mike Chester Mike Joyce	Short-term benefits Post employment benefits Share based payments Salary Consultancy Cash Non-Cash Superannuation Fees Agreement Bonus Benefits Contribution Options # Total Performance Related % $ $ $ $ $ $ $ 137,500 60,000 - - 12,375 155,540 365,415 - 20,000 - - - 1,800 54,750 76,550 - 20,000 10,000 - - 1,800 54,750 86,550 - 20,000 - - - 1,800 - 21,800 - - - - - - 54,750 54,750 -
	197,500 70,000 - - 17,775 319,790 605,065 -

2008
Directors
Nick Sheard
Stan Macdonald
Robert Hair
Mike Chester
Mike Joyce

Short-term benefits
Post employment
benefits
Share
based
payments
Salary
Consultancy
Cash
Non-Cash
Superannuation
Fees
Agreement
Bonus
Benefits
Contribution
Options #
Total
Performance
Related %
$
$
$
$
$
$
$
137,500
60,000
-
-
12,375
155,540
365,415
-
20,000
-
-
-
1,800
54,750
76,550
-
20,000
10,000
-
-
1,800
54,750
86,550
-
20,000
-
-
-
1,800
- 21,800
-
-
-
-
-
-
54,750
54,750
-

197,500
70,000
-
-
17,775
319,790
605,065
-

-The value of options treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payments.

Directors and Officers liability insurance forms part of remuneration, but has not been included in the remuneration of directors or key management personnel on the basis that it is impracticable to accurately allocate to each director and key management personnel.

Table 2: Remuneration of the named key management personnel

2008 Key Management Personnel Doug Brewster Chris Powell Bruce Acutt	Short-term benefits Post employment benefits Share based payments Salary Consultancy Cash Non-Cash Superannuation Fees Agreement Bonus Benefits Contribution Options # Total Performance Related % $ $ $ $ $ $ $ 120,312 - - - 10,828 76,650 207,790 - 75,000 - - - 6,750 27,375 109,125 - - - - - - 16,425 16,425 -
	195,312 - - - 17,578 120,450 333,340 -

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Table 3: Options issued as part of remuneration for the year ended 30 June 2008

The number and terms of the options issued are as follows:

2008	Grant date	Options	Fair	Exercise	Expiry date	Options
Director/Key		Granted	value	price per		Vested
Management			per	option
Personnel			option
			at grant
			date
			$	$
Nick Sheard	27/08/2007	1,000,000	0.1095	0.30	30/06/2010	1,000,000
Stan Macdonald	27/08/2007	500,000	0.1095	0.30	30/06/2010	500,000
Robert Hair	27/08/2007	500,000	0.1095	0.30	30/06/2010	500,000
Mike Joyce	27/08/2007	500,000	0.1095	0.30	30/06/2010	500,000
Doug Brewster	27/08/2007	400,000	0.1095	0.30	30/06/2010	400,000
Chris Powell	27/08/2007	250,000	0.1095	0.30	30/06/2010	250,000
Bruce Acutt	27/08/2007	150,000	0.1095	0.30	30/06/2010	150,000
Doug Brewster	14/11/2007	300,000	0.1095	0.30	30/06/2010	300,000
Nick Sheard	14/11/2007#	1,000,000	0.0100	0.40	14/11/2008	-
Nick Sheard	14/11/2007#	1,000,000	0.0215	0.50	14/11/2009	-
Nick Sheard	14/11/2007#	1,000,000	0.0318	0.60	14/11/2010	-

The board has resolved to issue the Managing Director an additional 3,000,000 unlisted options as part of his remuneration package. The issue of these options will require shareholder approval at the AGM.

The value of options granted in the year is the fair value of the options calculated at grant date using a Black-Scholes option-pricing model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period. The model takes into account the following factors:

Grant date	14/11/07	14/11/07	14/11/07	27/08/07
Vesting date	30/06/10	30/06/10	30/06/10	30/06/10
Exercise price	$0.40	$0.50	$0.60	$0.30
Share price at grant date	$0.17	$0.17	$0.17	$0.25
Life of the options	1 yr	2 yrs	3 yrs	3 yrs
Underlying share price volatility	65.00%	65.00%	65.00%	65.00%
Expected dividends	Nil	Nil	Nil	Nil
Risk free interest rate	7.00%	7.25%	7.50%	7.50%

Table 4: Options granted as part of remuneration

	Value of options	Value of options	Value of options	Total value of	% of remuneration
	granted during the	exercised during	lapsed during the	options granted,	consisting of
	year	the year	year	exercised and	options for the year
	$	$	$	lapsed during the
				year
				$
Directors
Nick Sheard	155,540	-	-	155,540	42.6%
Stan Macdonald	54,750	-	-	54,750	71.5%
Robert Hair	54,750	-	-	54,750	63.3%
Mike Chester	-	-	-	-	-
Mike Joyce	54,750	-	-	54,750	100.0%

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Table 4: Options granted as part of remuneration (continued)

Key Management Personnel Doug Brewster Chris Powell Bruce Acutt	Value of options granted during the year $ Value of options exercised during the year $ Value of options lapsed during the year $ Total value of options granted, exercised and lapsed during the year $ % of remuneration consisting of options for the year 76,650 - - 76,650 36.9% 27,375 - - 27,375 25.1% 16,425 - - 16,425 100.0%
	440,240 - - 440,240 46.9%

Meetings of Directors

The following table sets out the number of meetings of the Company’s directors and of the Audit and the Remuneration Committees held during the year ended 30 June 2008 and the number of meetings attended by each director.

	Directors’ Meetings	Audit	Remuneration
Number of meetings held	2	2	1
Number attended
Nick Sheard	2	2	1
Bob Hair	2	2	-
Mike Chester	2	-	1
Stan Macdonald	-	-	1

Indemnification of Officers or Auditor

Each of the Directors and the Secretary of the Company has entered into a Deed with the Company whereby the Company has provided certain contractual rights of access to books and records of the Company and certain indemnification to those Directors and Secretary.

The Company has insured all of the Directors of Carpentaria Exploration Limited. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act does not require disclosure of the information in these circumstances.

The Company has not indemnified its auditor.

Proceedings on Behalf of the Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purposes of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Share Options

At balance date there were a total of 25,331,384 restricted shares under options.

NumberofOptions	ExercisePrice	VestingDate	ExpiryDate
3,400,000	$0.30	27 August2007	30 June2010
300,000	$0.30	14 November 2007	30 June 2010
500,000	$0.27	7 January 2008	30 June 2010
21,131,384	$0.30	24 June 2008	30 June 2010

Subsequent to balance date, 800,000 options were granted as part of the Employee Share Option Plan with an exercise price of $0.15 and vesting date 30 June 2011.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Details of options issued, exercised and expired during the financial year are set out below:

Terms	01-Jul-07 Additions exercised expired 30-Jun-08
30 June 2010 30 June 2010 30 June 2010 30 June 2010 Expiring 30 June 2010 Weighted Average Exercise Price	- 3,400,000 - - 3,400,000 - 300,000 - - 300,000 - 500,000 - - 500,000 - 21,131,384 - - 21,131,384
	- 25,331,384 - - 25,331,384
	$0.29

Auditor Independence Declaration under Section 307c of the Corporations Act 2001

The Auditor’s Independence Declaration is attached and forms part of the Directors’ Report for the year ended 30 June 2008

Non-Audit Services

There were no non-audit services provided by the entity’s auditor, PKF.

Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the Company support and have adhered to the principles of corporate governance. The Company’s corporate governance statement is contained in a separate section of this report.

Signed in accordance with a resolution of the Board of Directors

==> picture [114 x 52] intentionally omitted <==

S N Sheard Executive Chairman Dated this 30th day of September 2008.

==> picture [92 x 64] intentionally omitted <==

Auditor's Independence Declaration

To: The Directors of Carpentaria Exploration Limited:

As lead engagement partner for the audit of Carpentaria Exploration Limited and its Controlled Entities for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been:

(i) no contraventions of the auditor independence requirements of the Corporations Act in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

PKF

CHARTERED ACCOUNTANTS

Albert Loots

Partner

Dated at Brisbane this 30[th] day of September 2008.

Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.au PKF | ABN 83 236 985 726

PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading as PKF. The East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice is a member of PKF International, an association of legally independent chartered accounting and consulting firms.

Liability limited by a scheme approved under Professional Standards Legislation

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

SHAREHOLDER INFORMATION

DISTRIBUTION OF NUMBER OF HOLDERS OF EACH CLASS OF SECURITIES AS AT 30 JUNE 2008

	Ordinary shares fully paid Escrow Ordinary shares Vesting 14/11/2009 Listed Option Exercisable @$0.30 30/06/2010
NumberofSecuritiesHeld	No.of holders No.of holders No.of holders
1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Number of shareholders holding less than a marketable parcel of shares	1,023 - 405 824 - 279 422 - 206 721 - 215 69 2 28
	3,059 2 1,133
	1,897 - -

TWENTY LARGEST HOLDERS OF EACH QUOTED SECURITY

			% Issued
Rank	Name	Balance	Capital
1	YANDAL INVESTMENTS PTY LTD	3,445,138	6.02%
2	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	2,685,838	4.69%
3	BREAMLEA PTY LIMITED	1,898,038	3.32%
4	MR STANLEY ALLAN MACDONALD	1,176,819	2.06%
5	GREY WILLOW PTY LTD	1,168,235	2.04%
6	MAXIGOLD HOLDINGS PTY LTD	1,125,541	1.97%
7	MR JOHN BEVAN TILBROOK	1,119,000	1.96%
8	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C	958,444	1.68%
9	ANZ NOMINEES LIMITED	885,752	1.55%
	MR GRAHAM DOUGLAS RILEY+MRS ANNE MARIE RILEY <THE RILEY SUPER
10	FUND A/C>	850,335	1.49%
11	MR WILLIAM HENRY HERNSTADT	784,924	1.37%
12	NATIONAL NOMINEES LIMITED	749,056	1.31%
13	AUSTRALIAN EXECUTOR TRUSTEES LIMITED	720,381	1.26%
14	MRS BARBARA ANNE BLEACH	613,123	1.07%
15	EQUITY TRUSTEES LIMITED	611,357	1.07%
16	MR ZBIGNIEW PUSCH	500,000	0.87%
17	CRESCENT NOMINEES LIMITED	448,646	0.78%
18	MS NADA GRANICH	406,492	0.71%
19	REXBURY NOMINEES PTY LTD	400,000	0.70%
20	MR DAVID BAY	377,170	0.66%
	TOTAL	20,924,289	36.57%
	Balance of Register	36,287,491	63.43%
	GRAND TOTAL	57,211,780	100.00%
Security: CAPES1 - ESCROW ORDINARY SHARES VESTING 14/11/2009
			% Issued
Rank	Investor	Balance	Capital
1	GIRALIA RESOURCES NL	6,788,220	87.16%
2	CARPENTARIA CORPORATION P/L	1,000,000	12.84%
	TOTAL	7,788,220	100.00%

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Security: CAPO - LISTED OPTION EXERCISABLE @ $0.30 EXP 30/06/2010

			%
			Issued
Rank	Investor	Balance	Capital
1	GIRALIA RESOURCES NL	3,394,110	16.06%
2	YANDAL INVESTMENTS PTY LTD	1,722,569	8.15%
3	BREAMLEA PTY LIMITED	949,019	4.49%
4	MR STANLEY ALLAN MACDONALD	588,410	2.78%
5	GREY WILLOW PTY LTD	584,118	2.76%
6	MAXIGOLD HOLDINGS PTY LTD	562,771	2.66%
7	MR JOHN BEVAN TILBROOK	559,500	2.65%
8	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	488,974	2.31%
	MR GRAHAM DOUGLAS RILEY + MRS ANNE MARIE RILEY <THE RILEY
9	SUPER FUND A/C>	425,168	2.01%
10	MRS BARBARA ANNE BLEACH	306,562	1.45%
11	ANZ NOMINEES LIMITED	254,888	1.21%
12	CARPENTARIA CORPORATION P/L	250,000	1.18%
13	MR ZBIGNIEW PUSCH	250,000	1.18%
14	TROJAN ONE PTY LTD	232,567	1.10%
15	CRESCENT NOMINEES LIMITED	224,323	1.06%
16	MS NADA GRANICH	203,246	0.96%
17	MIRRUP PTY LTD	200,000	0.95%
18	MR BRUCE RICHARD ACUTT	189,021	0.89%
19	BERNE NO 132 NOMINEES PTY LTD <399949 A/C>	171,527	0.81%
20	CRESCENT NOMINEES LIMITED	162,923	0.77%
	TOTAL FOR TOP 20:	11,719,696	55.46%
	TOTAL OTHER INVESTORS:	9,411,688	44.54%
	GRAND TOTAL:	21,131,384	100.00%

VOTING RIGHTS

All ordinary shares carry one vote per share without restriction.

SUBSTANTIAL SHAREHOLDERS

Substantial shareholders as shown in substantial shareholder notices received by the Company at 28 September 2008 are:

Name of Shareholder	Ordinary Shares
Yandal Investments Pty Ltd	3,445,138
Giralia Resources NL	6,788,220

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

INTERESTS IN MINING TENEMENTS

Carpentaria held the following interests in mining and exploration tenements as at 30 June 2008.

Queensland Tenements

Type	Title No	Location	Interest
Exploration Licence	EL 14170	Cargoon	100%
Exploration Licence	EL 14840	Redbank	100%
Exploration Licence	EL 14948	LadyInez	100%
Exploration Licence	EL 14955	Mt Agate	100%
Exploration Licence	EL 16393	Waterford	100%

New South Wales Tenements

Type	Title No	Location	Interest
Exploration Licence	EL 6246	Glen Isla	100%
Exploration Licence	EL6931	Tanners Creek	100%
Exploration Licence	EL6901	Combaning	100%
Exploration Licence	EL6857	LaingsLode	100%
Exploration Licence-JV Farm in	EL 6936	Euriowie	100% #
Exploration Licence-JV	EL6556	PanamaHat	100%^

- 100% Farm-in for all minerals other than lithium

^ - JV to earn potential Interest of 100%

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

CORPORATE GOVERNANCE STATEMENT

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

In August 2007, the ASX Corporate Governance Council released its Corporate Governance Principles and Recommendations (the “Recommendations”). In accordance with the Recommendations, the Corporate Governance Statement must contain certain specific information and must disclose the extent to which the Company has followed the guidelines during the period. Where a recommendation has not been followed, that fact must be disclosed, together with the reasons for the departure.

The Company’s Corporate Governance Statement is structured with reference to the Recommendations, which are as follows:

Principle 1. Lay solid foundations for management and oversight Principle 2. Structure the board to add value Principle 3. Promote ethical and responsible decision making Principle 4. Safeguard integrity in financial reporting Principle 5. Make timely and balanced disclosure Principle 6. Respect the rights of shareholders Principle 7. Recognise and manage risk Principle 8. Remunerate fairly and responsibly

Given the size of the Company and the number of Board members the Company is not in a position to be fully compliant with the Recommendations. The Company’s current policies do not meet the set out recommended practices in the following areas:

Recommendation 2.1 - A majority of the board should be independent directors:

The Company does not meet this recommendation as it does not have a majority of independent directors. The Board currently has three non-executive directors of whom two are independent directors.

Recommendations 2.2 and 2.3 - Recommendation 2.2 requires that the chairperson of a listed entity should be an independent director. Recommendation 2.3 requires that the roles of chairperson and chief executive officer should not be exercised by the same person. During the year, the Company did not meet these criteria, as the roles of Chairman and chief executive officer were held by the one person, who is an executive of the Company. The Board has reviewed this situation during the past financial year, including by investigating the availability of suitable personnel available and the consequential expense to the Company of such personnel and has determined that it is in the Company’s best interests to continue with the present structure in its current phase.

Recommendation 2.4 - The board should establish a nomination committee:

During the year, the Company did not meet the requirements of this Recommendation. The Company considers due to the size of the board and the nature of operations the current structure of the Audit Committee is appropriate to carry out its responsibility.

Recommendation 4.3 - Structure the audit committee so that it consists of only non-executive directors, a majority of independent directors, an independent chairperson who is not chairperson of the board, at least three members:

The Company has an audit committee consisting of two directors one of whom is an executive. It does not meet the recommendation. The Company considers due to the size of the board and the nature of operations the current structure of the Audit Committee is appropriate to carry out its responsibility.

For further information on corporate governance policies adopted by the Company, refer to our website: www.capex.net.au.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report. Directors are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment. The Company also takes into account the criteria for independence set out in the Recommendations.

In the context of director independence, “materiality” is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively material on the following basis - balance sheet items are material if they have a value of more than 5% of pro-forma net assets and profit and loss items are material if they will have an impact on the current year operating result of 10% or more. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the director in question to shape the direction of the Company’s loyalty.

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

NAME Mr Bob Hair Mr Mike Chester	POSITION Non-Executive Director Non-Executive Director

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of the Company are not considered to be independent:

NAME Mr Nick Sheard Mr Stan Macdonald	POSITION Executive Chairman Non-Executive Director	REASON THEREFORE Hold position of Chief Executive Officer (CEO) Officer of substantial shareholder

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

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

Name	Term in Office
Mr Nick Sheard	15 Months
Mr Stan Macdonald	14 Months
Mr Bob Hair	10 Months
Mr Mike Chester	6 Months

Remuneration Committee

The Board has established a Remuneration committee to ensure that the Board continues to operate within the established guidelines. The committee comprises non-executive directors namely S Macdonald and M Chester. For additional details regarding the Remuneration committee, please refer to the Statement of Corporate Governance Practices on our website (www.capex.net.au).

Audit Committee

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

The committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. The members of the audit committee during the year were Bob Hair (Chairman) and Nick Sheard.

For additional details of directors’ attendance at Audit and Risk Management Committee meetings and to review the qualifications of the members of the Audit and Risk Management Committee, please refer to the Directors’ Report.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Performance

The performance of the Board and executives is reviewed against both measurable and qualitative indicators. The nomination committee will conduct performance evaluations which will involve an assessment of each Board member’s and executive’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which directors and executives are assessed are aligned with the financial and non-financial objectives of the Company. Directors whose performance is consistently unsatisfactory may be sanctioned.

Remuneration

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality board and executive team by remunerating directors and executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature and amount of executive directors’ and executives’ emoluments to the Company’s financial and operational performance. Each executive remuneration is reviewed annually based upon individual and Company performance. The expected outcomes of the remuneration structure are the retention and motivation of executives, the attraction of quality management to the company and performance incentives which allow executives to share the rewards of the success of the Company.

For details on the amount of remuneration and all monetary and non-monetary components for each of the key management personnel during the year and for all directors, refer to the Remuneration Report in the Director’s Report.

In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the Company and the performance of the individual during the period.

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the chief executive officer and the executive team.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Notes Revenue 2 Employee benefits expense Depreciation and amortisation expenses 9 Other operating expenses 3 Loss before income tax (expense)/benefit Income tax (expense)/benefit 4 Loss after income tax Earnings per share Basic and diluted (loss) per share (cents per share) 20 Continuing operations Basic and diluted (loss) per share (cents per share) 20	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 261,786 114 261,786 114 (766,103) - (766,103) - (21,308) - (21,308) - (309,845) (2,578) (309,293) (2,578) (835,470) (2,464) (834,918) (2,464) - - - - (835,470) (2,464) (834,918) (2,464) (1.61) (0.05) (1.61) (0.05)
	(835,470) -
	(835,470)
	(1.61) (1.61)

The above income statements should be read in conjunction with the accompanying notes

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

BALANCE SHEETS AS AT 30 JUNE 2008

Notes
Current Assets
Cash and cash equivalents
5
Other receivables
6
Other assets
7
Total Current Assets
Non-Current Assets
Property, plant & equipment
9
Exploration and evaluation expenditure
10
Intangible assets
11
Other financial assets
8
Other receivables
6
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
12
Provisions
13
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
14
Reserves
15
Accumulated Losses
15
Total Equity

Consolidated
Parent Entity
2008
2007
2008
2007
$
$
$
$
5,429,561
60,146
5,429,560
60,146
213,719
52
213,719
52
122,798
-
92,798
-
5,766,078
60,198
5,736,077
60,198
31,873
-
31,873
-
2,515,421
45,746
2,425,981
45,746
23,201
-
23,201
-
-
-
1
-
-
-
119,992
-
2,570,495
45,746
2,601,048
45,746
8,336,573
105,944
8,337,125
105,944
150,283
83,062
150,283
83,062
34,045
-
34,045
-
184,328
83,062
184,328
83,062
184,328
83,062
184,328
83,062
8,152,245
22,882
8,152,797
22,882
8,499,789
25,346
8,499,789
25,346
490,390
-
490,390
-
- 837,934
- 2,464
- 837,382
- 2,464
8,152,245
22,882
8,152,797
22,882

The above balance sheets should be read in conjunction with the accompanying notes

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008

Consolidated

Balance at 1 July 2006 Issue of share capital Share issue costs Profit/(loss) for the period Balance at 30 June 2007 Issue of share capital Share issue costs Share-based payment expense Issue of options Profit/(loss) for the period Balance at 30 June 2008 Parent entity Balance at 1 July 2006 Issue of share capital Share issue costs Profit/(loss) for the period Balance at 30 June 2007 Issue of share capital Share issue costs Share-based payment expense Issue of options Profit/(loss) for the period Balance at 30 June 2008	Share Capital Accumulated Losses $ $ - - 60,100 - (34,754) - - (2,464)	Share Based Payment Reserve Total $ $ - - - 60,100 - (34,754) - (2,464)
	25,346 (2,464)	- 22,882
	8,750,000 - (486,871) - - - 211,314 - - (835,470)	- 8,750,000 - (486,871) 490,390 490,390 - 211,314 - (835,470)
	8,499,789 (837,934)	490,390 8,152,245
	Share Capital Accumulated Losses $ $ - - 60,100 - (34,754) - - (2,464)	Share Based Payment Reserve Total $ $ - - - 60,100 - (34,754) - (2,464)
	25,346 (2,464)	- 22,882
	8,750,000 - (486,871) - - - 211,314 - - (834,918)	- 8,750,000 - (486,871) 490,390 490,390 - 211,314 - (834,918)
	8,499,789 (837,382)	490,390 8,152,797

The Statements of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2008

		Consolidated	Consolidated	Parent	Entity
		2008	2007	2008	2007
	Note	$	$	$	$
Cash flow from operating activities
Payments paid to suppliers and employees		(668,724)	(2,578)	(638,172)	(2,578)
Interest received		109,753	114	109,753	114
Net cash used in operating activities	16	(558,971)	(2,464)	(528,419)	(2,464)
Cash flow from investing activities
Payments for exploration and evaluation expenditure		(1,219,675)	(45,746)	(1,130,236)	(45,746)
Payments for non-current assets		(76,382)	-	(76,382)	-
Payment of income tax
Net cash used in investing activities		(1,296,057)	(45,746)	(1,206,618)	(45,746)
Cash flow from financing activities
Proceeds from issue of shares and options		7,711,314	60,000	7,711,314	60,000
Payment of IPO related costs		(486,871)	(34,754)	(486,871)	(34,754)
Proceeds/(Repayment) from borrowings		-	-	(119,992)	-
Loan from holding company - Giralia Resoures NL		-	83,010	-	83,010
Net cash provided by financing activities		7,224,443	108,256	7,104,451	108,256
Net increase in cash held		5,369,415	60,046	5,369,414	60,046
Cash and cash equivalents at the beginning		60,146	100	60,146	100
of the year
Cash and cash equivalents at the end	16	5,429,561	60,146	5,429,560	60,146

The above Cash Flow Statements should be read in conjunction with the Notes to the Financial Statements

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

1. CORPORATE INFORMATION

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

Carpentaria (“Company” or “parent entity”) is a company limited by shares and listed on the Australian Securities Exchange.

The nature of the operations and principal activities of the Consolidated Entity are described in the Directors' Report.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards (including Australian Accounting Standards). Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements and notes of Carpentaria Exploration Limited comply with International Financial Reporting Standards (IFRS).The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Going concern

The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. The ability of the economic entity to continue to adopt the going concern assumption will depend upon a number of matters including the successful raising in the future of necessary funding through debt, equity or farm-out, or the successful exploration and subsequent exploitation of the Company’s tenements.

Critical accounting estimates and judgments

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 Company.

Key estimates – impairment

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

Key judgements – exploration & evaluation expenditure

The economic entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

These reviews are based on detailed surveys and analysis of drilling results performed to balance date.

Capital Management

Management controls the capital of the Company in order to provide capital growth to shareholders and ensure the Company can fund its operations and continue as a going concern. The Company’s capital includes ordinary share capital. There are no externally imposed capital requirements. Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management share issues.

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

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(a) Principles of consolidation

A controlled entity is any entity Carpentaria has the power to control the financial and operating policies so as to obtain benefits from its activities. A list of controlled entities is contained in Note 8 to the financial statements. All controlled entities have a June financial year-end.

(b) Foreign Currencies

Items included in the financial statements of each of the Company entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Revenue Recognition

Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

Interest revenue is recognised on a time proportional basis taking into account the interest rates applicable to the financial assets.

(c) Taxes

Income taxes

The income tax expense or benefit for the period is the tax payable on the current periods taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(d) Goods and Services Tax (GST)

Revenues, expenses, and assets are recognised net of the amount of GST, except where the GST incurred on a purchase of goods or services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable, and except for receivables and payables which are stated inclusive of GST.

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

The net amount of GST recoverable from or payable to the taxation authority is included as part of receivables or payables in the Balance Sheet. Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(e) Leases

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

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Finance leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Company are capitalised at the present value of the minimum lease payments. A lease liability of equal value is also recognised. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and recognised directly in net profit.

(f) Cash and cash equivalents

For purposes of the Cash Flow Statement, cash and cash equivalents includes cash on hand, deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(g) Receivables

All trade receivables 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 receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision of doubtful receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the assets carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

The carrying amounts of the loans are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the loan is impaired to its recoverable amount. The recoverable amount of the receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate

Loans between companies within the consolidated entity are included in current assets of the Parent entity, except for those with anticipated repayment terms greater than 12 months after the balance sheet date which are classified as non-current assets. Such assets are carried at amortised cost using the effective rate interest method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(h) Investments and other financial assets

The Company classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends upon the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-tomaturity, re-evaluates this designation at each reporting date.

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

Financial assets at fair value through profit or loss are financial assets held for trading which are acquired principally for the purpose of selling in the short term with the intention of making a profit. Derivatives are also categorised as held for trading unless they are designated as hedges.

(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. They arise when the Company provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Such assets are carried at amortised cost using the effective rate interest method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity.

(iv) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of investments are recognised on trade-date – the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value though profit or loss are initially recognised at fair value. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investment are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including interest and dividend income, are presented in the income statement within other income or other expenses in the period in which they arise.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as availablefor-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes, in the carrying amount of the security. The translation differences are recognised in profit and loss and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

The fair values of quoted investment are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company established fair value by using valuation techniques. These include the use of recent arms’ length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Company assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition costs and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in the income statement.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(i) Property, Plant and Equipment

Plant and Equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate portion of fixed and variable costs.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful life to the Company commencing from the time the asset is held ready for use. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The expected useful lives are as follows:

Major depreciation periods are
Office Equipment	5 years
Computer Equipment	3 years

Maintenance and repairs

Plant of the consolidated entity is required to be overhauled on a regular basis. This is managed as part of an ongoing cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and amortised as noted above. Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred.

The cost of plant and equipment constructed by the consolidated entity includes the cost of all materials used in construction, direct labour on the project, borrowing costs incurred during construction and an appropriate proportion of directly attributable variable and fixed overheads.

(j) Exploration, Evaluation and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular 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 which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing.

A provision is raised against exploration and evaluation expenditure where the Directors are of the opinion that the carried forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit 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 amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review has been undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(j) Exploration, Evaluation and Development Expenditure (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 structure, waste removal, and rehabilitation of the site in accordance with clauses of mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted 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 restoration will be completed within one year of abandoning the site.

(k) Trade & Other Payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accruals basis. Trade account payables are usually settled on a 30 day basis.

(l) Borrowings

All loans and convertible notes are measured at the principal amount net of transaction costs incurred. Costs in relation to the convertible notes issued are amortised on a straight line basis over the period from issue of the notes until the redemption date of the notes. Interest is charged as an expense as it accrues.

(m) Contributed Equity

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(n) Employee Benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and any vesting sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

iii) Share-based payments

The Company has issued options to executives and employees as part of their remuneration.

The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

(n) Employee Benefits (continued)

(iv) Employee benefit on-costs

Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

(o) Earnings/Loss per Share

Basic earnings per share

Basic earnings per share is determined by dividing net profit after income tax attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of the ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(p) Segment Reporting

The Company operates in one segment, being the exploration, development, and production of minerals. All of the Company’s areas of operation are currently located in Australia.

(q) Comparatives

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

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2008 reporting period. The Consolidated Entity’s and the Parent Entity’s assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a 'management approach' to reporting on financial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Consolidated Entity has not yet decided when to adopt AASB 8. Application of AASB 8 may result in different segments, segment results and different types of information being reported in the segment note of the financial report. However, at this stage, it is not expected to affect any of the amounts recognised in the financial statements.

(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]

The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of the Group.

(iii) AASB-I 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

AASB-I 14 will be effective for annual reporting periods commencing on or after 1 January 2008. It provides guidance on the maximum amount that may be recognised as an asset in relation to a defined benefit plan and the impact of minimum funding requirements on such an asset. As the Group does not have any defined benefits plans it is not expected to have any impact on the Group's financial statements.

CARPENTARIA EXPLORATION LIMITED - ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008

New standards and interpretations not yet adopted (continued)

(iv) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The Group intends to apply the revised standard from 1 July 2009.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

2. REVENUE Interest income - Cash and Cash Equivalents 3. EXPENSES *Expenses from continuing operations* Minimum lease payments Wages and salaries Share based payment expense Depreciation Amortisation 4. INCOME TAX (a) The Prima facie tax on profit before income tax is reconciled to the income tax provided in the financial report as follows: Prima facie tax payable on profit/(loss) before income tax at 30% (2007: 30%): Add Tax Effect of: Non-deductible entertainment Deferred tax not recognised on current year loss Share Based Payments Other temporary differences Less Tax Effect of: Other Non-assessable income items Deductible amounts recognised in equity Other temporary differences Income tax expense / (benefit) attributable to profit before income tax (b) Unrecognised deferred tax assets Deferred tax assets have not been recognised in the Balance Sheet for the following items: Unused tax losses Deductible temporary differences Potential benefit at 30% (2007: 30%) Gross value of tax losses not recognised	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 261,786 114 261,786 114	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 261,786 114 261,786 114
	261,786	114 261,786 114
	48,520 275,713 490,390 5,841 15,467 30% (250,641) 368 677,320 147,117 19,604 (43,710) (31,298) (518,760) $ 0 30% 677,320 144,794 $ 822,114 2,257,734	- 48,520 - - 275,713 - - 490,390 - - 5,841 - - 15,467 - Tax Rate 30% Tax Rate (250,475) 368 650,654 147,117 19,604 (43,710) (31,298) (492,260) $ 0 Tax Rate 30% Tax Rate 650,654 144,793 $ - $ 795,447 $ - 2,168,847

There is no expiry date on the future deductibility of unused tax losses.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

4. INCOME TAX (continued)

(c) Unrecognised deferred tax liabilities

Deferred tax liabilities have not been recognised in the Balance Sheet for the following items: Assessable temporary differences 5. CASH AND CASH EQUIVALENTS CURRENT Cash at Bank Deposits at call	30% Tax Rate 30% Tax Rate 798,336 771,504 Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 1,053,561 60,146 1,053,560 60,146 4,376,000 - 4,376,000 -	30% Tax Rate 30% Tax Rate 798,336 771,504 Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 1,053,561 60,146 1,053,560 60,146 4,376,000 - 4,376,000 -
	5,429,561	60,146 5,429,560 60,146

Cash on deposit has a maturity of between 6 and 12 months, however the company and the consolidated entity have the right to call up on the cash at any time.

6. OTHER RECEIVABLES

CURRENT

Other receivables Interest receivables	61,686 152,033	52 61,686 52 - 152,033 -
	213,719	52 213,719 52

Other receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual receivable is impaired. All receivables are within their standard terms and are not considered impaired.

NON-CURRENT

Receivable from controlled entity

Receivable from controlled entity 7. OTHER ASSETS CURRENT Prepayments Bonds and deposits	- - 119,992 -
	- - 119,992 -
	2,489 - 2,489 - 120,309 90,309
	122,798 - 92,798 -

8. OTHER FINANCIAL ASSETS

NON-CURRENT

Shares in controlled entities - at cost

- 1 -

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

8. OTHER FINANCIAL ASSETS (continued)

Percentage of equity interest All companies are incorporated in Australia and have a 30 June balance date. 2008 2007* % %	Percentage of equity interest All companies are incorporated in Australia and have a 30 June balance date. 2008 2007* % %	Investment 2008 2007 $ $
Willyama Prospecting Pty Limited* 100%	0%	1 -
		1 -

percentage of voting power is in proportion to ownership *Business Combination Acquisition of Willyama Prospecting Pty Limited (‘Willyama’)

On the 10[th] March 2008 the consolidated entity acquired a100% interest in Willyama, The total cost of acquisition was $1 and the net assets acquired were $1.

9. PROPERTY, PLANT AND EQUIPMENT Plant and equipment - at cost Less: accumulated depreciation Total Property, Plant and Equipment	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 37,714 - 37,714 - (5,841) - (5,841) -	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 37,714 - 37,714 - (5,841) - (5,841) -
	31,873	- 31,873 -

	31,873	- 31,873 -

Movement Schedule

Consolidated and Parent Entity	Plant & Equipment Total $ $
2008 Carrying amount at 1 July 2007 Additions Disposals Depreciation charge for the year Carrying amount at 30 June 2008 2007 - NIL	- - 37,714 37,714 - - (5,841) (5,841)
	31,873 31,873

10. EXPLORATION AND EVALUATION EXPENDITURE

NON-CURRENT

Exploration and development costs carried forward in respect of areas of interest not in production - Exploration phase Reconciliation Exploration expenditure capitalised - Opening balance - Current year expenditure - Transfer to subsidiary - Write off/disposed in current year Carried forward	2,515,421 45,746 2,425,981 45,746
	45,746 - 45,746 - 2,469,675 45,746 2,380,235 45,746 - - - - - - - -
	2,515,421 45,746 2,425,981 45,746

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

11. INTANGIBLE ASSETS Software - at cost Less: accumulated amortisation Carrying amount at 1 July 2007 Acquisitions Amortisation charge Carrying amount at 30 June 2008 12. TRADE AND OTHER PAYABLES CURRENT Other payables and accruals Payables to related party – Giralia Resources NL	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 38,668 - 38,668 - (15,467) - (15,467) -	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 38,668 - 38,668 - (15,467) - (15,467) -
	23,201	- 23,201 -
	- 38,668 (15,467)	- - - - 38,668 - - (15,467) -
	23,201	- 23,201 -
	150,283 -	- 150,283 - 83,062 - 83,062
	150,283	83,062 150,283 83,062

Terms and conditions relating to the above financial instruments

(i) Trade creditors are unsecured, non-interest bearing and are normally settled on 30 day terms

(ii) Other creditors are unsecured, non interest bearing

(iii) Due to the short term nature of the current payables the carrying value is assumed to approximate their fair value.

13. PROVISIONS

CURRENT

Employee benefits - Annual leave 34,045 - 34,045 -

14. ISSUED CAPITAL (a) Issued and paid up capital 65,000,000 ordinary shares fully paid (2007: 30,000,000) (b) Movements in shares on issue
	8,499,789 25,346 8,499,789 25,346
	2008 2007 No. of shares $ No. of shares $
Ordinary shares fully paid Beginning of the financial year Increases - Initial public offering - 1 - Share capital issued - 2 - Share capital issued - Issue of options - 3 - Option exercise - Costs of securities issued	30,000,000 25,346 100 100 30,000,000 7,500,000 - - 5,000,000 1,250,000 - - - - 29,999,900 60,000 - 211,314 - - - - - - - (486,871) - (34,754)
	65,000,000 8,499,789 30,000,000 25,346

Shares offered under the IPO Prospectus 30,000,000
4,000,000 ordinary fully paid shares issued to Giralia Resources NL (GIR) to purchase the legal and beneficial interests in Queensland Exploration Permit for Minerals 14170 and New South Wales Exploration Licence 6246.

1,000,000 ordinary fully paid shares issued to Daikoku Investment Trust in lieu of past consulting fees in relation to the acquisition of the Tenements.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

14. ISSUED CAPITAL (continued)

(b) Movements in shares on issue (continued)

A pro rata issue of options was made on 19 May 2008 to Shareholders on the basis of one option for every 2 shares held at the relevant date. The new options were issued at a price of 1 cent each, exercisable at $0.30 each on or before 30 June 2010.

(c) Options

The value of options granted in the year is the fair value of the options calculated at grant date using a Black-Scholes optionpricing model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period.

Terms	01-Jul-07 additions exercised expired 30-Jun-08
30 June 2010 – 1 30 June 2010 – 2 30 June 2010 – 3 30 June 2010 – 4	- 3,400,000 - - 3,400,000 - 300,000 - - 300,000 - 500,000 - - 500,000 - 21,131,384 - - 21,131,384
	- 25,331,384 - - 25,331,384

Options issued as at the date of the Prospectus to Directors, officers and other persons total 3.4 million and are on the following terms:
a. the exercise price of each Option is $0.30;
b. the Options expire at 5.00 pm EST 30 June 2010
Options issued to Employees as part of the ESOP on the following terms:
a. the exercise price of each Option is $0.30;
b. the Options expire at 5.00 pm EST 30 June 2010
Options issued to Employees as part of the ESOP on the following terms:
a. the exercise price of each Option is $0.27;
b. the Options expire at 5.00 pm EST 30 June 2010
A pro rata issue of options was made on 19 May 2008 to Shareholders on the basis of one option for every 2 shares held at the relevant date. The new options were issued at a price of 1 cent each, exercisable at $0.30 each on or before 30 June 2010.

(d) Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on share held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

15. ACCUMULATED LOSSES AND RESERVES (a) Accumulated losses Balance at the beginning of the year Net profit/(loss) attributable to members of Carpentaria Exploration Limited Balance at end of year (b) Reserves Share based payments reserve	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ (2,464) (100) (2,464) (100) (835,470) (2,364) (834,918) (2,364)
	(837,934) (2,464) (837,382) (2,464)

	490,390 - 490,390 -

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

Consolidated	Consolidated	Parent	Entity
2008	2007	2008	2007
$	$	$	$

15. ACCUMULATED LOSSES AND RESERVES (continued)

Share based payments reserve movements

Balance 1 July Option expense Options exercised Balance 30 June	- - - - 490,390 - 490,390 - - - - -
	490,390 - 490,390 -

(c) Nature and purpose of reserves

Share based payments reserve

The share based payment reserve is used to record the value of share based payments provided to employees, including key management personnel, as part of their remuneration.

16. STATEMENTS OF CASH FLOWS

Reconciliation of the operating /(loss) after tax to the net cash flows from operations Profit/(loss) after income tax Non-cash flows in profit after income tax: Depreciation Amortisation Share options expense Changes in assets and liabilities - (Increase)/Decrease in other assets - Increase/(Decrease) in trade payables and accruals - Increase/(Decrease) in provisions Cash flow from operations Reconciliation of cash - Cash at bank - Cash on deposit	(835,470) (2,464) (834,918) (2,464) 5,841 - 5,841 - 15,467 - 15,467 - 490,390 - 490,390 - (274,831) - (244,831) - 5,587 - 5,587 - 34,045 - 34,045 -
	(558,971) (2,464) (528,419) (2,464)
	1,053,561 60,146 1,053,560 60,146 4,376,000 - 4,376,000 -
	5,429,561 60,146 5,429,560 60,146

Non-cash transactions

A share issue of 5,000,000 fully paid ordinary shares for the purchase of tenements in Queensland and New South Wales.

17. EXPENDITURE COMMITMENTS

Lease expenditure commitments

(i) Operating leases Minimum lease payments - payable within one year - payable between one and five years Total contracted at balance date	64,485 - 64,485 - 93,823 - 93,823 -
	158,308 - 158,308 -

Future exploration

The consolidated entity has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the consolidated entity.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

17. EXPENDITURE COMMITMENTS (continued) The commitments to be undertaken are as follows: Payables - not later than 12 months - between 12 months and 5 years	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 764,500 - 667,500 - 705,500 - 705,500 -
	1,470,000 - 1,373,000 -

To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, the consolidated entity has the option to negotiate new terms or relinquish the tenements. The consolidated entity also has the ability to meet expenditure requirements by joint venture or farm in agreements.

18. SHARE BASED PAYMENTS

Equity based instruments

The Company has granted options over ordinary shares to directors, employees and consultants as part of their remuneration packages. The options were granted for nil consideration and are not quoted on the ASX. Information with respect to the number of options granted is as follows:

Consolidated and Parent Entity

2008 IssueDate ExpiryDate Exercise Price	Balance at start ofyear Granted in year Exercised in year Expired in year Balance at end ofyear Exercisable at end of year
27 Aug 2007 30 Jun 2010 $0.30 14 Nov 2007 30 Jun 2010 $0.30 7 Jan 2008 30 Jun 2010 $0.27 14 Nov 2007# 14 Nov 2008 $0.40 14 Nov 2007# 14 Nov 2009 $0.50 14 Nov 2007# 14 Nov 2010 $0.60	- 3,400,000 - - 3,400,000 - - 300,000 - - 300,000 - - 500,000 - - 500,000 - - 1,000,000 - - 1,000,000 - - 1,000,000 - - 1,000,000 - - 1,000,000 - - 1,000,000 -
	- 7,200,000 - - 7,200,000 -

The weighted average exercise price was $0.38.

The board resolved to grant a total of 3,000,000 options to the Executive Chairman. The options require approval from shareholders before they can be issued. This approval will be sought at the 2008 AGM.

The weighted average remaining contractual life of share options outstanding at the end of the period was 2 years. (2007 – Nil).

Fair value of options granted

The assessed fair value at the date of grant of options issued is determined using a Black-Scholes option pricing model that takes into account the exercise price, the underlying share price at the time of issue, the term of the option, the underlying share’s expected volatility, expected dividends and the risk free interest rate for the expected life of the instrument.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

18. SHARE BASED PAYMENTS (continued)

The value of the options was calculated by using the Black-Scholes pricing model applying the inputs shown below:

Grant date	14/11/07	14/11/07	14/11/07	27/08/07	07/01/08
Vesting date	30/06/10	30/06/10	30/06/10	30/06/10	30/06/10
Exercise price	$0.40	$0.50	$0.60	$0.30	$0.27
Share price at grant date	$0.17	$0.17	$0.17	$0.25	$0.30
Life of the options	1 yr	2 yrs	3 yrs	3 yrs	3 yrs
Underlying share price volatility	65.00%	65.00%	65.00%	65.00%	65.00%
Expected dividends	Nil	Nil	Nil	Nil	Nil
Risk free interest rate	7.00%	7.25%	7.50%	7.50%	6.50%

Expenses arising from share based payment transactions

Total expenses arising from share based payment transactions recognised during the period as part of employee benefit expense were as follows:

- Options issued	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 490,390 - 490,390 -

19. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The consolidated entity has no known contingent assets or contingent liabilities.

20. EARNINGS PER SHARE a) Reconciliation of Earnings to Profit or Loss Earnings used to calculate basic and dilutive EPS b) Weighted average number of ordinary shares outstanding during the year Effect of dilutive securities - Weighted average number of ordinary shares outstanding during the year used in calculating EPS and dilutive EPS		Consolidated 2008 2007 $ $	Consolidated 2008 2007 $ $
		(835,470)	(2,464)
		Number Number 4,767,207 30,000,000 - - 4,767,207 30,000,000

21. AUDITOR’S REMUNERATION Amounts received or due and receivable by the Auditor for: - audit and review of financial reports	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ 38,700 - 38,700 -
	38,700 - 38,700 -

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

22. KEY MANAGEMENT PERSONNEL DISCLOSURES

Information about the remuneration of Directors and Executives which is currently required under Section 300A of the Corporations Act and under Accounting Standard AASB 124 “Related Party Disclosures” is included in the Remuneration Report within the Director’s Report. The Company has taken the relief provided by Corporations Amendments Regulations.

Regulations.
Key management personnel compensation Short term employee benefits Post employment benefits Share based payments Other Total	Consolidated 2008 2007 $ $ 462,812 - - - 440,240 - 35,353 -	Parent Entity 2008 2007 $ $ 462,812 - - - 440,240 - 35,353 -
	938,405 -	938,405 -

Option holdings	of directors and key management	of directors and key management	personnel
2008	Balance at	Issued as	Options	Net Change Other	Balance at 30/6/08	Total
	1/7/07	Remuneration	Exercised			Vested and
						Exercisable
Directors
Nick Sheard	-	1,000,000	-	-	1,000,000	1,000,000
Bob Hair	-	500,000	-	10,000	510,000	510,000
Mike Chester	-	-	-	43,201	43,201	43,201
Stan Macdonald
	-	1,000,000	-	212,335	1,212,335	1,212,335
Mike Joyce	-	500,000	-	-	500,000	500,000
Key Management
Personnel
Doug Brewster	-	700,000	-	15,000	715,000	715,000
Chris Powell	-	250,000	-	10,500	260,500	260,500
Bruce Acutt	-	150,000	-	189,021	339,021	339,021
Total	-	4,100,000	-	480,057	4,580,057	4,580,057

2007 - Nil

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

22. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Security holdings of directors and key management personnel

All equity transactions with directors and key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. On market, public offering transactions are included within Net Change Other in the table below:

Ordinary Shares

Ordinary Shares
2008 Directors Nick Sheard Bob Hair Mike Chester Stan Macdonald Management Doug Brewster Chris Powell Bruce Acutt	Balance 1/7/07 Granted as Remuneration On Exercise of Options/Notes - - - - - - - - - - - - - - - - - - - - -	Net Change Other Balance 30/6/08 - - 20,000 20,000 86,401 86,401 1,424,669 1,424,669 30,000 30,000 21,000 21,000 389,603 389,603
	- - -	1,971,673 1,971,673

2007- Nil

Loans with directors and key management personnel

There were no loans outstanding with directors or key management personnel at 30 June 2008 (2007: nil).

Other transactions and balances with directors and key management personnel and amounts recognised at the reporting date in relation to other transactions

There were no other transactions with directors or key management personnel at 30 June 2008 (2007: nil).

23. RELATED PARTY TRANSACTIONS

2008	2007
$	$

Information about the remuneration of Directors and Executives which is currently required under Section 300A of the Corporations Act and under Accounting Standard AASB 124: Related Party Disclosures is included in the Remuneration Report within the Director’s Report.

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

During the year the following transactions were undertaken between the Company, executive officers and Director-related entities:

Directors and Consulting fees were paid to Camcove Pty Ltd, a company of which Bob Hair is a director and shareholder 10,000 - Consulting fees were paid to Sheard & Associates, a company of which Nick Sheard is a director and shareholder 60,000 -

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

23. RELATED PARTY TRANSACTIONS (continued)

Share and Option transactions of Directors and Director-Related Entities are shown in the Remuneration Report contained in the Director’s Report.

Key management personnel compensation

Disclosures relating to key management personnel are set out in Note 22.

24. SEGMENT REPORTING

The Company operates predominantly in one business and geographical segment, being mineral exploration in Australia. No revenue from this activity has been earned to date as the Company is still in the exploration and evaluation stage.

25. DIVIDENDS AND FRANKING CREDITS

There were no dividends paid or recommended during the financial year. There were no franking credits available to the shareholders of the consolidated entity.

26. FINANCIAL RISK MANAGEMENT

The Company’s principal financial instruments comprise deposits with banks, accounts receivable and payable and loans to subsidiaries. The main purpose of these financial instruments is to raise cash for the Company’s operations.

The Company does not have a formally established treasury function. The Board is responsible for managing the consolidated entities identification and control of financial risks and for evaluating treasury management strategies in the context of the most recent economic conditions and forecasts. For the period under review, it has been the entity’s policy not to trade in financial instruments.

The main risks arising from the Company’s financial instruments are interest rate risk, credit risk and liquidity risk. The Company uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate risk and assessments of market forecasts for interest rate prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, and liquidity risk is monitored through the development of future rolling cash flow forecasts.

Credit Risk

Credit risk arises in the event that counterparty will not meet its obligations under a financial instrument leading to financial losses. The Company is exposed to credit risk from its operating activities, financing activities including deposits with banks. The credit risk control procedures adopted by the Company is to assess the credit quality of the institution that funds are deposited or invested in, taking into account its financial position and past experiences.

The maximum exposure to credit risk on financial assets of the Company which have been recognised on the balance sheet is generally limited to the carrying amount. The Company’s concentration of credit risk is confined to large financial institutions, which are awarded a Standard and Poor’s AA ++ rating. At 30 June 2008 the Company had a concentration of credit risk with the Commonwealth Bank of Australia totalling $5,429,561 (2007: $0).

Market Risk

Market risk arises from the use of interest bearing, tradeable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).

(i) Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will affect the Company’s income or the value of its obligations, and arises on financial instruments that are subject to floating rates. The Company’s exposure to market interest rates relates primarily to the Company’s cash on deposit.

At balance date, the Company had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are not designated in cash flow hedges:

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

26. FINANCIAL RISK MANAGEMENT (continued)

Weighted average effective interest rate % 2008 Financial Assets Cash and cash equivalents 7.10% Other receivables - Total Financial Assets Financial Liabilities Trade and other payables - Total Financial Liabilities -	Floating interest rate Fixed interest rate Non interest bearing Total carrying amount as per the balance sheet $ $ $ $ 1,053,561 4,376,000 - 5,429,561 - - 213,719 213,719
	1,053,561 4,376,000 213,719 5,643,280
	- - 150,283 150,283
	- - 150,283 150,283

2007 - NIL

The consolidated entity has performed a sensitivity analysis relating to its exposure to interest rate risk. This sensitivity demonstrates the effect on the current year results and equity which could result from a change in these risks.

At 30 June 2008 the effect on profit and equity as a result of changes in the interest rate could be as follows:

	Consolidated entity	Consolidated entity
	2008	2007
	$	$
Change in profit
- Increase in interest rate by 1%		54,296	-
- Decrease in interest rate by 1%	(54,296)		-
Change in equity
- Increase in interest rate by 1%		54,296	-
- Decrease in interest rate by 1%	(54,296)		-

The above analysis assumes all other variables remain constant.

(ii) Currency Risk

The consolidated entity does not have any material currency risk exposures under financial instruments entered into by the consolidated entity.

(iii) Other Price Risk

The consolidated entity does not have any material other price risk exposures under financial instruments entered into by the consolidated entity.

Liquidity Risk

Liquidity risk is the risk that the consolidated entity may encounter difficulties raising funds to meet financial obligations as they fall due.

Liquidity risk is reviewed regularly by the Board.

The consolidated entity manages liquidity risk by monitoring forecast cash flows. The Company did not have any financing facilities available at balance date.

Maturity Analysis – Consolidated - 2008

Financial Liabilities Trade and Other Payables	Carrying Amount Contractual Cash flows <1 year 1 - 5 years > 5 years 150,283 150,283 150,283 - -
	150,283 150,283 150,283 - -

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

26. FINANCIAL RISK MANAGEMENT (continued)

Maturity Analysis – Parent Entity - 2008 Financial Liabilities Trade and Other Payables	Carrying Amount Contractual Cash flows <1 year 1 - 5 years > 5 years 150,283 150,283 150,283 - -
	150,283 150,283 150,283 - -

Maturity Analysis – 2007

Neither the Consolidated Entity nor the Parent Entity held material financial instruments subject to liquidity risk as at 30 June 2007.

Fair Values

The fair values of trade and other receivables, security deposits and trade and other payables approximate their carrying value.

27. SUBSEQUENT EVENTS

Subsequent to balance date, 800,000 options were granted as part of the Employee Share Option Plan with an exercise price of $0.15 and vesting date 30 June 2011.

Apart from this matter there have been no significant events since balance date and to the date of this report.

CARPENTARIA EXPLORATION LIMITED ANNUAL FINANCIAL REPORT

DIRECTORS' DECLARATION

The directors of Carpentaria Exploration Limited declare that:

(a) in the directors’ opinion the financial statements and notes on pages 3 to 51, and the remuneration disclosures that are contained in the Remuneration report in the Directors’ report, set out on pages 14 to 18 of the Director’s Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company and Consolidated Entity’s financial position as at 30 June 2008 and of their performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and
(c) the remuneration disclosures that are contained in the Remuneration report in the Directors’ report comply with Australian Accounting Standard AASB 124 Related Party Disclosures , the Corporations Act 2001 and the Corporations Regulations 2001; and
(d) 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 by the chief executive officer and chief financial officer for the financial year ended 30 June 2008, required by Section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

Dated at Brisbane this 30[th] day of September 2008

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....................................................... S N Sheard Executive Chairman

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INDEPENDENT AUDITOR’S REPORT

To the members of Carpentaria Exploration Limited

Report on the Financial Report

We have audited the accompanying financial report of Carpentaria Exploration Limited, which comprises the balance sheets as at 30 June 2008, and the income statements, statement of changes in equity and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration for both Carpentaria Exploration Limited (“the company”) and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with Australian Equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Liability limited by a scheme approved under Professional Standards Legislation

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Auditor’s Opinion

In our opinion:

(a) the financial report of Carpentaria Exploration Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included on pages 14 to 18 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Carpentaria Exploration Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Acts 2001 .

PKF

CHARTERED ACCOUNTANTS

Albert Loots Partner

Dated at Brisbane this 30[th] day of September 2008

AI assistant

HAWSONS IRON LTD — Annual Report 2008

65053_rns_2008-09-30_37419924-094d-4129-a879-0cdae557b74f.pdf

CORPORATE INFORMATION

Company Secretary

Solicitors

Auditor

Share Registry

Investor enquires

ASX Code

REPORT OF THE DIRECTORS

Executive Chairman’s Report

Profile of Directors and Senior Management

Name

Nick Sheard

Stanley A Macdonald

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Senior Management

Doug Brewster Exploration Manager

Chris Powell

Company Secretary

Bruce Acutt

Joint Company Secretary

Corporate Information

Corporate Structure

Nature of operations and principal activities

Operating and Financial Review

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Review of Financial Position

Capital structure

Treasury policy

Liquidity and funding

Dividends

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

REVIEW OF OPERATIONS

Summary

Glen Isla (Gold) - CAP 100%

Combaning (Gold, Nickel) - CAP 100%

Combaning (Gold, Nickel) - CAP 100% (continued)

Kallara (Gold, Tin, Tungsten) - CAP 100%

Laing’s Lode (Lead, Zinc, Silver) - CAP 100%

Panama Hat (Gold) - Farm-in

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Euriowie (Tin, Tungsten, Gold) – JV

Lady Inez (Copper, Gold) - CAP 100%

Burta (Copper, Gold) - CAP 100%

Redbank (Nickel) - CAP 100%

Cargoon (Nickel) - CAP 100%

Mt Agate (Copper, Gold) - CAP 100%

Waterford (Uranium) - CAP 100%

Matters Subsequent to the End of the Financial Year

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Likely Developments and Expected Results of Operations

Environmental Regulation and Performance

REMUNERATION REPORT

Remuneration Policy

Non-Executive Director Remuneration

Executive Chairman and Key Management Personnel Remuneration

Employment Contracts

The agreement:

Agreement with Company Secretary

The agreement:

Agreement with Exploration Manager

The agreement:

Details of Directors and Key Management Personnel

Name

Detail

Table 1: Director remuneration

-The value of options treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payments.

Table 2: Remuneration of the named key management personnel

Table 3: Options issued as part of remuneration for the year ended 30 June 2008

The board has resolved to issue the Managing Director an additional 3,000,000 unlisted options as part of his remuneration package. The issue of these options will require shareholder approval at the AGM.

CARPENTARIA EXPLORATION LIMITED ANNUAL REPORT 2008

Table 4: Options granted as part of remuneration (continued)

Meetings of Directors

Indemnification of Officers or Auditor

Proceedings on Behalf of the Company

Share Options

HAWSONS IRON LTD Annual Report 2008