LCL RESOURCES LIMITED — Annual Report 2011

Mar 19, 2012

METMINCO LIMITED REPORT FOR THE YEAR ENDED 31 DECEMBER 2011 ABN 43 119 759 349

CONTENTS

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CORPORATE GOVERNANCE STATEMENT 2
DIRECTORS’ REPORT 7
AUDITOR’S INDEPENDENCE DECLARATION 35
FINANCIAL STATEMENTS 36
NOTES TO THE FINANCIAL STATEMENTS 40
DIRECTORS’ DECLARATION 77
INDEPENDENT AUDITOR’S REPORT 78
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CORPORATE GOVERNANCE STATEMENT

Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been applied for the entire fi nancial year ended 31 December 2011.

Board Composition

The qualifi cations, experience and expertise relevant to the position of each director who is in offi ce at the date of the annual report and their term of offi ce are detailed in the Directors’ Report.

The names of the independent directors are: Antonio Ortuzar, Timothy Read and Francisco Vergara-Irarrazaval.

When determining whether a non-executive director is independent the director must not fail any one of the following materiality thresholds:

• less than 10% of Company shares are held by the director and any entity or individual directly or indirectly associated with the director;

• no sales are made to or purchases made from any entity or individual directly or indirectly associated with the director; and

• none of the directors’ income or the income of an individual or entity directly or indirectly associated with the director is derived from a contract with any member of the economic entity other than income derived as a director of the entity.

Directors have the right to seek independent professional advice in the furtherance of their duties as directors at the Company’s expense. Written approval must be obtained from the Chairman prior to incurring any expense on behalf of the Company.

Ethical Standards

The Board acknowledges and emphasises the importance of all directors and employees maintaining the highest standards of corporate governance practice and ethical conduct.

A code of conduct has been established requiring directors and employees to:

• act honestly and in good faith;

• exercise due care and diligence in fulfi lling the functions of offi ce;

• avoid confl icts and make full disclosure of any possible confl ict of interest;

• comply with the law;

• encourage the reporting and investigating of unlawful and unethical behaviour; and

• comply with the share trading policy outlined in the code of conduct.

Directors are obliged to be independent in judgment and ensure all reasonable steps are taken to ensure due care is taken by the Board in making sound decisions.

Trading Policy

The Company’s policy regarding directors and employees trading in its securities is set by the Audit Committee. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be refl ected in the security’s prices.

In compliance with AIM Listing Rules, directors and offi cers of the Company are also not permitted to trade in the Company’s securities for the periods as follows:

• two months preceding the publication of the Company’s annual results or, if shorter, the period from its fi nancial year end to the time of publication;

• two months immediately preceding the notifi cation of the Company’s half-yearly report or, if shorter, the period from the relevant fi nancial period end up to and including the time of the notifi cation; or

• one month immediately preceding the notifi cation of the Company’s quarterly results or, if shorter, the period from the relevant fi nancial period end up to and including the time of the notifi cation.

2 METMINCO LIMITED Annual Report 31 December 2011

Occupational Health and Safety Policy

Metminco will be a model for responsible exploration and mining.

Having excellent local and government relationships and solid health, safety and environmental practices is just as important to a successful mining project as strong technical expertise. Metminco and its subsidiaries have demonstrated their corporate responsibility, proof of which was renewal of the Environmental Impact Declaration permits for their exploration activities and a continuing and amicable dialogue with local community groups. Metminco will continue to build on its positive record in Chile and Peru.

Diversity Policy Statement

Metminco’s workforce consists of people from diverse backgrounds with a range of skills, values and experiences. Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company recognises the organisational strength, deeper problem solving ability and opportunity for innovation that this diversity brings. The Company is committed to providing an environment in which all employees are treated with fairness and respect, and have equal access to opportunities available at work.

Accordingly the Group has established a regional offi ce in Moquegua, Southern Peru approximately 60 km from the Los Calatos Project with one of the objectives being to increase community participation in the Group’s work force. As the Group has three staff in Australia it is not practical to set measurable targets.

However, the Company aims to continue with this diversity policy over the next few years as director and senior executive positions become vacant and appropriately qualifi ed candidates become available.

Audit Committee

An Audit and Risk Committee has been established by the Board. The Committee’s role and operations are documented in a Charter which is approved by the Board. This Charter is available on Metminco’s website under www.metminco.com.au/corporategovernance.

The Committee’s Charter provides that all members of the Audit and Risk Committee must be Non-Executive Directors, majority Independent Directors and that the Chair cannot be the Chairman of the Board.

The names and qualifi cations of those appointed to the Audit Committee and their attendance at meetings of the committee are included in the Directors’ Report.

The role of the Committee is to:

• Ensure the integrity of the Group’s internal and external fi nancial reporting including compliance with applicable laws, regulations and codes of conduct.

• Ensure that fi nancial information provided to the Board is of a suffi ciently high quality to allow the Board to make informed decisions.

• Ensure that appropriate and eff ective internal systems and controls are in place to ensure propery fi nancial governance and manage the Group’s exposure to risk.

• Oversee the appointment, compensation, retention and oversight of the external auditor, and review of any non-audit services provided by the external auditor.

• Regularly review the performance of the external auditor regarding quality, costs and independence.

• Oversee the frequency, signifi cance and propriety of all transactions with related parties.

The Audit and Risk Committee is required under the Charter to meet at least twice per year and otherwise as necessary. The Committee met three times during the year and Committee members’ attendance records are disclosed in the Directors’ Meetings section of the Directors’ Report.

The Managing Director, Chief Financial Offi cer and external auditor also regularly attend the Committee meetings by standing invitation. Other Directors and management are invited to attend Committee meetings and participate in discussion relating to specifi c issues that they have an interest in.

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3

CORPORATE GOVERNANCE STATEMENT continued

The Committee is authorised to obtain independent legal advice at the Group’s expense if it considers it necessary in fulfi lling its duties.

Performance Evaluation

The Board regularly receives reports from management on shareholder meetings including feedback on the perfromance of the Company and the Board.

The Managing Director undertakes an annual review of the performance of each senior executive against individual tasks and objectives. The report is considered by the Remuneration and Nomination Committee. Performance evaluations of the key executives were undertaken in the 2011 fi nancial year.

Board Roles and Responsibilities

The Board of Directors is responsible for the corporate governance of the Group and operates in accordance with the principles set out in its Charter, which is available in the corporate governance section of Metminco’s website. To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board. These responsibilities include:

• Setting the strategy for the Group, including operational and fi nancial objectives and ensuring that there are suffi cient resources for this strategy to be achieved.

• Appointing and, where appropriate, removing the Managing Director, approving other key executive appointments and planning for executive succession.

• Overseeing and evaluating the performance of the Managing Director and the executive team through a formal performance appraisal process having regard to the Group’s business strategies and objectives.

• Monitoring compliance with legal, regulatory, environmental, social and occupational health and safety requirements and standards.

• Overseeing the identifi cation of key risks faced by the Group and the implementation of an appropriate internal control framework to ensure those risks are managed to an acceptable level.

• Approving the Group’s budgets, including operational and capital budgets, and the approval of signifi cant acquisitions, expenditures or divestitures.

• Approval of the annual and half-yearly fi nancial reports.

• Ensuring the market and shareholders are fully informed of material developments.

The roles of Chairman and Managing Director are separated and clearly defi ned. The Chairman leads the Board and is responsible for ensuring the eff ectiveness of governance practices. The Chairman is also responsible for the conduct of Board and shareholder meetings.

Responsibility for the operations of the Company is delegated to the Managing Director who manages the Company within the policies set by the Board. The levels of authority for management are also documented.

To ensure that the responsibilities of the Board are upheld and executed to the highest level, the Board has established the following sub-committees:

• Audit and Risk Committee.

• Remuneration and Nomination Committee.

• Environment, Social, Occupational Health and Safety Committee.

Sub-committees are able to focus on a particular responsibility and provide informed feedback to the Board. Each of these sub-committees have established Charters and operating procedures in place, which are reviewed on a regular basis. The Board may also establish other sub-committees from time to time to deal with issues of special importance.

4 METMINCO LIMITED Annual Report 31 December 2011

Shareholder Rights

Shareholders are entitled to vote on signifi cant matters impacting on the business, which include the election and remuneration of directors, changes to the constitution and receipt of annual and interim fi nancial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meetings of Metminco Limited, to lodge questions to be responded to by the Board, and are able to appoint proxies.

Risk Management

The Board considers identifi cation and management of key risks associated with the business as vital to maximise shareholder wealth. A yearly assessment of the business’s risk profi le is undertaken and reviewed by the Board, covering all aspects of the business from the operational level through to strategic level risks. The Chief Financial Offi cer has been delegated the task of implementing internal controls to identify and manage risks for which the Board provides oversight. The eff ectiveness of these controls is monitored and reviewed regularly.

The Managing Director and Chief Financial Offi cer have signed a declaration in accordance with S295A of the Corporations Act that internal compliance and control systems of the Company and Consolidated Entity to the extent they relate to fi nancial reporting are operating effi ciently and eff ectively, are founded on a sound system of risk management and internal control and that the system is operating eff ectively in all material respects in relation to the reporting of fi nancial risks.

Remuneration Policies

The Remuneration Policy, which sets the terms and conditions for the key management personnel, was developed by the Remuneration and Nomination Committee after seeking professional advice from independent consultants and was approved by the Board. All executives receive a base salary, superannuation, performance incentives and retirement benefi ts. The Remuneration and Nomination Committee reviews executive packages annually by reference to Company performance, executive performance, comparable information from industry sectors and other listed companies and independent advice. The policy is designed to attract the highest calibre executives and reward them for performance, which results in long-term growth in shareholder value.

Executives are also entitled to participate in any employee share and option arrangements.

The amount of remuneration for all key management personnel for the Company is detailed in the Directors’ Report under the heading Remuneration Report. All remuneration paid to executives is valued at the cost to the Company and expensed. Shares given to executives are valued as the diff erence between the market price of those shares and the amount paid by the executive. Options are valued using the Binomial methodology.

The Board expects that the remuneration structure implemented will result in the Company being able to attract and retain the best executives to manage the Consolidated Group. It will also provide executives with the necessary incentives to work to grow long-term shareholder value.

The payment of bonuses, options and other incentive payments are reviewed by the Remuneration and Nomination Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. The Board can exercise its discretion in relation to approving incentives, bonuses and options and can recommend changes to the committee’s recommendations. Any changes must be justifi ed by reference to measurable performance criteria.

Remuneration and Nomination Committee

The names of the members of the Remuneration and Nomination Committee and their attendance at meetings of the committee are detailed in the Directors’ Report.

The role of the Committee with respect to its remuneration function is to assist the Board in determining appropriate remuneration arrangements for the Directors and executive management.

These responsibilities include:

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5

CORPORATE GOVERNANCE STATEMENT continued

• Reviewing the adequacy and form of remuneration of Non-Executive Directors.

• Ensuring that the remuneration of the Non-Executive Directors is refl ective of the responsibilities and the risks of being a Director of the Group.

• Reviewing the contractual arrangements of the Managing Director and the executive management team including their remuneration.

• Comparing the remuneration of the Managing Director and executive management to comparable groups within similar industries to ensure that the remuneration on off er can attract, retain and properly reward performance which will translate into long term growth in shareholder value.

• Annually review key performance indicators of the Managing Director and executive team to ensure that they remain congruent with the Group’s strategies and objectives.

• Reviewing the basis for remuneration of other Executive Directors of the Group for their services as Directors.

• Reviewing incentive performance arrangements when instructed by the Board.

• Reviewing proposed remuneration arrangements for new Director or executive appointments.

The Committee will submit their recommendations to the Board regarding the remuneration arrangements and performance incentives for the Managing Director and executive team. The Board will review these recommendations before providing their approval.

Details of the Group’s remuneration structure and details of senior executives’ remuneration and incentives are set out in the Remuneration Report contained within the Directors’ Report.

There are no schemes for retirement benefi ts other than statutory superannuation for non-executive directors.

Other Information

Further information relating to the Company’s corporate governance practices and policies has been made publicly available on the Company’s website at www.metminco.com.au.

Make timely and balanced disclosure

Metminco has established policies and procedures to ensure timely and balanced disclosure of all material matters concerning the Group, and ensure that all investors have access to information on the Group’s fi nancial performance. This ensures that the Group is compliant with the information disclosure requirements under the ASX Listing Rules and AIM Rules.

These policies and procedures include a comprehensive Disclosure Policy that includes identifi cation of matters that may have a material impact on the price of Metminco’s securities, notifying them to the ASX and AIM, posting relevant information on the Group’s website and issuing media releases. These policies are available on Metminco’s website under www.metminco.com.au/corporategovernance.

Matters involving potential market sensitive information must fi rst be reported to the Managing Director either directly or via the Company Secretary. The Managing Director will advise the other Directors if the issue is important enough to warrant the consideration of the full Board. In all cases the appropriate action must be determined and carried out in a timely manner in order for the Group to comply with the Information Disclosure requirements of the ASX and AIM.

Once the appropriate course of action has been agreed upon, either the Managing Director or Company Secretary will disclose the information to the relevant authorities, being the only authorised offi cers of the Group who are able to disclose such information. Board approval is required for market sensitive information such as fi nancial results, material transactions or upgrading/downgrading fi nancial forecasts. This approval is minuted in the meetings of the Board of Directors.

6 METMINCO LIMITED Annual Report 31 December 2011

DIRECTORS’ REPORT

The Directors present their report together with the fi nancial statements of the Group being Metminco Limited (Metminco or the Company) and its controlled entities, for the fi nancial year ended 31 December 2011.

Directors

The following persons held the offi ce of director at any time during or since the year ended 31 December 2011: Antonio Ortuzar (appointed 16 March 2011) Non Executive Chairman William J Howe Managing Director Timothy Read Non Executive Director Francisco Vergara-Irarrazaval Non Executive Director Phillip J Wing Non Executive Director William S Etheridge Non Executive Director John Fillmore (appointed 10 May 2007, resigned as a Director of the Company and Chairman of the Board on 16 March 2011).

Directors have been in offi ce since the start of the year unless otherwise stated.

Company Secretary

Philip Killen was the Company Secretary for the fi nancial year and was in offi ce at the date of this report.

Principal activities and signifi cant changes in the nature of activities

The Principal activities of the Group during the fi nancial year were as a diversifi ed mineral explorer focussing on prospects in South America. The Group has a signifi cant portfolio of projects located in Chile and Peru, primarily focused on porphyry copper style deposits, but including exposure to gold, molybdenum and zinc.

Operating results

The consolidated loss of the Group for the year was A$8,777,306 after providing for income tax (31 Dec 2010: loss of A$11,340,398 for 6 months).

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7

DIRECTORS’ REPORT continued

Review of operations

Metminco, through its wholly owned subsidiaries Minera Hampton Chile Limitada (Hampton Chile) and Minera Hampton Peru SAC (Hampton Peru), holds equity interests in a portfolio of base and precious metal projects that are located within wellconstrained metallogenic belts that occur within the Andean Cordillera in Chile and Peru. A summary of Metminco’s projects is provided below, with the three most advanced projects being the Los Calatos copper-molybdenum porphyry deposit in southern Peru, and the Mollacas copper leach deposit and La Colorada (Vallecillo) polymetallic deposits in Region IV, Chile.

The Company’s premier project, Los Calatos, is located near and in a similar geological setting to three large operating porphyry hosted copper-molybdenum mines, namely the Cerro Verde, Cuajone and Toquepala mines (Figure 1).

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J U L I A C A
A R E Q U I P A
AREQUIPA
Los Calatos (Cu, Mo)
Cerro Verde
mine
Chapi mine M O Q U E G U A
MOQUEGUA Cuajone mine
Tia Mara project
Quellaveco project
Toquepala mine
Metminco project
Major towns
Major roads Smelter Tails dam
refinery
Roads ILO T A C N A
Railway lines SPCC port
Southern Copper
facilities
TACNA
Southern Copper
rail line P a c i f i c O c e a n
0 100km
E
L
I
H
C
U
R
E
P
----- End of picture text -----

Figure 1: Location of Los Calatos and surrounding Cu-Mo operating mines

JORC-compliant resources have historically been declared for Los Calatos, Mollacas and Vallecillo (La Colorada) (Appendix 1).

A 34,200 metre diamond drilling program (Phase 3) was completed at Los Calatos in December 2011. A Phase 4 program comprising 100,000 metres of diamond drilling commenced in December 2011 and is scheduled for completion by the end of 2012, at which time a total of approximately 160 kilometres of diamond drilling would have been completed at Los Calatos. The Company will complete an interim resource estimate for Los Calatos by mid-2012, and a further updated resource estimate on completion of the 2012 drill program. The Company intends to commission a prefeasibility study on the Los Calatos Project for completion in 2013.

Exploration programs, which largely involved in-fi ll drilling, were also completed at the Mollacas and Vallecillo projects, for which revised resource estimates are currently in preparation. In the case of Mollacas, the new resource estimate will form the basis of a Feasibility Study, whereas in the case of Vallecillo, the resource estimate will be followed by a pre-feasibility study, both of which will be completed by the end of 2012.

8 METMINCO LIMITED Annual Report 31 December 2011

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The Los Calatos Project is located in a welldefi ned copper-molybdenum porphyry belt in southern Peru, approximately 80 kilometres to the southeast of Arequipa, and 60 kilometres northwest of Moquegua.

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286000 287000 288000
Diatreme (breccias & tuffs)
Interpreted outline of Cu
mineralisation at 0.1% cut-off
CD-29 Interpreted outline of Mo
CD-41 mineralisation at 0.01% cut-off
"LIX capping" main zone
CD36 CD-27B Porphyry plug
CD57 CD-27
CD-58 CD45 CD-61 Precursor diorite pluton
Toquepala volcanics
CD-42
CD-31
CD-33 CD-56 CD-32
CD-39
CD-26 CD-38CD-40 CD-35 CD-55 CD-47
CD-24 CD-44
CD-25 CD-46 CD-60 CD-62
CD-51 CD-28
CD-50 CD-34
CD-52 CD-37
CD-49
CD-59 CD-30
CD-53 CD-54
CD-48
CD-43
0 1km
286000 287000 288000
SECTION 10300W
SECTION 10000W
SECTION 9800W
8132000 8132000
8131000 8131000
8130000 8130000
----- End of picture text -----

Production from mines in this region exceeded 600,000 tonnes of copper metal in 2009. With the proposed upgrade to the Toquepala, Cuajone and Cerro Verde mines and the development of the Tia Maria and Quellaveco mines, production from this belt is anticipated to increase to more than 1.3 million tonnes of copper metal per annum. Molybdenum constitutes a signifi cant byproduct of copper mining from this belt (Figure 1).

The project comprises 26 exploration licences covering an area of 214 square kilometres, and occurs at an altitude of approximately 2,900 metres above mean sea level. It can be accessed via a sealed road (Pan American Highway) from Moquegua and Arequipa, except for the last 50 kilometres which is unsealed. The port of Ilo is located approximately 160 kilometres by road to the southwest of the project area.

Figure 2: Phase 3 drilling program and regional extent of the LIX zone

The main area of interest at Los Calatos is defi ned at surface by a north-westerly trending zone of advanced argillic alteration or “LIX capping” (Figure 2), which overlies a sub-vertical porphyry system that is developed to drilled depths in excess of 1,700 metres. The LIX capping is 3.3 kilometres in strike extent with a variable width of up to 1 kilometre.

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9

DIRECTORS’ REPORT continued

LOS CALATOS continued

An extensive, regional scale, mapping, geochemical and geophysical program has been completed historically by Metminco over the project area, which identifi ed eight anomalies (targets) with potential, of which two (Targets 1 and 2) have been drill tested. The current JORC-compliant resource (August 2010) is located within these two target areas (Figure 3).

A JORC-compliant mineral resource was estimated for the project by SRK Consulting (Chile) SA (“SRK”) in August 2010, based on the Phase 1 and 2 drilling results completed prior to July 2010, totalling 21,200 metres of drilling (Appendix 1).

A third phase of drilling was completed in December 2011 (Figure 2) totalling 34,200 metres, the objective of which was to delineate the extent of the mineralised porphyry system (mineralised envelope), as well as to ascertain future infi ll drilling requirements to increase, and upgrade the mineral resource. This drilling phase not only confi rmed the fact that the Los Calatos Project embraces a classic mineralised porphyry system, but it also returned wellmineralised intercepts at vertical depths of 50 metres to depths in excess of 1,700 metres below surface. Certain of the drilling results for Phase 3 are summarised in Table 1, Appendix 2.

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278000 282000 286000 290000 294000
8
OVERLYING VOLCANICS
Drilling Area
3
7
LUCIANA 1
1
2
6
5 4
OVERLYING VOLCANICS
Cu / Mo Anomaly
TENEMENTS
OVERLYING VOLCANICS
Polymetallic Anomaly Hampton Mining Peru
Mo (Sb) Anomaly Minera Peñoles Limitada
Mo Anomaly Junefield Group S.A.
Quartz Sericite Teck Cominco Peru S.A.
Alteration Zone
Minera Anaconda Peru S.A.
Mineralised Tourmaline
Breccia Zone Sumitomo Metal Mining
Peru S.A. 0 4 km
5 Target Areas
278000 282000 286000 290000 294000
8134000 8134000
8130000 8130000
8126000 8126000
8122000 8122000
----- End of picture text -----

Figure 3: Project area comprising 214km2 of tenements and defi ned exploration targets (1 to 8).

10 METMINCO LIMITED Annual Report 31 December 2011

The block model used in the estimation of the Mineral Resource announced in August 2010 included holes drilled to a vertical depth of 1,100 metres and a width of mineralisation of up to 500 metres. However, the Phase 3 drilling program has since demonstrated that copper and molybdenum mineralisation occurs over signifi cant intercepts to vertical depths in excess of 1,700 metres, with widths that vary from 700 metres near surface to approximately 1,000 metres at a depth of 1,500 metres below surface in the central part of the porphyry system. Furthermore, drill holes such as CD-31 have returned signifi cant Cu and Mo grades near surface (at depths of 50 metres below surface) on the northern boundary of the porphyry system, which area has the potential for the establishment a starter pit that would enhance early cash fl ows arising from a possible future mining operation at Los Calatos (Figure 4).

The Phase 3 drilling program also identifi ed Cu and Mo mineralisation associated with the younger Diatreme Complex to the south-east of the main porphyry system (Figures 2 and 5), which has the impact of extending the mineralised envelope associated with the porphyry complex further to the south-east.

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S N
PRECURSOR PORPHYRY ZONE PRECURSOR
DIORITE PLUTON DIORITE PLUTON
CD-27
CD-26
LIX CD-31
CD-23
213m; 0.20% Cu,
30 ppm Mo
QUARTZ SERICITE
CD-26 ALTERATION
70m; 0.11% Cu,
CD-25
625m; 0.67% Cu,
1467 ppm Mo
CD-16 CD-24
366m; 0.43% Cu, 851m; 0.43% Cu,
770 ppm Mo 482 ppm Mo
CD-18
681m; 0.52% Cu,
478 ppm Mo
POTASSIC
ALTERATION
? sericite
CD-27
1073m; 0.42% Cu,
226 ppm Mo
POTASSIC
ALTERATION
kspar biotite
CD-31
? 1690m; 0.60% Cu,
? 341 ppm Mo
?
?
0 500m
?
POTASSIC
ALTERATION
1770m EOH biotite 1940m EOH
PORPHYRY CORE
SECTION LINE 10300W
Mo %
Cu %
Lim
ti
of
1.5
1.0
0.5
1
2
3
4
5
m
in
er
ilas
aoit
n
ta
2.0
Cu
%
cu
-to
ff
Limit of mineralisation
----- End of picture text -----

Figure 4: Schematic north-south section through the Los Calatos porphyry system showing the Cu and Mo results for drill hole CD-31.

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PRECURSOR PORPHYRY DIATREME PRECURSOR TOQUEPALA
S PLUTON STOCK WEDGE PLUTON VOLCANICS N
CD-42
3000 m.
CD-46 CD-40
CD-20 LIX
790m; 0.22% Cu,
86 ppm Mo
CD-22
279m; 0.26% Cu,
97 ppm Mo
QUARTZ SERICITE
ALTERATION DIATREME
CD-46 2500 m.
435m; 0.50% Cu,
460 ppm Mo CD-21
459m; 0.33% Cu,
121 ppm Mo
CD-40
1202m; 0.367% Cu,
153 ppm Mo
CD-42
514m; 0.47% Cu,
2000 m. 118 ppm Mo 2000 m.
0 500m
SECTION LINE 9800W
POTASSIC ALTERATION
limi kspar biotite
t of mi
is
ral
ne
tia
limit of mineralisation
on
----- End of picture text -----

Figure 5: Schematic north-south section through the Los Calatos porphyry system showing the presence of mineralisation within the younger Diatreme Complex.

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11

DIRECTORS’ REPORT continued

LOS CALATOS continued

The Phase 3 drill program has also been successful in developing a better understanding of the extent of the mineralised envelope associated with the Los Calatos porphyry system, in both the vertical and horizontal dimensions. Figure 6 demonstrates the areal extent of the mineralised envelope on conclusion of the Phase 3 drilling program, by comparison the extent of the envelope modelled in support of the August 2010 resource estimate.

On completion of the Phase 3 drilling program, Metminco initiated a further phase of drilling (Phase 4), the primary objective of which will be to increase, and upgrade, the existing mineral resource estimate. The Phase 4 drilling program will comprise two sub-phases, totalling 100,000m of drilling, which is planned to be completed in late 2012.

• Phase 4a: ±30,000m of diamond drilling (100m x 200m grid)

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

286000E 286500E 287000E 287500E
PRECURSOR
DIORITE PLUTON
0.05% Cu
TOQUEPALA VOLCANICS
0.01% Mo
Phase 3 enlarged
0.2% Cu envelope (>0.2%Cu)
2010 Resource
Outline
Zn (<"b")
PLUG BANDED
SILICEOUS
RX
PRECURSOR
DIORITE PLUTON PLUG
0.1% Cu
0 500m
286000E 286500E 287000E 287500E
8131500N 8131500N
8131000N 8131000N
8130500N 8130500N
----- End of picture text -----

Figure 6: Extent of Phase 3 delineated mineralised envelope (> 0.2% Cu) by comparison the extent of the August 2010 resource estimate.

• Phase 4b: ±70,000m of diamond drilling (100m x 100m grid)

On completion of Phase 4a during Q2 2012, the Company will complete an interim, JORC-compliant mineral resource estimate, which will incorporate the results of some 64,000 metres of additional drilling by comparison to the August 2010 resource estimate. Phase 4b is aimed at increasing the confi dence level of the aforementioned resource estimate to a vertical depth of 1,200 metres by advancing a large percentage of the defi ned Inferred Resource into an Indicated Resource category. It will also culminate in a revised JORC-compliant resource estimate, which will form the basis of a pre-feasibility study that is to be commissioned in early-2013.

12 METMINCO LIMITED Annual Report 31 December 2011

Eight drill rigs are currently operating on site as part of the Phase 4a program, with a planned drilling rate of some 8,000 metres per month.

Preliminary fl otation testwork undertaken in 2009 on composite samples from drill core have been previously reported by the Company. The test results (predicted results from each of the locked cycle tests using 160 micron material) are shown in the following table:

CONCENTRATE	GRADES	CONCENTRATE	RECOVERY
CU%	MO%	CU%	MO%
24.0	2.5	87.5	79.1

By comparison, the average historical concentrate grade for the nearby Cuajone mine has been ±26% Cu, and for the Toquepala mine just over 27% Cu. Historic copper recoveries at these mines have generally been in the range of 85% to 87%. The molybdenum recoveries achieved for Los Calatos are exceptionally high, as an overall recovery rate of 65 to 68% is normally expected for a commercial grade molybdenum concentrate.

Further metallurgical testwork is required to optimise copper recoveries and copper concentrate grade by conventional fl otation, and to test fl otation and separation of the molybdenum from the copper / molybdenum concentrate. Gold, silver and rhenium are also likely to contribute as credits to any revenue stream arising from mining operations at Los Calatos. The grades of eight concentrate samples are shown in the table below:

==> picture [483 x 17] intentionally omitted <==

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

METAL UNIT AVERAGE GRADE RANGE
----- End of picture text -----

Ag	g/t	42	12	–	91
Au	g/t	1.15	0.7	–	1.8
Cu	%	24.93	21.4	–	30.5
Mo	%	3.08	0.62	–	5.94

Extensive work has been completed on the proposed route for a services corridor to the coast, the position of which has recently been confi rmed. The purpose of the services corridor will be for the pumping of sea water to the metallurgical facilities at Los Calatos, and for the pumping of concentrate to a loading facility along the coast. In this regard, additional metallurgical testwork is to be undertaken during 2012 to assess the impact of using sea water as an integral part of the envisaged metallurgical extractive process (fl otation circuit).

The regional power grid is presently under review by the Peruvian power net authorities to evaluate the transmission capacity of the grid and the ability thereof to accommodate future power requirements (e.g. Los Calatos). Further, and also from an infrastructural perspective, the Company has completed preliminary investigations for a tailings disposal site and mine waste dumps.

On 11 July 2011 the Company announced that the Los Calatos Project had been declared a “Project of National Interest” by the Peruvian Government. A “Project of National Interest” is an exceptional designation that allows Metminco’s wholly owned subsidiary, Hampton Peru, to acquire surface title to the Los Calatos project tenements, which are located on State-owned barren lands, by direct purchase from the Peruvian government. The general rule is that State-owned property can only be transferred by a public auction. This designation only applies in circumstances where the project’s feasibility and economic benefi t for the country can be demonstrated to the Peruvian government.

==> picture [40 x 842] intentionally omitted <==

13

DIRECTORS’ REPORT continued

==> picture [184 x 26] intentionally omitted <==

The Mollacas Project, which occurs at an altitude of 1,500 metres above sea level, covers an area of 33 square kilometres and is located in Region IV, Chile, approximately 65 kilometres east of the town of Ovalle, and 160 kilometres by road from the port of La Serena (Figure 7).

==> picture [479 x 571] intentionally omitted <==

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

The Mollacas Project, which occurs at an
Metminco Project
altitude of 1,500 metres above sea level, Taltal
Major Towns
covers an area of 33 square kilometres and Major Roads Chañaral
is located in Region IV, Chile, approximately Railway Lines Pueblo HundidoCaldera
65 kilometres east of the town of Ovalle, Copiapo A R G E N T I N A
and 160 kilometres by road from the port of Huasc
La Serena (Figure 7). Camaron (Au, Cu) Isidro (Cu, Au)
La Serena
Mollacas is located along a north-south Coquimbo Vallecillo (Au, Zn, Cu)
trending sequence of volcanics, which Mollacas (Cu) Ov
has been intruded by younger porphyritic Loica (Cu, Mo) OQUIMBO
dacites. The copper deposit is associated VALPARAÍSO
with an alteration zone that measures Viña del Mar La Piedra (Cu, Au, Mo)
Valparaíso
SANTIAGO
800 metres by 600 metres, where the SANTIAGO
defi ned resource is limited to an oxide and O'HIGGENS 0 300km
supergene “blanket” that occurs above a MAULE
primary, low grade, porphyry (Figure 8).
Figure 7: Locality of Chilean Projects.
MD-10 MD-28
MD-12 SECTION LINE 8550N
MD-02
LIX MR-09
LIX 0.21% Cu / 15m MD-08 MD-38 0.54% Cu / 75m MD-33 MD-17 MD-26
0.23% Cu / 5m 0.52% Cu / 35m
MR-03
CuSS MD-45 0.22% Cu / 17m
T LIX
0.63% Cu / 41m CuOx 0.31% Cu / 24m
0.54% Cu / 38m
0.57% Cu / 25m
0.41% Cu / 65m
0.98% Cu / 33m 0.89% Cu / 32m CuSS ANDESITIC
VOLCANICS
ANDESITIC
VOLCANICS
0.42% Cu / 7m
0.28% Cu, 0.21g/t Au,
86ppm Mo / 86m
0.28% Cu, 0.17g/t Au,
42ppm Mo / 144m
ARGILLIC
ALTERATION
LIX LEACHED
0.26% Cu, 0.16g/t Au,
CuOx COPPER OXIDES 49ppm Mo / 314m
CuSS COPPER SECONDARY QUARTZ SERICITE ALTERATION
SULPHIDES
T TRANSITION
POTASSIC ALTERATION
0 100M
D A C I T I C P O R P H Y R Y
A M A
P a c i f i cO c e a n
E
L
I
H
C
----- End of picture text -----

Mollacas is located along a north-south trending sequence of volcanics, which has been intruded by younger porphyritic dacites. The copper deposit is associated with an alteration zone that measures 800 metres by 600 metres, where the defi ned resource is limited to an oxide and supergene “blanket” that occurs above a primary, low grade, porphyry (Figure 8).

Figure 8: Mollacas resource comprises an enriched copper oxide and supergene cap.

14 METMINCO LIMITED Annual Report 31 December 2011

==> picture [385 x 200] intentionally omitted <==

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

OPEN PIT
HEAP LEACH
CRUSHING &
SX/EW AGGLOMERATING
----- End of picture text -----

Figure 9: Preliminary infrastructural layout of the Mollacas Cu leach solvent extraction/electrowinning (SX/EW) mining operation.

In November 2007 SRK fi nalised a mineral resource estimate for the project (Appendix 1), which was followed by a Scoping Study (April 2008), where SRK concluded that the mineral resource could be mined as an open pit operation with a strip ratio of 1.3:1 over a 6 year life of mine, producing 13,500 tonnes of cathode copper per annum at a unit operating cost of US$0.91 per pound. Further, and at an estimated capital requirement of $56 million, and a copper price of US$2.50 per pound, the project returned a Net Present Value of US$103 million (8% discount rate) and 70% IRR.

defi ned mineral resources to Measured and Indicated Resource categories, as well as to provide suffi cient material for further tall column leach and permeability testwork. The results of the diamond drilling program are summarized in Appendix 2, Table 2.

The metallurgical testwork will assist in refi ning current copper recovery estimates, acid consumption, and in the design of the leaching and solvent extraction/ electrowinning circuit, which will facilitate more accurate operating and capital cost estimates.

Geotechnical work has been completed in support of the 3-D modeling required for the design of the planned open pit and associated slope angles. Figure 9 provides an indication as to the proposed infrastructural layout at Mollacas.

In November 2008, Metminco completed a 3,970 metre diamond drilling program, which provided oxide and supergene ore for detailed column leach testwork. The testwork, which was undertaken by CIMM laboratories in Santiago, was completed in late October 2010 and demonstrated recoveries of up to 80% of soluble copper, or up to 72% of total copper.

The Company has completed an environmental base line study for the project, and has completed the purchase of land (freehold) and water rights for its development.

Metminco completed a drilling program in Q3 2011 comprising 2,250 metres of diamond drilling and 1,154 metres of reverse circulation drilling. The reverse circulation drilling was undertaken for site infrastructure (condemnation drilling) and hydrological purposes, whilst the diamond drilling program was aimed at providing suffi cient data to convert all previously

On completion of a new, upgraded, resource estimate, a Feasibility Study will be initiated, which is scheduled for completion during Q4 2012.

==> picture [40 x 842] intentionally omitted <==

15

DIRECTORS’ REPORT continued

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The Vallecillo Project covers an area of 179 square kilometres, and is located approximately 50 kilometres northeast of Ovalle and some 25 kilometres north of the Mollacas Project (Figure 7).

The project hosts porphyry related base and precious metal mineralisation that occurs in an arcuate polymetallic belt that has been defi ned on the basis of a soil geochemical sampling program conducted by Metminco during 2009 and 2010 (Figure 10). Four polymetallic targets have been identifi ed (namely targets V1 to V4), of which the V1 target (La Colorada) has been drilled extensively, such that a JORC-compliant resource was estimated in July 2009 (Appendix 1).

The mineralisation at La Colorada is hosted by a porphyry related breccia, which contains gold, silver, zinc, lead and copper mineralisation, which have a distinct vertical zonation, with gold and zinc mineralisation occurring at shallower open pittable depths, while the copper mineralisation occurs beneath the polymetallic zone at a depth of 300 metres below surface (Figure 11).

==> picture [284 x 572] intentionally omitted <==

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

334000 336000 340000
Vallecillo Type
Polymetallic-Breccia
Target Zone
V5
VR15 VR24
V2
V6
VD49 VD50
VR14 VR17 VR18 VD51
VR13 VR19 VD48
VD45 VD47
La Colorada
Pb Geochemical target VR21 VR22 VR20 V3 V1
Au Geochemical target VR16
Cu Geochemical target
Hampton Licences
V7
Drill holes
V4
Au
Target Zone
0 2 km
334000 336000 338000 340000
Figure 10: Polymetallic belt defi ned by soil geochemical sampling.
W E
VR09
ANDESITIC
VOLCANICS ANDESITIC
VOLCANICS
PORPHYRY
0 100m
MINERALISED
BRECCIA
SECTION LINE N2150
Zn %
Au g/t
1.5
1.0
0.5
0.5
1.0
1.5
2.0
6624000 6624000
6622000 6622000
6620000 6620000
----- End of picture text -----

Figure 11: Schematic Section through La Colorada showing distribution of gold and zinc values.

16 METMINCO LIMITED Annual Report 31 December 2011

A drilling program comprising 9,155 metres of diamond drilling and 3,768 metres of reverse circulation drilling was completed in Q4 2011. The 12 reverse circulation drill holes targeting the Portezuelo CuAu porphyry target to the west of the polymetallic belt returned uneconomic Cu, Mo and Au grades, and confi rmed that the geophysical anomaly identifi ed related primarily to the occurrence of pyrite, and an elevated water table. Accordingly, no further exploration work will be scheduled for the area.

The diamond drilling program, which focussed on the La Colorada deposit (28 drill holes) and some of the adjoining polymetallic targets (6 drill holes), was completed during Q4 2011. The drill holes completed at La Colorada formed part of a 25 x 25 metre drilling grid (Figure 12), targeting both an increase in the resource, as well as an upgrade of the resource into predominantly Measured and Indicated Resource categories.

Analytical results have been received for certain of the drill holes completed at La Colorada (Appendix 2, Table 3). On receipt of the fi nal analytical results for the La Colorada drilling program, an updated resource estimate will be completed in advance of a pre-feasibility study, which is to be commissioned in Q2 2012.

Preliminary metallurgical testwork for the La Colorada deposit, completed in early 2010, indicates that the best metallurgical performance is obtained by combining gravity concentration, fl otation and cyanidation of the gravity concentrate and bulk concentrate. The metallurgical balance indicates that it is possible to recover 92% of the gold by cyanide leaching of the gravity concentrate and bulk sulphide concentrate. By comparison, the zinc concentrate assays 55% with a recovery of 93%.

==> picture [284 x 354] intentionally omitted <==

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

338400 338500 338600 338700 338800
VD27 VD25 VD40
VD31 VD29 VD23 VD09
VD39 VD34
INTRUSIVE
VD37 VD32 VD07
VD36 VD21 VD22
N2275 HYDROTHERMALBRECCIA VD06 VD08 VD17 N2275
VD19 VD18+VD20
VD10 VD05 VD04
VR04
VD38 VD24
N2150 VR12 VD15 VR03 VR09 VD16 N2150
VD41 VD43 VD26
MINERALISED
VD14 STOCKWORK VR02 VD13 ANDESITES
VR019
VD42 VD30 VD28
VD12 VR01 VR05 VD11
VD33 VD35
VD46
VR06 VD02
ANDESITES VR08 VD03
VD44
VR07 VD01
VR011
DRILLHOLES
VR01 - 11 (old)
VD01 - 16 (old)
0 100m
VD17 - 46 (new)
338400 338500 338600 338700 338800
00m
0
9
0
9
m
1
e
1
siv
e
Intr
is
u
u
v
in
e
M
r
r
a
6622400 6622400
6622300 6622300
6622200 6622200
t
6622100 6622100
6622000 6622000
6621900 6621900
In
lis
a
n
o
it
----- End of picture text -----

Figure 12: Phase 3 drilling program at La Colorada – tageting a 25 x 25 metre drilling grid.

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17

DIRECTORS’ REPORT continued

==> picture [174 x 25] intentionally omitted <==

The Company has secured an option to purchase a 100% interest in the La Piedra Project, located in Region V, Chile, some 75 kilometres to the northeast of Santiago, and 25 kilometres to the north of Codelco’s Andina mining operation (Figure 13). The project occurs at an altitude of 2,500 to 3,500 metres above mean sea level.

The La Piedra tenements cover an area of 60.5 square kilometres and include a number of hydrothermal alteration zones, of which alteration Zone ‘B’ is the most signifi cant at present. This zone extends over a strike extent in excess of 2 kilometres, is up to 1 kilometre wide, and is exposed at surface over a vertical distance of approximately 600 metres. Reconnaissance soil and channel sampling conducted by Metminco during 2011 identifi ed anomalous copper, gold and molybdenum values, with the former returning values of up to 0.80% copper.

Hydrothermal breccias and porphyry intrusives are the dominant rock types associated with the alteration zones.

The Company has successfully completed an access agreement with the landowner covering the La Piedra Project. A detailed geological mapping and surface sampling program has been initiated over the Zone ‘B’ area, which will be followed by a diamond drilling program.

The drilling, which will take the form of a reconnaissance diamond drilling program comprising 2,500 metres (due to limited road access), will focus on Zone ‘B’ in an endeavour to test the identifi ed Cu-AuMo anomalism at depth. This program is scheduled to be conducted during Q1 of 2012.

==> picture [483 x 290] intentionally omitted <==

Figure 13: Locality of the La Piedra Project, Chile.

18 METMINCO LIMITED Annual Report 31 December 2011

==> picture [173 x 26] intentionally omitted <==

The Camaron Project covers an area of approximately 130 square kilometres, and is located some 40 kilometers to the north of the Vallecillo Project and 60 kilometres to the east of the port of La Serena at an altitude of 1,500 metres above sea level (Figure 7). Metminco holds 100 square kilometres of tenements in its own right, and has an option to purchase 100% of the remaining 30 square kilometres of tenements. The project is located at an elevation of 1,500 metres above mean sea level.

A limited geophysical program comprising induced polarisation, resistivity and ground magnetics was completed during Q4 2011, which identifi ed potentially mineralized conductors, and hence assisted in refi ning the planned drill holes.

Whilst a 5,000 metre reverse circulation drilling program was to be undertaken at Camaron in the latter part of 2011, the drilling program was postponed due to a delay in completing an access agreement with the landowner. The Company has made application to the courts in Vicuna, Region IV, Chile, for access rights. Accordingly, it is anticipated that the drilling program will commence during Q2 2012.

Exploration work conducted to date suggests that the Camaron Project represents a large intensely altered (argillic / chloritic / silicifi cation) porphyry-related system, which has a surface expression that covers an area of approximately 10 kilometres x 6 kilometres with a northwest-southeast strike. Although anomalous gold values have been returned over the full strike extent of the alteration zone, molybdenum anomalies are limited to the southern sector of the project area (Figure 14).

==> picture [342 x 288] intentionally omitted <==

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

334000 336000 338000 340000
B
Alluvium and colluvium
Dacites, andesitic pyroclastics
Andesitic, rhyolitic & dacitic lavas
A
Dacite (micro-porphyry) C
F
Andesitic intrusive (porphyritic)
Sinter - white D E G
Sinter - black H
Fault
Reverse fault
Au geochemical trend
Mo geochemical trend
Anomalous geochemical samples
Proposed borehole K L M
Tenement boundary N P
Q O
S
R
0 2 km
334000 336000 338000 340000
qtz vein
VICUNA FAULT
6668000 6668000
6666000 6666000
6664000 6664000
6662000 6662000
----- End of picture text -----

Broad-spaced mapping and soil geochemical sampling completed in late 2009 returned signifi cant copper, gold and molybdenum values, in addition to identifying a number of drill targets.

Figure 14: Extent of gold and molybdenum anomalies.

==> picture [40 x 842] intentionally omitted <==

19

DIRECTORS’ REPORT continued

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The Isidro Project, which is located to the north of Vicuna, and hence north of the Camaron Project, covers an area of approximately 250 square kilometres, of which 230 square kilometres are 100% owned by Metminco and 20 square kilometres are held by SCM San Lorenzo (50% owned by Metminco).

Isidro has been interpreted to be a large coppergold stacked manto system, and has as yet to be drill tested. Surface geochemical sampling by Metminco has identifi ed extensive, well developed, copper-gold anomalism.

Future exploration work will comprise prospect scale mapping and geochemical sampling assisted by satellite imagery to defi ne drill targets and enable drilling by early 2013.

==> picture [100 x 26] intentionally omitted <==

The Loica Project covers an area of 35 square kilometres and is located approximately 100 kilometres to the southeast of Ovalle.

Loica comprises a large copper-molybdenum porphyry system, approximately 4 kilometres in strike extent, with a north-south orientation. Metminco drilled the upper part of the Loica porphyry system in 2007, returning signifi cant widths of low grade coppermolybdenum mineralisation.

Future exploration is warranted and will ultimately comprise mapping, geochemical sampling and geophysical surveys of the breccia zones as a prelude to possible further drill testing.

==> picture [179 x 21] intentionally omitted <==

Reconnaissance exploration activities are being planned for areas currently held under application over the Caldera (42 square kilometres) in the Arica area of northern Chile, and Jaspe (14 square kilometres) in the Antofagasta area of northern Chile.

20 METMINCO LIMITED Annual Report 31 December 2011

APPENDIX 1: MINERAL RESOURCE ESTIMATES AS AT 31 DECEMBER 2011

				GRADE		CONTAINED
PROJECT	CATEGORY	RESOURCE	COPPER	MOLYBDENUM	COPPER	EQUIVALENT METAL4
LOS CALATOS1 (August 2010) MOLLACAS2 (November 2007)	INDICATED INFERRED INDICATED	million tonnes 111.26 814.97 7.21	% 0.39 0.37 0.56	% 0.038 0.026	million tonnes million pounds 0.65 1,423 4.07 8,984 0.04 89
	INFERRED	9.83	0.52		0.05	113
					GRADE
PROJECT	CATEGORY	RESOURCE	GOLD	SILVER	ZINC	LEAD
VALLECILLO3 (July 2009)	INDICATED	million tonnes 7.89	grams/tonne 1.14	grams/tonne 11.39	% 1.32	% 0.29
	INFERRED	2.21	0.78	8.16	0.58	0.26

NOTES:

• 1 Reported at a 0.2% copper cutoff

• 2 Reported at a 0.2% copper cutoff

3 Reported at a 0.3 grams per tonne gold cutoff

4 Copper equivalence assumes the copper/molybdenum price ratio of 5:1

Competency Statements

The estimate of the Resources for the Los Calatos Project as presented in this statement, has been carried out in accordance with the guidelines of the ‘Australian Code for Reporting of Mineral Resources and Ore Reserves’ committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Mineral Council of Australia, 2004. Information was collated and interpreted by Mr. C Sinclair and resource block modeling undertaken by SRK Consulting, Chile. Mr. Sinclair reviewed and validated the information provided by Metminco and the work undertaken by SRK Consulting, Chile. Mr. Sinclair is a full time employee of Minera Hampton Chile Limitada, a wholly owned subsidiary of Metminco, and estimated the resources based on the block modeling undertaken by SRK Consulting, Chile. Mr. Sinclair has suffi cient experience (over 30 years) which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defi ned in the 2004 edition of the Australian Code for Reporting Mineral Resources and Ore Reserves. Mr. Sinclair is a Member of the AusIMM and has over 40 years’ experience. Mr. Sinclair is signing off as the competent person for this statement, and consents to the inclusion in a report based on this information in the form and context in which it appears.

The information in this report that relates to Mineral Resources for the Mollacas Project is based on information compiled and reviewed by Mr. George G. Even, Principal Geologist of SRK Consulting, Chile (SRK), in Santiago, who is a member of the AusIMM (overseas branch). Mr. Even has suffi cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defi ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Even consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Mr. Ernesto Jaramillo, Senior Resource Geologist of SRK Consulting, Chile, performed the updating of the geologic model as well as the estimation and classifi cation of the mineral resources.

The information in this report that relates to Mineral Resources of the Vallecillo gold-zinc deposit is based on information compiled by Mr. Even, Principal Geologist of SRK Consulting in Santiago, Chile. Mr. Even a Qualifi ed Person for JORC compliant statements, reviewed the technical information presented in this document. Mr. Ernesto Jaramillo, Principal Resource Geologist with SRK Santiago, performed the resource estimation. Mr. Even has suffi cient experience that is relevant to the style of mineralisation and type of mineral deposit under consideration and to the activity which was undertaken, to make the statements found in this report in the form and context in which they appear.

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21

DIRECTORS’ REPORT continued

APPENDIX 2

Table 1: Los Calatos - Summary of Phase 3 drill hole results

==> picture [231 x 27] intentionally omitted <==

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

CUMULATIVE
HOLE ID INTERVAL (M) CU % MO PPM
----- End of picture text -----

CD-24	851	0.43	482
CD-25	630	0.67	1,467
CD-27	1,073	0.42	227
CD-28	335	0.49	76
CD-31	1,690	0.60	353
CD-33	373	0.38	328
CD-34	187	0.38	20
CD-35	442	0.41	103
CD-38	1,158	0.33	165
CD-39	1,242	0.32	269
CD-40	1,220	0.36	153
CD-41	268	0.19	40
CD-42	514	0.47	118
CD-45	553	0.30	174
CD-46	534	0.45	380
CD-47	347	1.03	103
CD-49	550	0.28	208

Table 3: Vallecillo (La Colorada) – Drill hole results (as at 31 December 2011)

HOLE	ID FROM m	DEPTH TO m	INTERVAL m	Au g/t	Ag g/t	Zn %	Pb %	Cu %
VD-18	180	218	38	0.32	8.95	0.70	0.46	0.02
	241	265	24	1.26	7.33	0.76	0.04	0.05
VD-20	182	219	37	1.66	9.89	1.27	0.66	0.02
	280	297	17	0.45	19.12	0.69	0.05	0.45
	317	331	14	0.08	4.93	0.57	0.02	0.08
VD-22	254	275	21	0.18	7.95	0.66	0.53	0.02
VD-30	167	215	48	1.17	7.19	1.56	0.02	0.08
	224	234	10	0.05	9.5	1.09	0.03	0.07

22 METMINCO LIMITED Annual Report 31 December 2011

Table 2: Mollacas – Summary of drill hole results (MD-61 to MD-84)

==> picture [483 x 46] intentionally omitted <==

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

HOLE ID HOLE DEPTH DEPTH INTERVAL CU CU ORE TYPE
FROM TO
m m m %
----- End of picture text -----

MD-61	90	0	33	33	0.53	Oxide
		34	57	23	0.45	Supergene
MD-62	90	41	50	9	0.18	Supergene
MD-63	75	36	75	39	0.32	Primary
MD-64	110	51	103	52	0.15	Supergene
MD-65	120	31	65	34	0.15	Oxide
		70	112	42	0.37	Supergene
MD-66	90	41	53	12	0.10	Supergene
MD-67	120	27	37	10	0.60	Oxide
		41	53	12	0.24	Oxide
		53	110	57	0.70	Supergene
MD-68	60	15	26	11	0.50	Supergene
MD-69	135	71	103	32	0.54	Supergene
MD-70	120	37	75	38	0.78	Oxide
		75	102	27	0.71	Supergene
MD-71	63	49	55	6	0.32	Primary
MD-72	50	14	37	23	0.46	Supergene
MD-73	80	0	25	25	0.42	Oxide
MD-74	100	42	89	47	0.96	Supergene
MD-75	120	115	118	3	0.23	Primary
MD-76	105	20	51	31	0.47	Oxide
		52	89	37	0.67	Supergene
MD-77	110	13	37	24	0.58	Oxide
		44	79	35	0.57	Supergene
MD-78						Nil
MD-79	80	35	76	41	0.42	Supergene
	including	35	51	16	0.77	Supergene
MD-80	80	0	29	29	0.39	Oxide
		44	80	36	0.48	Supergene
MD-81	70	0	9	9	0.26	Oxide
		39	51	12	1.01	Supergene
MD-82	110	58	73	15	0.34	Oxide
		80	110	30	0.26	Supergene
MD-83	90	42	69	27	0.57	Supergene
MD-84	85	48	56	8	0.17	Supergene

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23

DIRECTORS’ REPORT continued

Corporate

A$30.4 million Capital Raising

On 3 June 2011 the Company completed a capital raising before costs of A$30.4 million by placement of 80 million new fully paid shares in the Company (Shares) at an issue price of A$0.38 per Share. This placement, which was primarily to institutional investors in Australia, Asia, Chile and the United Kingdom, further broadened Metminco’s shareholder base and introduced a number of new “cornerstone” investors to the Company.

The capital raising was completed in two tranches as follows:

• A$7.6 million by issue of 20 million Shares at an issue price of A$0.38 per Share completed 6 May 2011; and,

• A$22.8 million by issue of 60 million Shares at A$0.38 per Share, approved by shareholders at the Company’s Annual General Meeting on 30 May 2011.

Canaccord BGF acted as the lead manager and underwriter for this placement.

Acquisition of Los Calatos “buy back right” and purchase of remaining 50% of SCM Ovalle

On 28 April 2011 the Company completed the following transactions, which in the opinion of Directors, signifi cantly strengthened the Company’s asset base and enhanced long term shareholder value.

• Acquisition of Barrick’s “buy back right” over 51% of the Los Calatos project

Barrick Gold Corporation (Barrick) surrendered a conditional once off “buy back right” over certain tenements comprising the Los Calatos project in exchange for 75 million Shares.

The risk that Barrick could exercise this “buy back right”, and in doing so acquire 51% of the Los Calatos project for signifi cantly lower than a resources based market value, has now been removed.

• Purchase of 50% of SCM Ovalle

The Group purchased a 50% interest in SCM Ovalle from EM Dos resulting in SCM Ovalle becoming a wholly owned subsidiary of Metminco. Metminco (through its wholly owned subsidiary Hampton Chile) now owns 100% of the Mollacas copper leach project, the Vallecillo Au-Zn project and the Loica Cu-Mo deposit.

The Group paid EM Dos US$35 (A$33.9) million, satisfi ed by the issue of 70,250,855 Shares and payment of US$10 million in cash.

Together with the $30.4 million placement reported above, these transactions removed the complexity and uncertainty surrounding the ownership and the future development timetable of the projects and paves the way for the Group to advance the Los Calatos, Mollacas and Vallecillo projects.

A$40 million Capital Raising to Institutional Investors

On 25 November 2011 the Company announced the successful completion of a A$40 (£25.1) million placement before costs to institutional investors in the United Kingdom, Australia, Asia and Chile by the issue of 285,714,286 new fully paid shares in the Company (Shares) at an issue price of A$0.14 (£0.088) per Share.

This placement was completed in two tranches as follows:

• A$29.7 million by issue of 211,850,000 Shares settled on 2 December 2011 (Firm Placement); and

• A$10.3 million by issue of 73,864,286 Shares, approved by shareholders at the Company’s Extraordinary General Meeting on 4 January 2012 and settled on 6 January 2012 (Conditional Placing).

Canaccord Genuity, Liberum and Canaccord BGF acted as brokers for this placement.

24 METMINCO LIMITED Annual Report 31 December 2011

Early repayment of US$0.5 million convertible notes

Metminco completed early repayment of convertible notes totalling US$0.5 million by issue of 4,845,000 Shares in satisfaction of the principal value of the convertible notes. The Company also paid US$80,000 in early repayment fees. As previously announced on 1 April 2010, these notes were entered into by Metminco as part of the A$20 million capital raising and admission to the AIM Market of the London Stock Exchange. The majority of funds from this capital raising were applied to acquire Junior Investment Company‘s 31% shareholding in Hampton in May 2010. Hampton became a wholly owned subsidiary of Metminco in December 2010. There are now no convertible notes outstanding.

Option to acquire La Piedra Project

On 30 June 2011, Hampton Chile entered into an option agreement to purchase a 100% interest in the La Piedra Project (La Piedra Option).

To maintain the La Piedra Option, Hampton Chile is required to make the following option payments:

• US$350,000 on signing the La Piedra Option (already paid);

• US$350,000 on or before 30 June 2012;

• US$350,000 on or before 30 June 2013;

• US$1,000,000 on or before 30 June 2014.

To exercise the La Piedra Option, Hampton Chile must pay US$28 million in cash, or US$14 million in cash and US$14 million in Metminco shares (at Metminco´s election), on or before 30 June 2015.

The La Piedra Option will provide Hampton Chile with suffi cient time to evaluate the prospectivity of the La Piedra tenements, and to delineate Mineral Resources, ahead of the option expiry date of 30 June 2015.

Hampton Chile may elect to terminate the La Piedra Option at any time before 30 June 2015.

Option to acquire Genesis Tenments (part of the Camaron Project)

Hampton Chile fi nalised the purchase of a 33% interest in the Genesis tenements (which form part of the Camaron project) for US$782,000 (A$782,000) and entered into an 18 month option agreement to acquire the remaining 67% (Genesis Option Agreement).

On signing the Genesis Option Agreement Hampton Chile paid US$370,000 (A$365,000) with 2 further option payments of US$370,000 (A$365,000) payable on the six month and twelve month anniversary. If Hampton Chile exercises the option then it must pay US$1 million on the exercise date and 3 further annual payments each of US$1 million on the second, third and fourth anniversary of exercise of the option (in total $US 4 million – A$ 4 million) as an advance payment against future royalty payments, and pay 1.7% Net Smelter Return on future production from the Genesis tenements.

Hampton Chile may elect to terminate the Option to acquire the remaining 67% at any time prior to August 2012.

S&P/ASX 300

On 18 March 2011 Metminco joined the S&P/ASX 300 index which exposes Metminco to stronger institutional investment support and wider investor recognition for its portfolio of assets in Chile and Peru.

Board Changes

On 16 March 2011, Mr Antonio Vicuna Ortuzar (48), a Chilean national and resident, was appointed to the Board of the Company. Mr Ortuzar, a lawyer by profession, is a highly respected fi gure in the global resources sector and has extensive experience and networks in the fi nancial markets in both North and South America as well as in London. Mr Ortuzar also assumed the role of Chairman of the Board.

Mr Ortuzar’s appointment followed the resignation of Mr John Fillmore (founding chairman of Metminco). Mr Fillmore resigned from the Board and as Chairman of the Company in order to focus on his growing Melbourne legal practice and to develop new mining and exploration ventures. John Fillmore provided Metminco with outstanding service as Chairman of the Board.

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25

DIRECTORS’ REPORT continued

Change in Nominated Adviser and Joint Broker on the AIM Market

On 26 July 2011 the Company appointed Canaccord Genuity Limited as its Nominated Adviser and Joint Broker on the AIM market, and Liberum Capital Limited as Joint Broker on the AIM market.

Signifi cant Changes in State of Aff airs

There are no signifi cant changes in the state of aff airs during the year other than as disclosed in this report.

Dividends paid or recommended

No dividends were paid or declared during the year by the Company. The Directors do not recommend paying a fi nal dividend for the year ended 31 December 2011.

Events subsequent to reporting date

Matters subsequent to the end of the fi nancial period follow:

Likely future developments

The Group will continue to focus on exploration activities and further advancement of mineralised deposits in Chile and Peru.

Environmental regulations

The Group’s operations are subject to signifi cant environmental regulation under the laws of Australia, Chile and Peru. The Directors are not aware of any breaches of the legislation during the year that are material in nature.

In Chile the Environmental Act provides a framework for environmental policy and in Peru environmental policy is governed by the Environmental Regulation for Mining Exploration Projects (Supreme Decree N 020-200-EM).

a) Settlement of Conditional Placing of A$10.3 million On 25 November 2011 the Company announced a A$40 (£25.1) million placement consisting of a Firm Placement (211,850,000 Shares to raise A$29.7 million) settled on 2 December 2011 and a Conditional Placement (73,864,286 Shares to raise A$10.3 million). The Conditional Placement was approved by shareholders at the Company’s Extraordinary General Meeting on 4 January 2012 and settled on 6 January 2012.

b) Rights Issue

On 24 November 2011, the Company announced a Rights Issue of one new share (New Share) for every twenty Shares held by Australian and New Zealand resident shareholders (Eligible Shareholders) in Metminco on 14 December 2011 at an off er price of A$0.14 per New Share. The Rights Issue closed on 3 January 2012 with 1,211,141 New Shares (approximately 2% of the Right Issue off er) subscribed for by Eligible Shareholders raising approximately A$0.2 million. The Rights Issue was undersubscribed by 67,349,599 Shares (Shortfall Shares). The Directors resolved not to place the Shortfall.

26 METMINCO LIMITED Annual Report 31 December 2011

Information on Directors

Antonio Ortúzar Non Executive Chairman (appointed 16 March 2011) QUALIFICATIONS University Gabriela Mistral (LLB) EXPERIENCE Antonio. is a senior partner of Cruzat, Ortúzar & Mackenna Ltda, a member of Baker & McKenzie International, one of the leading law fi rms in Chile. He is also the joint coordinator of the Latin America Energy, Mining, Chemicals and Infrastructure Group. Antonio’s experience includes international joint ventures, project fi nancing, foreign investments, corporate and commercial arrangements, as well as major mining infrastructure projects, mining and telecommunications. He has been involved in the placement of shares in the Chilean stock market, ADRs in the New York Stock Exchange and IPOs in Australia and Canada. Antonio also handles the issuing of bonds, various mining infrastructure issues, and energy and water projects in Chile. He also serves as assistant professor of economic law at Finis Terrae University in Santiago, and is a member of the Chilean Bar Association. He is a former vice president of the Australian-Chilean Chamber of Commerce. Mr Otuzar is a director of Atacama Pacifi c Corporation, a TSX listed company and Baker & McKenzie LLP.

INTEREST IN SHARES A related party holds 6,400,000 ordinary shares in Metminco Limited and 3,000,000 options to acquire AND OPTIONS shares. SPECIAL Member of the Environment, Social, Occupational Health and Safety Committee. RESPONSIBILITIES

William Howe Managing Director QUALIFICATIONS B.Sc. FAusIMM EXPERIENCE Appointed as a Director on 17 July 2009 and Managing Director on 8 December 2010. Mr Howe, the founder of Hampton, has over 30 years experience in the mining industry and has worked in Southern and West Africa, Asia, Australia and the USA. He has been instrumental in the development of a number of new mining operations in Australia and Indonesia including the development and management of the fi rst copper heap leach Project in Australia, and an open pit coal mine in South East Kalimantan in Indonesia. He specializes in optimising existing operations and the development of new operations in both underground and open pit mining environments and has extensive experience in mine development, mine management and corporate management. He has worked in many geological and mining environments in several countries around the world and in such commodities as gold, coal, copper, uranium, antimony, chrome and tin. Mr Howe was a founding director of Straits Resources Limited and was Managing Director of Ghana Gold Mines Limited, Hargraves Resources NL,Selwyn Mines Limited and Hampton Mining Limited.

INTEREST IN SHARES 48,264,168 ordinary shares in Metminco Limited. AND OPTIONS Phillip Wing Non Executive Director QUALIFICATIONS PhD, MEc, BEc, CPA EXPERIENCE Appointed on 17 July 2009, Dr Wing is the Executive Chairman of a number of special purpose private equity fi rms. He is currently Chairman or non executive Director of six investee companies ranging from mining to medical devices. Until January 2006, Phillip was for 7 years a partner of Technology Venture Partners (TVP), a specialist Institutional Information Technology and Telecommunications venture capital fi rm, and was an active non-executive director on many of TVP’s portfolio companies in Australia and overseas. Prior to joining TVP, Phillip was a senior executive in IBM’s global and Asia Pacifi c management team. He held responsibility for a major industry business unit in Asia and was also General Manager of the IBM (Australia and New Zealand) consulting business. His last role in IBM was as General Manager (Global Services) responsible for strategy, marketing and business development including acquisitions, alliances and business partners. Prior to his career at IBM, Phillip was a partner at Ernst and Young, KPMG Peat Marwick and Touche Ross, specializing in strategy and IT and corporate advisory consulting. Phillip held managing partner roles responsible for the consulting business units and spent two years on secondment as the Chief Information Offi cer of NSW Health. Phillip has worked extensively in the USA, Asia, and Europe. He has a Bachelor and Masters of Economics and has completed a PhD in Organisational Change. He is a member of the Institute of Chartered Accountants, and also an adjunct lecturer with the Centre for Applied Finance (Macquarie University). INTEREST IN SHARES 15,893,336 ordinary shares in Metminco Limited. AND OPTIONS SPECIAL Member of the Audit and Risk Committee. RESPONSIBILITIES

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27

DIRECTORS’ REPORT continued

William Etheridge Non Executive Director

QUALIFICATIONS	B.Eng, MA (Economics, Cantab)
EXPERIENCE	Appointed on 17 July 2009. Mr Etheridge has over 35 years experience in the mining and mining f nance
	industry, based mainly in Sydney and London. He worked as a mining engineer with Hamersley Iron, and
	as an economist / business development executive for mining companies in London (Consolidated Gold
	Fields) and Sydney (Renison Goldf elds Consolidated). He has also since worked within mining companies
	(including Hargraves Resources and Selwyn Mines Limited) focusing on mining project scoping,
	analysis and appraisal, valuation of internal and external opportunities, cut-of grade analysis, project
	administration, preparation of company reports and investor relations. He also worked in stockbroking
	(including Merrill Lynch, ABS White and HSBC James Capel) as a resource analyst, covering a range of
	mining companies, and including experience in equity raising. He has consulted on mining investment
	opportunities in coal, gold and base metals and has undertaken detailed analysis of a number of mineral
	commodities.
INTEREST IN SHARES	61,800,000 ordinary shares in Metminco Limited.
AND OPTIONS
SPECIAL	Member of the Environment, Social, Occupational Health and Safety Committee.
RESPONSIBILITIES
Timothy Read	Non Executive Director
QUALIFICATIONS	BA (Economics), Fellow of the Chartered Institute for Securities and Investment
EXPERIENCE	Appointed on 1 April 2010, Tim has over forty years experience in the mining and metals sector, f rst
	as a mining analyst, then as an investment banker and, most recently, as a corporate executive and
	director. Between 1995 and 1999, he was Managing Director and Global Co-Head of Mining and Metals
	Investment Banking for Merrill Lynch Inc. and, accordingly has extensive experience of all aspects of
	corporate f nance, particularly M&A and equity capital markets. Between 1999 and 2006, he was the
	chief executive of Adastra Minerals Inc (acquired by First Quantum Minerals in 2006) and since then has
	acted as a non-executive director for several natural resource companies including Cumerio SA (acquired
	by Norddeutsche Af nerie in 2008), Kopane Diamond Developments (until December 2009), Starf eld
	Resources Inc. and Faroe Petroleum plc. Tim is also a Director of Capital Drilling Limited, a company listed
	on the London Stock Exchange.
INTEREST IN SHARES	650,000 ordinary fully paid shares in Metminco Limited and 6,000,000 options to acquire shares.
AND OPTIONS
SPECIAL	Chairman of the Audit and Risk and Remuneration and Nomination Committees.
RESPONSIBILITIES
Francisco	Non Executive Director
Vergara-Irarrazaval
QUALIFICATIONS	Law Degree from the Catholic University of Chile, Fulbright Scholar and undertook graduate studies in
	the Institute of International and Foreign Trade Law of Georgetown University, Washington D.C. and at the
	Law School of Cornell University, Ithaca, New York.
EXPERIENCE	Appointed on 1 April 2010, Francisco has over 30 years experience in the mining industry in Chile and
	other Latin American countries where he was Vice President of Compaò”a Minera El Indio and Compaò”a
	Minera San Josè, subsidiaries of St. Joe Minerals Corporation until 1991. In 1991, he established Vergara
	& Cia, Law Firm, providing legal services to dif erent mining companies and international engineering
	f rms focused in natural resources, energy, shipping, agriculture, and foreign governments through their
	embassies in Chile and has acted as Director of listed companies and Chairman and Director of a number
	of unlisted companies.
INTEREST IN SHARES	50,140,000 ordinary shares in Metminco Limited.
AND OPTIONS
SPECIAL	Member of the Audit and Risk, Remuneration and Nomination, and Environment, Social, Occupational
RESPONSIBILITIES	Health and Safety Committees.

28 METMINCO LIMITED Annual Report 31 December 2011

Company Secretary

Philip Killen Chief Financial Offi cer/Company Secretary

QUALIFICATIONS B.Maths/B.Commerce, CPA

EXPERIENCE Mr Killen is a fi nance professional with over 17 years experience in the mining and exploration sector as principal of CPK Consulting and prior to that in various senior executive roles, including Financial Controller of Plutonic Resources Limited and Chief Financial Offi cer of Otter Gold Mines Limited. Previously he was with the Caltex Group for over 10 years in various senior fi nance, audit and technology roles located in Australia and overseas. His experience includes fi nancial modeling to support bankable feasibility studies, development of funding strategies, treasury, statutory and ASX compliance reporting, and implementation of commercial systems.

INTEREST IN SHARES 4,149,836 ordinary shares in Metminco Limited and 5,000,000 options to acquire shares. AND OPTIONS

Meetings of the Board

The Board of Directors held 10 meetings during the period ended 31 December 2011. Attendances of Directors at these meetings are shown in the table below:

tings are shown in the table below:
DIRECTOR	MEETINGS ATTENDED	ELIGIBLE TO ATTEND BOARD MEETINGS
Antonio Ortúzar_(appointed 16 March 2011)_	8	8
Phillip Wing	10	10
William Howe	10	10
William Etheridge	10	10
Timothy Read	10	10
Francisco Vergara-Irarrazaval	9	10
John Fillmore_(resigned 16 March 2011)_	1	2

Meetings of Board Committees

The number of board committee meetings held and the number of meetings attended by each director (who are members of board committees) during the year ended 31 December 2011 were as follows:

	AUDIT AND	RISK COMMITTEE	REMUNERATION AND	NOMINATION COMMITTEE
DIRECTOR	MEETINGS ATTENDED	ELIGIBLE TO ATTEND MEETINGS	MEETINGS ATTENDED	ELIGIBLE TO ATTEND MEETINGS
Timothy Read	3	3	2	2
Francisco Vergara-Irarrazaval	3	3	2	2
Phillip Wing	1	1	–	–
(appointed 7 September 2011)

The Board has also resolved to form an environment, social and occupational health and safety committee.

Indemnifi cation of Directors and Offi cers

Under the provisions of the Constitution of the Company every offi cer (and former offi cer) of the Company is indemnifi ed, to the extent permitted by law, against all costs expenses and liabilities incurred as such an offi cer providing it is in respect of a liability to another person (other than the Company or a related body corporate) where such liability does not arise out of conduct involving a lack of good faith and is in respect of a liability for costs and expenses incurred in defending proceedings in which judgment is given in favour of the offi cer or in which the offi cer is acquitted or is granted relief under the Law.

The Company has paid premiums to insure the Directors and Offi cers against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in their capacity as offi cers of the Company other than conduct involving a wilful breach of duty in relation to the Company. The premiums amounted to A$28,447 for the year ended 31 December 2011 (for the year ended 31 Dec 2010: A$28,447).

Indemnifi cation of Auditors

No indemnities have been given or insurance premiums paid, during or since the end of the half year, for any person who is or has been an auditor of the Company.

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29

DIRECTORS’ REPORT continued

Options

At the date of this report, the unissued ordinary shares of Metminco Limited under option are as follows: Listed options

GRANT DATE	DATE OF EXPIRY	EXERCISE PRICE	NUMBER UNDER OPTION
4 December 2009	4 December 2012	$0.25	1,000,000
4 December 2007	4 December 2012	$0.25	26,217,517
			27,217,517
Unlisted options
GRANT DATE	DATE OF EXPIRY	EXERCISE PRICE	NUMBER UNDER OPTION
29 September 2010	31 July 2012	$0.30	4,500,000
30 December 2010	06 December 2013	$0.44	14,250,000
30 December 2010	06 December 2013	$0.525	14,250,000
30 December 2010	06 December 2013	$0.44	2,000,000
30 December 2010	06 December 2013	$0.525	2,000,000
05 December 2011	05 December 2014	$0.215	2,500,000
05 December 2011	05 December 2014	$0.260	2,500,000
			42,000,000

Option holders do not have any right to participate in any issues of shares or other interests in the Company or any other entity. There have been no unissued shares or interests under option of any controlled entity within the Group during the reporting period. For details of options issued to directors and executives as remuneration, refer to the Remuneration Report.

Non-audit services

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

• all non-audit services are reviewed prior to commencement to ensure they do not adversely aff ect the integrity and objectivity of the auditor; and

• the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees were paid or payable to Grant Thornton for non-audit services provided during the year ended 31 December 2011:

r 2011:
	$
Advisory services regarding Employee Share Option Plan	1,327
Other advisory services	4,600
Advisory services regarding MNC Chile assets	5,700
Tax advice	3,500
	15,127

Auditor’s Independence Declaration

The lead auditors’ independence declaration as required under section 307C of the Corporations Act 2001 for the year ended 31 December 2011 is set out on page 35.

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 proceedings to which the Company is a party for the purpose 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.

30 METMINCO LIMITED Annual Report 31 December 2011

REMUNERATION REPORT (audited)

Remuneration Policy

The remuneration policy of Metminco has been designed to align key management personnel objectives with shareholder and business objectives by providing a fi xed remuneration component and off ering specifi c longterm incentives based on key performance areas aff ecting the Company’s fi nancial results. The Board of Metminco believes the remuneration policy to be appropriate and eff ective in its ability to attract and retain the best key management personnel to run and manage the Company, as well as create goal congruence between directors, executives and shareholders.

The Board’s policy for determining the nature and amount of remuneration for key management personnel of the Company is as follows:

• The remuneration policy is to be developed by the Remuneration and Nomination Committee and approved by the Board with professional advice from independent external consultants.

• The Remuneration and Nomination Committee reviews key management personnel packages annually by reference to the Group´s performance, executive performance and comparable information from industry sectors.

The performance of key management personnel is measured against criteria agreed with each executive. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Committee’s recommendations. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth.

Key Australian resident management personnel receive a superannuation guarantee contribution required by the Superannuation Guarantee legislation, and do not receive any other retirement benefi ts.

Upon retirement, key management personnel are paid employee benefi t entitlements accrued to the date of retirement. All remuneration paid to key management personnel is valued at the cost to the Company and expensed.

The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Remuneration and Nomination Committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting.

Performance-based Remuneration

The Company did not have a performance based remuneration scheme for Non-Executive Directors in 2011. The Company has provided some performance based remuneration to Executive Directors for the period. The Company does provide performance based remuneration to certain key executives of the Group.

Employment Details of Members of Key Management Personnel and Other Executives

The following table provides employment details of persons who were, during the year, members of key management personnel of the Group. The table also illustrates the proportion of remuneration that was performance and non-performance based and the proportion of remuneration received in the form of options.

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31

DIRECTORS’ REPORT continued

REMUNERATION REPORT continued

			PROPORTIONS OF ELEMENTS OF	PROPORTIONS OF ELEMENTS OF
		PROPORTIONS OF ELEMENTS	REMUNERATION NOT RELATED TO
		OF REMUNERATION RELATED TO PERFORMANCE	PERFORMANCE
POSITION HELD AS AT	CONTRACT DETAILS	NON-SALARY
31 DECEMBER 2011 AND	(DURATION AND	CASH-BASED	FIXED SALARY/
ANY CHANGE DURING THE YEAR	TERMINATION)	INCENTIVES SHARES/UNITS OPTIONS/RIGHTS	FEES	TOTAL
		% % %	%	%
Group Key Management Personnel Antonio Ortúzar Chairman	No written contract	– – –	100	100
(appointed 16 March 2011) William Howe Managing Director	Written contract	33 – –	67	100
	(6 months’ notice)
Philip Wing Non Executive Director	No written contract	30 – –	70	100
William Etheridge Non Executive Director	No written contract	33 – –	67	100
Tim Read Non Executive Director	No written contract	– – –	100	100
Francisco Vergara- Non Executive Director	No written contract	– – –	100	100
Irarrazaval Philip Killen CFO and Company	Written contract	– – 12	88	100
Secretary	(6 months’ notice)
Colin Sinclair General Manager	Written contract	– – 12	88	100
Exploration	(6 months’ notice)
Keith Weston Exploration Manager Peru	(not applicable)	– – –	100	100
(resigned 22 Dec 2011) Stephen Tainton General Manager	Written contract	– – 29	71	100
Investor Relations	(6 months’ notice)
(appointed 1 March 2011) Gavin Daneel General Manager	Written contract	– – 12	88	100
Business Development	(6 months’ notice)
(appointed 1 Jan 2011) John Fillmore Chairman (resigned 16 March 2011)	No written contract	– – 92	8	100

The employment terms and conditions of key management personnel are usually formalised in contracts of employment.

Terms of employment require that the relevant group entity provide an executive with their contractual entitlements.

A contracted person employed on a permanent basis may terminate their employment in accordance with their contract by giving three month’s prior written notice. Termination payments are not payable on resignation or under the circumstances of unsatisfactory performance.

Non-Executive Directors are not subject to contracts. Termination payments are at the discretion of the Remuneration and Nomination Committee.

Changes in Directors and Executives Subsequent to 31 December 2011

There were no changes in Directors or Executives subsequent to 31 December 2011.

32 METMINCO LIMITED Annual Report 31 December 2011

Remuneration Details for the year ended 31 December 2011

The following table of benefi ts and payments details, in respect to the fi nancial year, the components of remuneration for each member of the key management personnel of the Consolidated Group:

==> picture [484 x 515] intentionally omitted <==

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

CASH-
SETTLED
EQUITY-SETTLED SHARE-
POST-EMPLOYMENT LONG-TERM SHARE-BASED BASED TERMINATION
SHORT-TERM BENEFITS BENEFITS BENEFITS PAYMENTS PAYMENTS BENEFITS TOTAL
PENSION
PROFIT AND
SALARY, FEES SHARE AND NON- SUPER- INCENTIVE SHARES/ OPTIONS/
AND LEAVE BONUSES MONETARY OTHER ANNUATION OTHER PLANS LSL UNITS RIGHTS
$ $ $ $ $ $ $ $ $ $ $ $ $
Group Key Management Personnel
Antonio Dec 2011 97,917 – – – – – – – – – – – 97,917
Ortúzar
Dec 2010 – – – – – – – – – – – – –
William Howe Dec 2011 450,000 225,000 – – – – – – – – – – 675,000
Dec 2010 200,000 – – – – – – – – – – – 200,000
Phillip Wing Dec 2011 256,376 107,500 – – – – – – – – – – 363,876
Dec 2010 121,250 – – – – – – – – – – – 121,250
William Dec 2011 208,624 107,500 – – 8,876 – – – – – – – 325,000
Etheridge Dec 2010 103,593 – – – 9,323 – – – – – – – 112,916
Tim Read Dec 2011 123,103 – – – – – – – – – – – 123,103
Dec 2010 40,773 – – – – – – – – 505,554 – – 546,327
Francisco Dec 2011 75,000 – – – – – – – – – – – 75,000
Vergara-
Irarrazaval Dec 2010 31,251 – – – – – – – – – – – 31,251
Philip Killen Dec 2011 275,000 – – – 12,385 – – – – 40,717 – – 328,102
Dec 2010 116,250 – – – – – – – – 337,036 – – 453,286
Colin Sinclair Dec 2011 300,000 – – – – – – – – 40,717 – – 340,717
Dec 2010 132,500 – – – – – – – – 421,295 – – 553,795
Keith Weston Dec 2011 175,000 – – – – – – – – – – – 175,000
Dec 2010 87,500 – – – – – – – – 252,777 – – 340,277
Stephen Dec 2011 200,000 – – – – – – – – 81,434 – – 281,434
Tainton Dec 2010 – – – – – – – – – – – – 69,892
Gavin Daneel Dec 2011 300,000 – – – – – – – – 40,717 – – 340,717
Dec 2010 – – – – – – – – – – – – –
John Fillmore Dec 2011 25,000 – – – – – – – – – – 75,000 100,000
Dec 2010 43,000 – – – – – – – – 505,554 – – 548,554
Total Key Dec 2011 2,486,020 440,000 – – 21,261 – – – – 203,585 – 75,000 3,225,866
Management Personnel Dec 2010 876,117 14,000 – – 9,323 – – – – 2,022,216 – – 2,907,656
----- End of picture text -----

Securities received that are not performance-related

No members of key management personnel are entitled to receive securities which are not performance-based as part of their remuneration package.

Cash bonuses, performance-related bonuses and share-based payments

The Company issued options to directors and key management personnel under terms and conditions set out in the Employee Share Option Plan as follows:

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33

DIRECTORS’ REPORT continued

REMUNERATION REPORT continued

Stephen Tainton:

• 1,000,000 options exercisable at A$0.215 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

• 1,000,000 options exercisable at A$0.260 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

Gavin Daneel:

• 500,000 options exercisable at A$0.215 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

• 500,000 options exercisable at A$0.260 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

Colin Sinclair:

• 500,000 options exercisable at A$0.215 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

• 500,000 options exercisable at A$0.260 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

Philip Killen:

• 500,000 options exercisable at A$0.215 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

• 500,000 options exercisable at A$0.260 per share no later than 5 December 2014 in accordance with the rules of the Company’s Employee Option Plan.

The options have been included in employee and director’s benefi ts expense in the statement of comprehensive income. The options have been valued using the Binomial method, a share price of $0.1716 (based on the Company’s 30 Day Weighted Average Price as at 3 December 2011), interest rate of 4.25%, 70% volatility, the terms of the options and an estimated option life to 31 March 2013 based on the Company’s best estimate of the expected exercise patterns, which may not eventuate. The options are not transferrable, the expiry date is contingent on a number of terms and conditions set out in the Employee Share Option Plan and the holder will only realise a benefi t through exercise of the options.

There were no other options or rights issued or granted to directors and employess, or exercised by directors and employees during the year.

Options

Option holders do not have any rights to participate in any issues of shares or other interests in the Company. For details of options issued to directors and executives as remuneration, refer to the Remuneration Report.

This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.

William S Etheridge Director

20 March 2012 Sydney

34 METMINCO LIMITED Annual Report 31 December 2011

AUDITOR’S INDEPENDENCE DECLARATION to the Directors of Metminco Limited

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Grant Thornton Audit Pty Ltd ACN 130 913 594

Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Offi ce Sydney NSW 1230

T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Metminco Limited for the year ended 31 December 2011, I declare that, to the best of my knowledge and belief, there have been:

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

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

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GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

A G Rigele Director – Audit & Assurance

Sydney, 20 March 2012

Grant Thornton Australia Limited is a member fi rm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member fi rms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation

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35

STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2011

NOTE Revenue Other income 2 Fair value loss on convertible notes Fair value adjustment on equity swap Realised gain on equity swap Finance costs Foreign exchange gain/(loss) Administration expenses Corporate expenses Occupancy expense Exploration and evaluation expenditure impaired Share of net loss of associates and joint ventures Loss before income tax 3 Income tax expense 4 Loss for the year Other comprehensive income Exchange dif erences on translating foreign controlled entities (net of tax) Total comprehensive loss for the year Loss for the year attributable to: Members of the parent entity Non controlling interests Total comprehensive loss attributable to: Members of the parent entity Non controlling interests Loss per share From continuing operations: Basic loss per share (cents) 7 Diluted loss per share 7	CONSOLIDATED GROUP 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 350,909 67,695 (66,649) (5,882,403) (1,029,297) 2,210,160 – 327,868 (560,005) (1,290,843) 317,596 (334,224) (4,599,382) (3,760,239) (2,675,082) (2,571,390) (462,248) (89,966) (53,148) (9,875) – (7,181)	CONSOLIDATED GROUP 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 350,909 67,695 (66,649) (5,882,403) (1,029,297) 2,210,160 – 327,868 (560,005) (1,290,843) 317,596 (334,224) (4,599,382) (3,760,239) (2,675,082) (2,571,390) (462,248) (89,966) (53,148) (9,875) – (7,181)
	(8,777,306)	(11,340,398) –
	–
	(8,777,306)	(11,340,398)
		(3,612,522)
	(928,552)
	(9,705,858)	(14,952,920)
		(11,140,906) (199,492)
	(8,777,306)
	–
	(8,777,306)	(11,340,398)
		(13,767,291) (1,185,629)
	(9,705,858)
	–
	(9,705,858)	(14,952,920)
	(0.63) (1.25) (0.63) (1.25)

The fi nancial statements should be read in conjunction with the accompanying notes

36 METMINCO LIMITED Annual Report 31 December 2011

STATEMENT OF FINANCIAL POSITION as at 31 December 2011

NOTE ASSETS Current assets Cash and cash equivalents 8 Trade and other receivables 9 Derivative f nancial instrument 9 Other assets 10 Total current assets Non-current assets Trade and other receivables 9 Derivative f nancial instrument 9 Investments accounted for using equity method 11 Property, plant and equipment 14 Exploration and evaluation expenditure 15 Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables 16 Short term provisions 18 Total current liabilities Non-current liabilities Borrowings 17 Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 19 Reserves 28 Accumulated losses TOTAL EQUITY	CONSOLIDATED GROUP 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 44,030,949 23,189,432 2,402,416 1,999,828 109,613 1,648,388 14,495 196,571
	46,557,473 27,034,219
	3,515,405 3,340,018 – 465,147 2,947,726 4,160,154 3,589,445 669,378 183,840,162 102,297,461
	193,892,738 110,932,158
	240,450,211 137,966,377
	4,167,824 2,021,494 216,805 73,382
	4,384,629 2,094,876
	– 1,701,892
	– 1,701,892
	4,384,629 3,796,768
	236,065,582 134,169,609
	307,900,070 196,501,824 (40,715,410) (39,990,443) (31,119,078) (22,341,772)
	236,065,582 134,169,609

The fi nancial statements should be read in conjunction with the accompanying notes

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37

STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2011

ISSUED CAPITAL ACCUMULATED LOSSES OPTION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE ACQUISITION RESERVE $ $ $ $ Consolidated Group Total equity as at 1 July 2010 106,133,934 (11,200,866) 302,628 1,109,948 – Loss attributable to members of the parent entity – (11,140,906) – – – Loss attributable to non-controlling interests – – – – – Other comprehensive income – – – (2,626,385) – Total comprehensive loss – (11,140,906) – (2,626,385) – Acquisition of minority interest – – – – (41,506,662) Options issued to directors and employees and service providers – – 2,730,028 – – Shares issued during the period 92,232,755 – – – – Transaction costs (1,864,865) – – – – Balance as at 31 December 2010 196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662) Total equity as at 1 January 2011 196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662) Loss attributable to members of the parent entity – (8,777,306) – – – Other comprehensive income – – – (928,552) – Total comprehensive loss – (8,777,306) – (928,552) – Options issued to directors and employees and service providers – – 203,585 – – Shares issued during the period 115,342,535 – – – – Transaction costs (3,944,289) – – – – Balance as at 31 December 2011 307,900,070 (31,119,078) 3,236,241 (2,444,989) (41,506,662)	ISSUED CAPITAL ACCUMULATED LOSSES OPTION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE ACQUISITION RESERVE $ $ $ $ Consolidated Group Total equity as at 1 July 2010 106,133,934 (11,200,866) 302,628 1,109,948 – Loss attributable to members of the parent entity – (11,140,906) – – – Loss attributable to non-controlling interests – – – – – Other comprehensive income – – – (2,626,385) – Total comprehensive loss – (11,140,906) – (2,626,385) – Acquisition of minority interest – – – – (41,506,662) Options issued to directors and employees and service providers – – 2,730,028 – – Shares issued during the period 92,232,755 – – – – Transaction costs (1,864,865) – – – – Balance as at 31 December 2010 196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662) Total equity as at 1 January 2011 196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662) Loss attributable to members of the parent entity – (8,777,306) – – – Other comprehensive income – – – (928,552) – Total comprehensive loss – (8,777,306) – (928,552) – Options issued to directors and employees and service providers – – 203,585 – – Shares issued during the period 115,342,535 – – – – Transaction costs (3,944,289) – – – – Balance as at 31 December 2011 307,900,070 (31,119,078) 3,236,241 (2,444,989) (41,506,662)	NON- CONTROLLING INTERESTS TOTAL $ $ 9,592,651 105,938,295 – (11,140,906) (199,492) (199,492) (986,137) (3,612,522)
	– (11,140,906) – (2,626,385) – – – – – (41,506,662) – – 2,730,028 – – 92,232,755 – – – – (1,864,865) – – – –	(1,185,629) (14,952,920) (8,407,022) (49,913,684) – 2,730,028 – 92,232,755 – (1,864,865)
	196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662)	– 134,169,609
	196,501,824 (22,341,772) 3,032,656 (1,516,437) (41,506,662) – (8,777,306) – – – – – – (928,552) –	– 134,169,609 – (8,777,306) – (928,552)
	– (8,777,306) – (928,552) – – – 203,585 – – 115,342,535 – – – – (3,944,289) – – – –	– (9,705,858) – 203,585 – 115,342,535 – (3,944,289)
	307,900,070 (31,119,078) 3,236,241 (2,444,989) (41,506,662)	– 236,065,582

The fi nancial statements should be read in conjunction with the accompanying notes

38 METMINCO LIMITED Annual Report 31 December 2011

STATEMENT OF CASH FLOWS for the year ended 31 December 2011

NOTE Cash f ows from operating activities Payments to suppliers and employees Interest received Finance costs paid Net cash used in operating activities 24(b) Cash f ows from investing activities Purchase of plant and equipment Purchase of land Payments for exploration expenditure Payment for subsidiaries net of cash acquired 24(c) Net cash used in investing activities Cash f ows from f nancing activities Proceeds from issue of shares Payments in respect to capital raisings Proceeds from equity swap Proceeds from issue of shares to non-controlling interest Net cash provided by f nancing activities Net increase in cash and cash equivalents held Cash and cash equivalents at beginning of the year/period Ef ect of exchange rates on cash holdings in foreign currencies Cash and cash equivalents at the end of the year/period 24(a)	CONSOLIDATED GROUP 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ (6,554,301) (3,623,291) 412,312 67,695 (92,500) (560,486)
	(6,234,489) (4,116,082)
	(704,748) (11,160) (2,364,254) – (18,902,274) (3,388,351) (10,144,361) (5,010,762)
	(32,115,637) (8,410,273)
	60,058,905 35,003,160 (3,944,289) (1,864,865) 2,854,740 1,026,086 – 29,068
	58,969,356 34,193,449
	20,619,230 21,667,094 23,189,432 2,159,428 222,287 (637,090)
	44,030,949 23,189,432

The fi nancial statements should be read in conjunction with the accompanying notes

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39

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This fi nancial report includes the consolidated fi nancial statements and notes of Metminco Limited and controlled entities (“Consolidated Group” or “Group”) for the full year ended 31 December 2011.

Basis of preparation

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

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

Pursuant to subsections 323D(3) of the Corporation Act 2001 (Cth), Metminco changed its fi nancial year from 30 June to 31 December eff ective 31 December 2010 to synchronise with its consolidated entities. Therefore comparatives for income and expense items represent 6 months as opposed to 12 months.

The fi nancial report has been prepared on an accruals basis and is based on historical costs, modifi ed, where applicable, by the measurement at fair value of selected non-current assets, fi nancial assets and fi nancial liabilities. The fi nancial statements were authorised for issue by the directors on 20 March 2012.

a. Going concern basis of accounting

The Consolidated Group has made a loss for the year. Metminco Limited is an exploration Company currently without an operating cash fl ow and the net cash position of the Group will continue to decrease until such time as the Group has an operating cashfl ow.

The Group will need to raise additional capital to maintain and advance its current portfolio of exploration projects and meet ongoing working capital requirements. The directors are satisfi ed that the Company and Group have suffi cient cash reserves to maintain its current portfolio and meet its debts as and when they fall due. Therefore these fi nancial statements have been prepared on a going concern basis.

b. Principles of Consolidation

The consolidated fi nancial statements incorporate the assets, liabilities and results of entities controlled by Metminco Limited at the end of the reporting period. A controlled entity is any entity over which Metminco Limited has the power to govern the fi nancial and operating policies so as to obtain benefi ts from the entity’s activities. Control will generally exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and eff ect of holdings of actual and potential voting rights are also considered.

Where controlled entities have entered or left the Group during the year, the fi nancial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 13 to the fi nancial statements.

In preparing the consolidated fi nancial statements, all inter-group balances and transactions between entities in the Consolidated Group have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity.

Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the consolidated Statement of Financial Position and Statement of Comprehensive Income. The noncontrolling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

c. Business Combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identifi ed as the acquirer (ie parent entity). The business combination will be accounted for as at the acquisition

40 METMINCO LIMITED Annual Report 31 December 2011

date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifi able assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured.

The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate fi nancial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer.

Fair value uplifts in the value of pre-existing equity holdings are taken to the profi t and loss. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profi t or loss. Acquisitions of non-controlling interests in a subsidiary that does not result in a loss of control are accounted for as an equity transaction. The carrying amount of the controlling and non-controlling interests shall be adjusted to refl ect the changes in their relative interests in the subsidiary. Any diff erence between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received shall be recognised directly in equity and attributed to the owners of the parent.

All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income.

d. Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

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

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

Changes in deferred tax assets or liabilities are recognised as a component or tax income or expense in profi t and loss, except where they relate to items that are recognised in the other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income.

Deferred tax assets and liabilities are ascertained based on temporary diff erences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no eff ect on accounting or taxable profi t or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also refl ects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary diff erences and unused tax losses are recognised only to the extent that it is probable that future taxable profi t will be available against which the benefi ts of the deferred tax asset can be utilised.

Where temporary diff erences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary diff erence can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are off set where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are off set where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or diff erent taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which signifi cant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

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41

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

e. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

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 fl ows that will be received from the asset’s employment and subsequent disposal. The expected net cash fl ows have been discounted to their present values in determining recoverable amounts.

The cost of property and plant constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fi xed and variable overheads.

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 benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the fi nancial period in which they are incurred.

Depreciation

The depreciable amount of all fi xed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

CLASS OF FIXED ASSET	DEPRECIATION RATE
Land	Nil
Plant and equipment	20% to 33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the profi t and loss. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

f. Exploration and Development Expenditure

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

Accumulated costs in relation to an abandoned area are written off in full against profi t in the y ear 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 is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

g. Leases

Leases of assets where substantially all the risks and benefi ts incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the consolidated group, are classifi ed as fi nance leases.

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

42 METMINCO LIMITED Annual Report 31 December 2011

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefi ts remain with the lessor, are charged as expenses on a straight-line basis over the period of the lease.

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

h. Financial Instruments

Recognition and initial measurement

Financial assets and fi nancial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For fi nancial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classifi ed ‘at fair value through profi t or loss’, in which case transaction costs are expensed to profi t or loss immediately.

Classifi cation and subsequent measurement

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

Amortised cost is calculated as:

• a. the amount at which the fi nancial asset or fi nancial liability is measured at initial recognition;

• b. less principal repayments;

• c. amount initially recognised and the maturity amount calculated using the eff ective interest method ; and

• d. less any reduction for impairment.

The eff ective interest method iis used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the fi nancial instrument to the net carrying amount of the fi nancial asset or fi nancial liability. Revisions to expected future net cash fl ows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profi t or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifi cally applicable to fi nancial instruments.

i. Financial assets at fair value through profi t or loss

Financial assets are classifi ed at ‘fair value through profi t or loss’ when they are either held for trading for the purpose of short-term profi t taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of fi nancial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profi t or loss.

ii. Loans and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (All other loans and receivables are classifi ed as non-current assets.)

iii. Held-to-maturity investments

Held-to-maturity investments are non-derivative fi nancial assets that have fi xed maturities and fi xed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. (All other investments are classifi ed as current assets.)

If during the period the Group sold or reclassifi ed more than an insignifi cant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would be tainted and reclassifi ed as available-for-sale.

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43

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

h. Financial Instruments continued

iv. Available-for-sale fi nancial assets

Available-for-sale fi nancial assets are non-derivative fi nancial assets that are either not suitable to be classifi ed into other categories of fi nancial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fi xed maturity nor fi xed or determinable payments. Available-for-sale fi nancial assets are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. (All other fi nancial assets are classifi ed as current assets.)

v. Financial liabilities

Non-derivative fi nancial liabilities (excluding fi nancial guarantees) are subsequently measured at amortised cost.

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a fi nancial instrument has been impaired. In the case of available-for-sale fi nancial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

De-recognition

Financial assets are de-recognised where the contractual rights to receipt of cash fl ows expires or the asset is transferred to another party whereby the entity no longer has any signifi cant continuing involvement in the risks and benefi ts associated with the asset. Financial liabilities are de-recognised where the related obligations are either discharged, cancelled or expired. The diff erence between the carrying value of the fi nancial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profi t or loss.

i. Derivative fi nancial instruments

The Consolidated Group uses derivative fi nancial instruments. In relation to the convertible note (Note 17), changes in the fair value of this derivative are included in the profi t and loss, together with any changes in the fair value of the liabilities that the derivatives are attributable to.

Equity swap agreement

The equity swap arrangement embedded in the long-term receivable (Note 9) has been designated as a fair value hedge.

Convertible note option

The conversion option embedded in the convertible notes (Note 17) has been treated as an embedded derivative and fair valued through the statement of comprehensive income.

On conversion of a convertible instrument at maturity, the entity derecognises the liability component and recognises it as equity. The original equity component remains as equity (although it may be transferred from one line item within equity to another). There is no gain or loss on conversion at maturity.

When an entity extinguishes a convertible instrument before maturity through an early redemption or repurchase in which the original conversion privileges are unchanged, the entity allocates the consideration paid and any transaction costs for the repurchase or redemption to the liability and equity components of the instrument at the date of the transaction. The method used in allocating the consideration paid and transaction costs to the separate components is consistent with that used in the original allocation to the separate components of the proceeds received by the entity when the convertible instrument was issued.

44 METMINCO LIMITED Annual Report 31 December 2011

j. Impairment of Non-Financial Assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profi ts. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

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

Impairment testing is performed annually for goodwill and intangible assets with indefi nite lives.

k. Investments in Associates

Associate companies are companies in which the Group has signifi cant infl uence through holding, directly or indirectly, 20% or more of the voting power of the company. Investments in associates are accounted for in the fi nancial statements by applying the equity method of accounting whereby the investment is initially recognised at

cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate company. In addition the Group’s share of the profi t or loss of the associate company is included in the Group’s profi t or loss.

The carrying amount of the investment includes goodwill relating to the associate. Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the investor’s share of the associate’s profi t or loss in the period in which the investment is acquired.

Profi ts and losses resulting from transactions between the Group and the associate are eliminated to the extent of the relation to the Group’s investment in the associate.

When the reporting dates of the Group and the associate are diff erent, the associate prepares, for the Group’s use, fi nancial statements as of the same date as the fi nancial statements of the Group with adjustments being made for the eff ects of signifi cant transactions or events that occur between that date and the date of the investor’s fi nancial statements. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group discontinues recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. When the associate subsequently makes profi ts, the Group will resume the recognition of its share of those profi ts once its share of the profi ts equals the share of the losses not recognised.

l. Interests in Joint Ventures

The consolidated group’s share of the assets, liabilities, revenue and expenses of jointly controlled assets have been included in the appropriate line items of the consolidated fi nancial statements. Details of the consolidated group’s interests are shown at Note 12.

The consolidated group’s interests in joint venture entities are brought to account using the equity method of accounting (refer to Note 1(k) for details) in the consolidated fi nancial statements. The parent entity’s interests in joint venture entities are brought to account at cost.

Where the Group contributes assets to the joint venture or if the Group purchases assets from the joint venture, only the portion of the gain or loss that is not attributable to the Group’s share of the joint venture shall be recognised. The Group however will recognise the full amount of any loss when the contribution results in a reduction in the net realisable value of current assets or an impairment loss.

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45

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

m. Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated fi nancial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange diff erences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash fl ow or net investment hedge.

Exchange diff erences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the gain or loss is directly recognised in equity, otherwise the exchange diff erence is recognised in the statement of comprehensive income.

Group companies

The fi nancial results and position of foreign operations whose functional currency is diff erent from the Group’s presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at the end of the reporting period;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange diff erences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the statement of fi nancial position. These diff erences are recognised in the statement of comprehensive income in the period in which the operation is disposed.

n. Employee Benefi ts

Provision is made for the Group’s liability for employee benefi ts arising from services rendered by employees to balance date. Employee benefi ts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefi ts payable later than one year have been measured at the present value of the estimated future cash outfl ows to be made for those benefi ts. In determining the liability, consideration is given to employee wages increases and the probability that the employee may satisfy vesting requirements. Those cash outfl ows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash fl ows.

o. Provisions

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

p. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of one month or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of fi nancial position.

q. Revenue and Other Income

Interest revenue is recognised using the eff ective interest rate method, which, for fl oating rate fi nancial assets, is the rate inherent in the instrument.

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

46 METMINCO LIMITED Annual Report 31 December 2011

r. Equity Settled Compensation

The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Binomial pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Where equity is used to pay service providers the Group measures the goods or services received and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

s. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Offi ce. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of fi nancial position are shown inclusive of GST. Cash fl ows are presented in the statement of cashfl ows on a gross basis, except for the GST component of investing and fi nancing activities, which are disclosed as operating cash fl ows.

t. Comparative Figures

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

When the Group applies an accounting policy retrospectively, makes a retrospective restatement or reclassifi es items in its fi nancial statements, a statement of fi nancial position as at the beginning of the earliest comparative period will be disclosed.

u. Key estimates

i. Impairment

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specifi c to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using valuein-use calculations which incorporate various key assumptions. These assumptions are disclosed in each of the notes to the fi nancial report where applicable.

ii. Exploration and Evaluation Expenditure

The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet concluded. Such capitalised expenditure is carried at the end of the reporting period at $183,840,162.

iii. Fair value of derivative fi nancial instruments

The fair value of derivative fi nancial instruments are determined using various key assumptions. These assumptions are disclosed in each of the notes to the fi nancial report where applicable.

iv. Valuation methodology used in calcuation of share options

The Binomial method has been used to value shares options in respect of the optionality underlying the convertible notes, share options issued in lieu of consulting fees and share options issued to directors and employees. The Company has used a 70% volatility (based on historical volatity), the share price on the applicable date (being either the date of issue or the balance date) and an option life based on the Company’s best estimate of the expected exercise patterns which may not eventuate in the future.

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47

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

v. Signifi cant Management Judgment in Applying Accounting Policies

When preparing the fi nancial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

Signifi cant management judgement

The following are signifi cant management judgements in applying the accounting policies of the Group that have the most signifi cant eff ect on the fi nancial statements.This Standard is not expected to impact the Company.

Recognition of deferred tax assets

The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised. In addition, signifi cant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

w. Changes in Accounting Policies

Adoption of improvements to AASBs 2010 – AASB 2010-4 and 2010-5

The IASB has issued Improvements to IFRSs 2010 which was issued in Australia as AASB 2010-4 Further amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB 2010-5 Amendments to Australian Accounting Standards , and made several minor amendments to a number of AASBs. The only amendment relevant to the Group relates to AASB 101 Presentation of Financial Statements . The Group previously presented the reconciliations of each component of other comprehensive income in the statement of changes in equity. The Group now presents these reconciliations in the notes to the fi nancial statements, as permitted by the amendment (see note 20.2). This reduces duplicated disclosures and presents more clearly the overall changes in equity. Prior period comparatives have been restated accordingly.

x. Standards, amendments and interpretations to existing standards that are not yet eff ective and have not been adopted early by the Group

At the date of authorisation of these fi nancial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet eff ective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the fi rst period beginning after the eff ective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s fi nancial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s fi nancial statements..

AASB 9 Financial Instruments (eff ective from 1 January 2013)

The AASB aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classifi cation, measurement and derecognition of fi nancial assets and liabilities have been issued. These chapters are eff ective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed. Management have yet to assess the impact that this amendment is likely to have on the fi nancial statements of the Group. However, they do not expect to implement the amendments until all chapters of AASB 9 have been published and they can comprehensively assess the impact of all changes.

Consolidation Standards

A package of consolidation standards are eff ective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated fi nancial statements.

AASB 10 Consolidated Financial Statements (AASB 10)

AASB 10 supersedes AASB 127 Consolidated and Separate Financial Statements (AASB 127) and Interpretation 112 Consolidation – Special Purpose Entities. It revised the defi nition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any non-controlling interests and changes in control remain the same.

48 METMINCO LIMITED Annual Report 31 December 2011

AASB 11 Joint Arrangements (AASB 11)

AASB 11 supersedes AASB 131 Interests in Joint Ventures (AASB 131). It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method, which is currently used for investments in associates.

AASB 12 Disclosure of Interests in Other Entities (AASB 12)

AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including

unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

Consequential amendments to AASB 127 and AASB 128 Investments in Associates and Joint Ventures (AASB 128)

AASB 127 now only deals with separate fi nancial statements. AASB 128 brings investments in joint ventures into its scope. However, AASB 128’s equity accounting methodology remains unchanged.

AASB 13 Fair Value Measurement (AASB 13)

AASB 13 does not aff ect which items are required to be fair-valued, but clarifi es the defi nition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Group’s management have yet to assess the impact of this new standard.

Amendments to AASB 101 Presentation of Financial Statements (AASB 101 Amendments)

The AASB 101 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassifi ed subsequently to profi t or loss and (b) will be reclassifi ed subsequently to profi t or loss when specifi c conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Group’s management expects this will change the current presentation of items in other comprehensive income; however, it will not aff ect the measurement or recognition of such items.

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49

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 2: OTHER INCOME Interest received – other persons NOTE 3: LOSS FOR THE YEAR Expenses from continuing operations: Administration expenses Employee and directors’ benef ts expense Depreciation and amortisation expense	CONSOLIDATED 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 350,909 67,695
	(420,569) (382,141) (4,029,878) (3,299,090) (148,935) (79,008)

NOTE 4: INCOME TAX EXPENSE

The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows:

Loss before tax Total income tax benef t calculated at 30% (2010: 30%) Tax ef ect of: Foreign exchange losses/(gains) Fair value losses/(gains) on equity swap derivative Fair value loss on convertible notes Options issued Impairment of capitalised exploration and evaluation expenditure Exploration expenditure capitalised Share of associates’ loss Deferred tax asset not brought to account Income tax expense Applicable weighted average ef ective tax rate Deferred tax asset not taken to account Tax losses carried forward: – Revenue losses and temporary dif erences carried forward	8,777,306 11,340,398 (2,633,192) (3,402,119) (95,279) 100,267 308,789 (761,408) 158,560 1,764,721 61,075 819,008 15,944 2,963 (5,202,893) (1,016,506) – 2,154
	(7,386,996) (2,490,920) 7,386,996 2,490,920
	– –
	0% 0% 26,885,979 19,498,983

The deductible temporary diff erences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not yet considered probable that future taxable income will be available to utilise them. The Group does not have any capital losses.

NOTE 5: INTERESTS OF KEY MANAGEMENT PERSONNEL (KMP)

Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 31 December 2011.

The totals of remuneration paid to KMP of the Company and the Group during the year are as follows:

50 METMINCO LIMITED Annual Report 31 December 2011

Short term employee benef ts Post-employment benef ts Other long term benef ts Termination benef ts Share based payments	CONSOLIDATED 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 2,926,020 876,117 21,261 9,323 – – 75,000 – 203,585 2,022,216
	3,225,866 2,907,656

KMP Options and Rights Holdings

The number of options over ordinary shares held by each KMP of the Group during the period is as follows:

BALANCE AT THE BEGINNING OF THE YEAR GRANTED AS REMUNER- ATION DURING THE PERIOD EXERCISED DURING THE PERIOD OTHER CHANGES DURING THE PERIOD BALANCE AT END OF YEAR VESTED DURING THE PERIOD 31 December 2011 Antonio Ortúzar1 3,000,000 – – – 3,000,000 William Howe – – – – – – Philip Wing – – – – – – William Etheridge – – – – – – Tim Read 6,000,000 – – – 6,000,000 – Francisco Vergara-Irarrazaval – – – – – – Philip Killen 4,000,000 – – – 4,000,000 – Unlisted option @ $0.215 Dec 2014 – 500,000 – – 500,000 500,000 Unlisted option @ $0.260 Dec 2014 – 500,000 – – 500,000 500,000 Stephen Tainton – – – – – – Unlisted option @ $0.215 Dec 2014 – 1,000,000 – – 1,000,000 1,000,000 Unlisted option @ $0.260 Dec 2014 – 1,000,000 – – 1,000,000 1,000,000 Gavin Daneel2 750,000 – – – 750,000 – Unlisted option @ $0.215 Dec 2014 – 500,000 – – 500,000 500,000 Unlisted option @ $0.260 Dec 2014 – 500,000 – – 500,000 500,000 Colin Sinclair 5,000,000 – – – 5,000,000 – Unlisted option @ $0.215 Dec 2014 – 500,000 – – 500,000 500,000 Unlisted option @ $0.260 Dec 2014 – 500,000 – – 500,000 500,000 Keith Weston 3,274,999 – – – 3,274,999 – John Fillmore3 7,099,999 – – – 7,099,999 – 29,124,998 5,000,000 – – 34,124,998 5,000,000

VESTED AND EXERCISABLE 3,000,000 – – – 6,000,000 – 4,000,000 500,000 500,000 – 1,000,000 1,000,000 750,000 500,000 500,000 5,000,000 500,000 500,000 3,274,999 7,099,999

34,124,998

• 1 Antonio Ortúzar was appointed a Director on 16 March 2011 (options held at time of appointment).

• 2 Gavin Daneel was appointed as General Manager, Business Development on 1 January 2011 (options held at time of appointment).

• 3 John Fillmore resigned as a Director on 16 March 2011

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51

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 5: INTERESTS OF KEY MANAGEMENT PERSONNEL (KMP) continued

BALANCE AT THE BEGINNING OF THE PERIOD GRANTED AS REMUNER- ATION DURING THE PERIOD EXERCISED DURING THE PERIOD OTHER CHANGES DURING THE PERIOD BALANCE AT END OF PERIOD VESTED DURING THE PERIOD 31 December 2010 John Fillmore Listed option @ $0.25 Dec 2012 1,099,999 – – – 1,099,999 – Unlisted option @ $0.44 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Unlisted option @ $0.525 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 William Howe – – – – – – Philip Wing – – – – – – William Etheridge – – – – – – Tim Read – – – – – – Unlisted option @ $0.44 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Unlisted option @ $0.525 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Francisco Vergara-Irarrazaval – – – – – – Philip Killen – – – – – – Unlisted option @ $0.44 Dec 2013 – 2,000,000 – – 2,000,000 2,000,000 Unlisted option @ $0.525 Dec 2013 – 2,000,000 – – 2,000,000 2,000,000 Colin Sinclair – – – – – – Unlisted option @ $0.44 Dec 2013 – 2,500,000 – – 2,500,000 2,500,000 Unlisted option @ $0.525 Dec 2013 – 2,500,000 – – 2,500,000 2,500,000 Keith Weston Listed option @ $0.25 Dec 2012 274,999 – – – 274,999 – Unlisted option @ $0.44 Dec 2013 – 1,500,000 – – 1,500,000 1,500,000 Unlisted option @ $0.525 Dec 2013 – 1,500,000 – – 1,500,000 1,500,000 1,374,998 24,000,000 – – 25,374,998 24,000,000	BALANCE AT THE BEGINNING OF THE PERIOD GRANTED AS REMUNER- ATION DURING THE PERIOD EXERCISED DURING THE PERIOD OTHER CHANGES DURING THE PERIOD BALANCE AT END OF PERIOD VESTED DURING THE PERIOD 31 December 2010 John Fillmore Listed option @ $0.25 Dec 2012 1,099,999 – – – 1,099,999 – Unlisted option @ $0.44 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Unlisted option @ $0.525 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 William Howe – – – – – – Philip Wing – – – – – – William Etheridge – – – – – – Tim Read – – – – – – Unlisted option @ $0.44 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Unlisted option @ $0.525 Dec 2013 – 3,000,000 – – 3,000,000 3,000,000 Francisco Vergara-Irarrazaval – – – – – – Philip Killen – – – – – – Unlisted option @ $0.44 Dec 2013 – 2,000,000 – – 2,000,000 2,000,000 Unlisted option @ $0.525 Dec 2013 – 2,000,000 – – 2,000,000 2,000,000 Colin Sinclair – – – – – – Unlisted option @ $0.44 Dec 2013 – 2,500,000 – – 2,500,000 2,500,000 Unlisted option @ $0.525 Dec 2013 – 2,500,000 – – 2,500,000 2,500,000 Keith Weston Listed option @ $0.25 Dec 2012 274,999 – – – 274,999 – Unlisted option @ $0.44 Dec 2013 – 1,500,000 – – 1,500,000 1,500,000 Unlisted option @ $0.525 Dec 2013 – 1,500,000 – – 1,500,000 1,500,000 1,374,998 24,000,000 – – 25,374,998 24,000,000	VESTED AND EXERCISABLE 1,099,999 3,000,000 3,000,000 – – – – 3,000,000 3,000,000 – – 2,000,000 2,000,000 – 2,500,000 2,500,000 274,999 1,500,000 1,500,000
	1,374,998 24,000,000 – – 25,374,998 24,000,000	25,374,998

52 METMINCO LIMITED Annual Report 31 December 2011

KMP Shareholdings

The number of ordinary shares in Metminco Limited held by each KMP of the Group during the period is as follows:

		GRANTED AS		ISSUED ON EXERCISE OF
	BALANCE AT	REMUNERATION DURING		OPTIONS DURING THE	OTHER CHANGES	BALANCE AT
	31 DECEMBER 2010	THE PERIOD		PERIOD	DURING THE PERIOD	31 DECEMBER 2011
31 December 2011
Antonio Ortúzar1	–		–	–	6,400,000	6,400,000
William Howe	48,264,168		–	–	–	48,264,168
Philip Wing	15,893,336		–	–	–	15,893,336
William Etheridge	62,400,000		–	–	(600,000)	61,800,000
Tim Read	250,000		–	–	400,000	650,000
Francisco Vergara - Irarrazaval	50,140,000		–	–	–	50,140,000
Philip Killen	3,949,836		–	–	200,000	4,149,836
Colin Sinclair	5,766,353		–	–	–	5,766,353
Keith Weston	550,000		–	–	(25,000)	525,000
John Fillmore2	2,220,000 189,433,693		– –	– –	– 6,375,000	2,220,000 195,808,693

• 1 Antonio Ortúzar was appointed as a Director on 16 March 2011

• 2 John Fillmore resigned as a Director on 16 March 2011

31 December 2010	BALANCE AT 30 JUNE 2010 GRANTED AS REMUNERATION DURING THE PERIOD ISSUED ON EXERCISE OF OPTIONS DURING THE PERIOD OTHER CHANGES DURING THE PERIOD BALANCE AT 31 DECEMBER 2010
John Fillmore	2,220,000 – – – 2,220,000
William Howe	48,264,168 – – – 48,264,168
Philip Wing	15,893,336 – – – 15,893,336
William Etheridge	62,400,000 – – – 62,400,000
Tim Read	250,000 – – – 250,000
Francisco Vergara - Irarrazaval	50,140,000 – – – 50,140,000
Philip Killen	3,949,836 – – – 3,949,836
Colin Sinclair	5,766,353 – – – 5,766,353
Keith Weston	550,000 – – – 550,000
Shane Turner	40,000 – – – 40,000 189,473,693 – – – 189,473,693

Other KMP Transactions

There have been no other KMP transactions involving equity instruments other than those described in the tables above. For details of other transactions with KMP refer to Note 26 Related Party Transactions.

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53

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 6: AUDITORS’ REMUNERATION Audit services provided by Grant Thornton: Parent Subsidiaries – Minera Hampton Chile Limitada and Minera Hampton Peru SAC Professional services Australia NOTE 7: LOSS PER SHARE a. Reconciliation of earnings to loss Loss Loss attributable to minority equity interest Loss used in the calculation of basic and dilutive EPS b. Weighted average number of ordinary shares outstanding during the full year used in calculating basic EPS Weighted average number of dilutive options outstanding c. Anti-dilutive options on issue not used in dilutive EPS calculation NOTE 8: CASH AND CASH EQUIVALENTS Cash at bank Short-term bank deposits NOTE 9: RECEIVABLES AND DERIVATIVE FINANCIAL INSTRUMENT Current Other receivables Receivable from equity swap – secured VAT receivables Total current trade and other receivables Equity swap derivative at fair value	CONSOLIDATED 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 89,541 70,566 36,349 26,493
	125,890 97,059 15,127 14,256 141,017 111,315
	CONSOLIDATED 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ (8,777,306) (11,340,398) – 199,492
	(8,777,306) (11,140,906)
	NO. NO. 892,478,975 443,794,287 – – 69,217,517 64,217,517 CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 44,030,949 23,189,432 – –
	44,030,949 23,189,432
	397,953 287,500 854,473 1,712,328 1,149,990 –
	2,402,416 1,999,828
	109,613 1,648,388

54 METMINCO LIMITED Annual Report 31 December 2011

Non-current VAT receivables Long term receivables Receivable from equity swap – secured Total non-current trade and other receivables Equity swap derivative at fair value	CONSOLIDATED 31 DECEMBER 2011 31 DECENBER 2010 $ $ 3,515,405 2,295,511 – 93,215 – 951,292
	3,515,405 3,340,018
	– 465,147

The Company entered into a subscription agreement, an equity swap agreement, an interest rate swap agreement and a credit support agreement on 1 April 2010. Pursuant to these agreements the Company issued 25,000,000 shares at 9p per share for an aggregate subscription amount of £2,250,000. As security for the proceeds of these shares the recipient of the shares placed £2,250,000 in government bonds with an escrow agent as security for the proceeds receivable.

Over a 24 month period the Company will exchange £93,750 worth of government bonds per month for a cash payment the amount of which is determined against a benchmark price of 12p per ordinary share. If the volume weighted average price of an ordinary share in Metminco for the fi ve dealing days prior to settlement exceeds the benchmark price then the Company will receive more than 100% of the monthly payment due. If the price is less than the benchmark price, the Company will receive less than 100% of the monthly payment due. There is no higher or lower limit on the amount of the payments due to the Company under these arrangements but the total number of shares issued is fi xed. The secured equity swap receivable is measured at amortised cost.

Fair value of equity swap

The derivative from the equity swap is assessed on recoverability according to the terms of the equity swap agreement. A fair value gain/(loss) has been taken to the Statement of Comprehensive Income and amounts to the unrealised loss of $1,029,297 (2010: 2,210,160 unrealised gain). The fair value of the equity swap is based on the future discounted cash fl ow assuming the 180 day VWAP of shares, GBP/AUD exchange rate and applicable United Kingdom interest rate as at 31 December 2011 (31 December 2010: 90 days VWAP).

Movement in the fair value of equity swap derivative is as follows:

	OPENINGBALANCE		CASH RECEIVED ON	FAIR VALUE	CLOSING BALANCE
	1 JULY 2010		EQUITY SWAP	ADJUSTMENT	31 DECEMBER 2010
Consolidated Group
Current receivable from equity swap	–	–	–	–	–
Non-current receivable from equity swap	(96,625)	–	–	561,772	465,147
	OPENINGBALANCE	TRANSFER TO	CASH RECEIVED ON	FAIR VALUE	CLOSING BALANCE
	1 JANUARY 2011	CURRENT	EQUITY SWAP	ADJUSTMENT	31 DECEMBER 2011
Consolidated Group
Current receivable from equity swap	1,648,388	465,147	(974,625)	(1,029,297)	109,613
Non-current receivable from equity swap	465,147	(465,147)	–	–	–

Realised gain on Equity SWAP in 2010 of $327,868 was recognized as income. Trade receivables are neither past due nor impaired and considered to be of high credit quality.

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55

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE NOTE 10: OTHER ASSETS CURRENT Prepayments Total current other assets NOTE 11: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Equity accounted investments in joint venture entities 12	CONSOLIDATED 31 DECEMBER2011 31 DECEMBER 2010 $ $ 14,495 196,571
	14,495 196,571
	2,947,726 4,160,154
	2,947,726 4,160,154

NOTE 12: INTEREST IN JOINT VENTURES

Interests are held in the following:

NAME PRINCIPAL ACTIVITIES COUNTRY OF INCORPORATION SHARES OWNERSHIP INTEREST 31 DECEMBER 2011 31 DECEMBER 2010 Unlisted: SCM Ovalle Exploration Chile Ordinary 100% 50% SCM San Lorenzo Exploration Chile Ordinary 50% 50%	CARRYING AMOUNT OF INVESTMENT 31 DECEMBER 2011 31 DECEMBER 2010 – 1,209,237 2,947,726 2,950,917
	2,947,726 4,160,154

In April 2011 the Metminco Group acquired the remaining 50% of SCM Ovalle not already owned by the Group. The merger of SCM Ovalle into Hampton Chile was completed mid December 2011.

In January 2009, in accordance with an agreement dated 19 May 2008 between Golden Amazonas (Amazonas) and Hampton Chile , SCM San Lorenzo was incorporated. The shareholders of SCM San Lorenzo are Hampton Chile, with 50% of the shares, and fi ve minor shareholders with the remaining 50%. For the transfer of title of the San Lorenzo Properties to SCM San Lorenzo, Hampton Chile paid Amazonas US$3 million. Hampton Chile does not control SCM San Lorenzo as the joint venture was formed for the sole purpose of holding ownership of the mining tenements.

a. Movements during the year in equity accounted investment in joint venture entities: Balance as at the beginning of the period Less acquisition of 100% of SCM Ovalle – now consolidated Share of joint venture company’s loss after tax Impact of foreign exchange movement on balance at beginning of period Balance as at the end of the year	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 4,160,154 5,053,371 (1,209,237) – – (7,181) (3,191) (886,036)
	2,947,726 4,160,154

56 METMINCO LIMITED Annual Report 31 December 2011

b. Equity accounted losses of joint venture companies are broken down as follows: Share of joint venture companies’ loss before income tax Share of joint venture companies’ income tax expense Share of joint venture companies’ loss after income tax c. Summarised presentation of aggregate assets, liabilities and performance of joint venture Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets Loss after income tax COUNTRY OF INCORPORATION NOTE 13. CONTROLLED ENTITIES a. Controlled entities consolidated Subsidiaries of Metminco Limited: Hampton Mining Limited Australia Minera MNC SAC5 Chile North Hill Holdings Group Inc British Virgin Islands Wholly owned subsidiaries of Hampton: Hampton Mining Peru SAC2 Peru Minera Hampton Chile Limitada3 Chile SCM Ovalle4 Chile Wholly owned subsidiaries of North Hill Holdings Group Inc.: Cerro Norte Mining Inc British Virgin Islands North Hill Ovalle Inc1 British Virgin Islands North Hill Peru Inc1 British Virgin Islands North Hill Colombia Inc1 British Virgin Islands Minera Cerro Norte SA2 Peru Minera Hampton Peru SAC2 (formerly Minera CN SAC) Peru Minera Hampton Chile Limitada3 Chile	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $
	– (7,181) – –
	– (7,181)
	– 6,608 5,895,452 8,410,752
	5,895,452 8,417,360 – 97,053
	– 97,053
	5,895,452 8,320,307
	– (14,362)
	PERCENTAGE OWNED 31 DECEMBER 2011 31 DECEMBER 2010 % % 100 69.4 – 100 100 100 – 100 – 100 – 50 100 100 100 – 100 – 100 – – 100 100 100 100 –

1 Entities incorporated during the period

2 Entities were merged to form one company – Minera Hampton Peru SAC. Hampton Mining Limited sold 100% of Hampton Peru SAC to Cerro Norte Mining Inc during the year.

• 3 Hampton Mining Limited sold 100% of Minera Hampton Chile Limitada to North Hill Ovalle Inc

• 4 On acquisition of 100%, SCM Ovalle was merged into Minera Hampton Chile Limitada.

• 5 In December 2011 Minera MNC SAC was merged into Minera Hampton Chile Limitada

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57

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 13. CONTROLLED ENTITIES continued

b. Acquisition with respect to controlled entities

On 28 April 2011, North Hill Ovalle Inc acquired a 50% ownership interest in SCM Ovalle. The acquisition resulted in Metminco having ownership of 100% and control of SCM Ovalle. As at 31 December 2011 this acquisition has been allocated to specifi c areas of interest (Mollacas, Vallecillo and Loica).

On 28 April 2011, Barrick Gold Corporation (Barrick) surrendered a potential right to purchase 51% of the issued capital of Minera CN SAC for 200% of expenditure incurred on the Los Calatos Project in exchange for 75 million Metminco shares.

Acquisition of SCM Ovalle Purchase consideration: Initial investment Cash Ordinary shares Identif able assets acquired and liabilities assumed: Receivables Property, plant and equipment Exploration expenditure Acquisition of Barrick’s potential “buy back right” of 51% of Minera CN SAC Purchase consideration: Metminco Shares Identif able assets acquired	FAIR VALUE $ 1,349,229 9,414,800 24,510,523
	35,274,552 9,354 6,457 35,258,741
	35,274,552
	28,500,000
	28,500,000

(i) A 50% interest in SCM Ovalle was held by non controlling interests at 31 December 2010. The Consolidated Group held 100% of issued capital of Minera CN SAC.

(ii) The Directors believe the receivables are fully recoverable and no provision for impairment is required.

(iii) Included within corporate costs in the statement of comprehensive income are acquisition related costs totaling $50,000. The costs include advisory, legal, accounting and other professional fees.

(iv) The fi nancial statements of SCM Ovalle and Minera CN SAC are prepared for the year ended 31 December. This reporting period aligns with the reporting periods of the Consolidated Group.

(v) The consolidated loss of SCM Ovalle included in the Consolidated Group loss since the acquisition date is nil. If the consolidated results of SCM Ovalle had been consolidated from 1 January 2011, the loss of the consolidated Group would have been $5,374,844.

(vi) The consolidated loss of Minera CN SAC is included on a 100% basis in the Consolidated Group loss for the period.

(vii) The fair value of the Company’s shares was derived from their trading price on the ASX at the date of acquisition.

(viii) The number of share issued for the acquisition of SCM Ovalle was 70,250,855 and the number of shares issued for the surrender of Barrick Gold Corporation’s potential right to purchase a 51% interest in SCM Ovalle was 75,000,000.

58 METMINCO LIMITED Annual Report 31 December 2011

NOTE 14: PROPERTY, PLANT AND EQUIPMENT Land At cost Total land Plant and equipment At cost Accumulated depreciation Total plant and equipment Total property, plant and equipment Reconciliations Reconciliation of the carrying amounts for each class of property, plant and equipment are set out below: Land Carrying amount at beginning of year Additions through acquisition of entity Impact of foreign exchange movement on balance at beginning of year Carrying amount of land at end of year Plant and equipment Carrying amount at beginning of year Additions Impact of foreign exchange movement on balance at beginning of year Depreciation Carrying amount of plant and equipment at end of year Carrying amount at end of year	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 2,678,365 314,111
	2,678,365 314,111
	1,234,199 548,017 (323,119) (192,750)
	911,080 355,267
	3,589,445 669,378
	314,111 372,629 2,364,254 – – (58,518)
	2,678,365 314,111
	355,267 447,832 704,748 11,160 – (24,717) (148,935) (79,008)
	911,080 355,267
	3,589,445 669,378

No assets are held as security for any liabilities.

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59

NOTES TO THE FINANCIAL STATEMENTS continued

	CONSOLIDATED	CONSOLIDATED
	31 DECEMBER 2011		31 DECEMBER 2010
	$		$
NOTE 15: EXPLORATION AND EVALUATION EXPENDITURE
Costs carried forward in respect of areas of interest in:
– exploration and evaluation phases at the end of year	183,840,162		102,297,461
Reconciliations
Carrying amount at the beginning of year	102,297,461		101,608,247
Expenditure incurred during current year	18,902,274		3,388,601
Additions through acquisition of entity and conditional Barrick buy back	63,758,741		–
Impact of foreign exchange movement during the year	(1,065,166)		(2,689,512)
Exploration written of	(53,148)		(9,875)
Carrying amount at the end of year	183,840,162		102,297,461

Recoverability of the carrying amount of exploration assets is dependent upon the successful recovery of mineral reserves. Capitalised costs amounting to $18,902,274 (for the period ended 31 December 2010: $3,388,601) have been included in cash fl ows from investing activities.

NOTE 16: TRADE AND OTHER PAYABLES

NOTE 16: TRADE AND OTHER PAYABLES
Trade payables	2,440,901	700,434
Other payables and accrued expenses	1,726,923	1,321,060
	4,167,824	2,021,494
NOTE 17: BORROWINGS
NON CURRENT
Unsecured liabilities
Convertible notes	–	491,981
Fair value loss	–	1,209,911
Total non-current borrowings	–	1,701,892
Total borrowings	–	1,701,892

Convertible loan facility

During the year ended 31 December 2011, Metminco completed early repayment of convertible notes totalling $US0.5 million by issue of 4,845,000 Shares in satisfaction of principal. The Company also paid US$80,000 in early repayment fees. As previously announced on 1 April 2010, these notes were entered into by Metminco as part of the A$20 million capital raising and admission to the AIM Market of the London Stock Exchange. The majority of funds from this capital raising were applied to acquire Junior Investment Company‘s 31% stake in Hampton in May 2010 and with it a controlling interest in Hampton, which in turn lead to Hampton becoming a wholly owned subsidiary of Metminco in December 2010.

On 19 April 2011 the Company issued 1,200,000 shares in settlement of claims with respect to convertible notes repaid in 2010. There are now no convertible note/loans outstanding.

60 METMINCO LIMITED Annual Report 31 December 2011

NOTE 18: PROVISIONS

NOTE 18: PROVISIONS
Consolidated Group Opening balance at January 2011 Additional provisions Balance at 31 December 2011 - Employee benef ts NOTE 19: CONTRIBUTED EQUITY 1,674,466,146 (31 December 2010: 1,231,107,839) fully paid ordinary shares a. Movements in ordinary share capital Balance at beginning of the reporting period Shares issued – 1 July 2010 – 1 July 2010 – 19 July 2010 – 28 July 2010 – 1 October 2010 – 29 November 2010 – 3 December 2010 – 3 December 2010 – 3 December 2010 – 17 December 2010 – 24 December 2010 – 31 December 2010 – 31 March 2011 – 19 April 2011 – 28 April 2011 – 28 April 2011 – 3 May 2011 – 26 May 2011 – 6 June 2011 – 5 December 2011 At the end of the reporting period	SHORT-TERM EMPLOYEE BENEFITS TOTAL $ $ 73,382 68,519 143,423 4,863
	216,805 73,382
	307,900,070 196,501,824
	NO. OF SHARES NO. OF SHARES 1,231,107,839 778,862,608 – 1,556,360 – 9,999,999 – 23,333,334 – 21,506,248 – 1,374,430 – 150,000,000 – 212,834,076 – 1,350,000 – 12,500 – 100 – 30,114,160 – 164,024 161,671 – 1,200,000 – 70,250,855 – 75,000,000 – 20,000,000 – 4,895,781 – 60,000,000 – 211,850,000 –
	1,674,466,146 1,231,107,839

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61

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 19: CONTRIBUTED EQUITYcontinued b. Movements in ordinary share capital Balance at beginning of the reporting period Shares issued – 1 July 2010 – 1 July 2010 – 19 July 2010 – 28 July 2010 – 1 October 2010 – 29 November 2010 – 3 December 2010 – 3 December 2010 – 3 December 2010 – 17 December 2010 – 31 December 2010 – 31 March 2011 – 19 April 2011 – 28 April 2011 – 28 April 2011 – 3 May 2011 – 26 May 2011 – 6 June 2011 – 5 December 2011 Costs of capital raising At the end of the reporting period	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 196,501,824 106,133,934
	– 1,425,000 – 3,251,665 – 3,225,937 – 274,886 – 29,500,000 – 41,525,286 – 405,000 – 3,125 – 35 – 10,690,526 – 66,430 60,627 – 450,000 – 24,510,523 – 28,500,000 – 7,600,000 – 1,762,481 – 22,800,000 – 29,658,904 – (3,944,289) –
	307,900,070 196,501,824

On 31 March 2011 the Company issued 161,671 shares in settlement of interest for the quarter ended 31 March 2011 in respect of a $US 500,000 convertible note facility.

On 19 April 2011 the Company issued 1,200,000 shares in settlement of claims with respect to convertible notes repaid in 2010.

On 28 April 2011 the Company issued 70,250,855 shares to Inversiones EM Dos Limitada forming part of the consideration for 50% of Sociedad Contractual Minera Ovalle.

On 28 April 2011 the Company issued 75,000,000 shares to Barrick Gold Corporation as consideration for Barrick surrendering its buy back right in connection with the Los Calatos Project.

On 03 May 2011 the Company issued 20,000,000 shares to selected professional and institutional investors to raise A$7,600,000 before costs.

On 26 May 2011 the Company issued 4,895,781 shares on exercise of conversion rights by convertible note holders in settlement of US$500,000 in loans and accrued interest to date of early repayment.

On 06 June 2011 the Company issued 60,000,000 shares to selected professional and institutional investors to raise A$22,800,000 before costs.

On 05 December 2011 the company issued 211,850,000 new ordinary shares by way of private placement to sophisticated and professional investors at a subscription price of A$0.14 per share to raise equity of up to approximately A$29.7 million.

All the shares rank for dividends immediately. Each share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

62 METMINCO LIMITED Annual Report 31 December 2011

c. Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confi dence and to sustain future development of the business to provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.

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

There are no externally imposed capital requirements.

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

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. This strategy is to ensure that the Group’s gearing ratio remains below 10%. The gearing ratios for the full year ended 31 December 2011 are as follows:

NOTE Face value of convertible notes Loss on fair value Total borrowings 17 The loss on fair value will only be incurred if the borrowings are repaid by th Borrowings repayable by cash Less cash and cash equivalents 8 Net debt Total equity Gearing ratio	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ – 491,981 – 1,209,911
	– 1,701,892
	e issue of shares. – 491,981 (44,030,949) (23,189,432)
	(44,030,949) (22,697,451) 236,065,582 134,169,609
	– –

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63

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 20: OPTIONS

NOTE 20: OPTIONS
	EXERCISE PRICE	OUTSTANDING AT	GRANTED DURING	EXERCISED DURING	LAPSED DURING	OUTSTANDING AT
EXPIRY DATE	$	31 DECEMBER 2010	THE YEAR	THE YEAR	THE YEAR	31 DECEMBER 2011
Listed
31 December 2011
4 December 2012	$0.25	27,217,517	–	–	–	27,217,517
Unlisted
31 July 2012	$0.30	4,500,000	–	–	–	4,500,000
6 December 2013	$0.44	14,250,000	–	–	–	14,250,000
6 December 2013	$0.525	14,250,000	–	–	–	14,250,000
6 December 2013	$0.44	2,000,000	–	–	–	2,000,000
6 December 2013	$0.525	2,000,000	–	–	–	2,000,000
5 December 20141	$0.215	–	2,500,000	–	–	2,500,000
5 December 20142	$0.260	–	2,500,000	–	–	2,500,000
	EXERCISE PRICE	OUTSTANDING AT	GRANTED DURING	EXERCISED DURING	LAPSED DURING	OUTSTANDING AT
EXPIRY DATE	$	30 JUNE 2010	THE YEAR	THE YEAR	THE YEAR	31 DECEMBER 2010
31 December 2010
4 December 2012	$0.25	27,230,017	–	12,500	–	27,217,517
Unlisted
31 December 2010
31 July 20121	$0.30	–	4,500,000	–	–	4,500,000
6 December 2013	$0.44	–	14,250,000	–	–	14,250,000
6 December 2013	$0.525	–	14,250,000	–	–	14,250,000
6 December 2013	$0.44	–	2,000,000	–	–	2,000,000
6 December 2013	$0.525	–	2,000,000	–	–	2,000,000

Notes:

1 On 5 December 2011 the Company issued 2,500,000 Employee Options @ $0.215 cents expiring 5 December 2014.

2 On 5 December 2011 the Company issued 2,500,000 Employee Options @ $0.260 cents expiring 5 December 2014.

The options have been included in employee and director’s benefi ts expense in the statement of comprehensive income. The options have been valued using the Binomial method, a share price of $0.1716 (based on the Company’s 30 Day Weighted Average Price as at 3 December 2011), interest rate of 4.25%, 70% volatility, the terms of the options and an estimated option life to 31 March 2013 based on the Company’s best estimate of the expected exercise patterns, which may not eventuate. The options are not transferrable, the expiry date is contingent on a number of terms and conditions set out in the Employee Share Option Plan and the holder will only realise a benefi t through exercise of the options.

Included under employee and directors’ benefi t expense in Note 3 is $203,585 (Dec 2010: $2,401,382). The exercise prices of options range from $0.215 to $0.260 and the weighted average life assuming maximum life is 881 days.

64 METMINCO LIMITED Annual Report 31 December 2011

NOTE 21: CAPITAL AND LEASING COMMITMENTS a. Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the f nancial statements Payable (minimum lease payments) – not later than 12 months – between 12 months and 5 years – greater than 5 years The Group has non-cancellable leases over seven premises in Australia, Chil Rent is payable monthly in advance. b. Exploration Tenement Licence Commitments Mining and exploration licence fees for tenements held by the Group but not yet capitalised in the f nancial statements Payable (minimum licence payments) – not later than 12 months	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 240,165 261,514 229,155 656,955 – –
	469,320 918,469
	e and Peru with terms ranging from 1 to 36 months. 426,422 415,096

NOTE 22: COMMITMENTS AND CONTINGENT LIABILITIES

• a. The holder of the surface titles in respect of the Mollacas Project, Agrícola Bauzá Ltda has fi led various actions against Hampton Chile in respect of claims relating to access and environmental accusations. All claims determined by the Chilean judiciary to date have been successfully defended.

• b. In January 2011 wholly owned subsidiary Hampton Chile fi nalised the purchase of a 33% interest in the Genesis tenements (which form part of the Camaron project) for US$782,000 (A$782,000) and entered into an 18 month option agreement to acquire the remaining 67% (Genesis Option Agreement).

• On signing the Genesis Option Agreement Hampton Chile paid US$370,000 (A$365,000) with 2 further option payments of US$370,000 (A$365,000) payable on the six month and twelve anniversary. If Hampton Chile exercises the option then it must pay US$1 million on the exercise date and 3 further annual payments each of US$1 million on the second, third and fourth anniversary of exercise of the option (in total $US 4 million – A$ 4 million) as an advance payment against future royalty payments, and pay 1.7% Net Smelter Return on future production from the Genesis tenements.

• Hampton Chile may elect to terminate the Option to acquire the remaining 67% at any time prior to August 2012.

• c. On 30 June 2011, Hampton Chile entered into an option agreement to purchase a 100% interest in the La Piedra Project (La Piedra Option Agreement).

To exercise the La Piedra Option Agreement, Hampton Chile is required to make the following payments:

• US$350,000 on signing the La Piedra Option Agreement (already paid);

• US$350,000 on or before 30 June 2012;

• US$350,000 on or before 30 June 2013;

• US$1,000,000 on or before 30 June 2014; and

• US$28 million in cash, or US$14 million in cash and US$14 million in Metminco shares (at Metminco´s election), on or before 30 June 2015, should Hampton Chile elect to purchase 100% of the La Piedra tenements.

The Option Agreement will provide Hampton Chile with suffi cient time to evaluate the prospectivity of the La Piedra tenements, and to delineate Mineral Resources, ahead of the option expiry date of 30 June 2015

Hampton Chile may elect to terminate the La Piedra Option at any time before 30 June 2015.

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65

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 23: REPORTING SEGMENTS

The Company’s primary activity is mineral exploration in the geographic area of South America. This focus is consistent with the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group is managed primarily for the sole purpose of mineral exploration.

Basis of accounting for purposes of reporting by operating segments

a. Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, being the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual and half yearly fi nancial statements of the Group.

b. Inter-segment transactions

There are no inter segment transactions.

c. Segment assets

Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifi able on the basis of their nature and physical location.

d. Segment liabilities

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

e. Unallocated items

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

• Derivatives

• Net gains on disposal of available-for-sale investments

• Impairment of assets and other non-recurring items of revenue or expense

• Income tax expense

• Deferred tax assets and liabilities

• Current tax liabilities

• Other fi nancial liabilities

• Intangible assets

• Discontinuing operations

• Retirement benefi t obligations.

66 METMINCO LIMITED Annual Report 31 December 2011

MINERAL EXPLORATION UNALLOCATED TOTAL 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ $ $ $ $ i. Segment performance Other income 785 1,354 350,124 66,341 350,909 67,695 Total segment revenue 785 1,354 350,124 66,341 350,909 67,695 Total group revenue 785 1,354 350,124 66,341 350,909 67,695 Segment loss before tax 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Loss before tax from continuing operations 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Depreciation and amortisation expense included in segment result 112,670 77,050 36,265 1,958 148,935 79,008 MINERAL EXPLORATION UNALLOCATED TOTAL 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 $ $ $ $ $ $ ii. Segment assets Segment assets 196,083,034 111,319,144 44,367,177 26,647,233 240,450,211 137,966,377 Segment asset increases for the period – capital expenditure 21,951,379 3,394,353 19,897 5,158 21,971,276 3,399,511 – acquisitions 80,512,559 – – 21,755,171 80,512,559 21,755,171 102,463,938 3,394,353 19,897 21,760,329 102,483,835 25,154,682 Included in segment assets are: – Equity accounted associates and joint ventures 2,947,726 4,160,154 – – 2,947,726 4,160,154 iii. Segment liabilities Segment liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768 Reconciliation of segment liabilities to group liabilities Total group liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768	MINERAL EXPLORATION UNALLOCATED TOTAL 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ $ $ $ $ i. Segment performance Other income 785 1,354 350,124 66,341 350,909 67,695 Total segment revenue 785 1,354 350,124 66,341 350,909 67,695 Total group revenue 785 1,354 350,124 66,341 350,909 67,695 Segment loss before tax 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Loss before tax from continuing operations 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Depreciation and amortisation expense included in segment result 112,670 77,050 36,265 1,958 148,935 79,008 MINERAL EXPLORATION UNALLOCATED TOTAL 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 $ $ $ $ $ $ ii. Segment assets Segment assets 196,083,034 111,319,144 44,367,177 26,647,233 240,450,211 137,966,377 Segment asset increases for the period – capital expenditure 21,951,379 3,394,353 19,897 5,158 21,971,276 3,399,511 – acquisitions 80,512,559 – – 21,755,171 80,512,559 21,755,171 102,463,938 3,394,353 19,897 21,760,329 102,483,835 25,154,682 Included in segment assets are: – Equity accounted associates and joint ventures 2,947,726 4,160,154 – – 2,947,726 4,160,154 iii. Segment liabilities Segment liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768 Reconciliation of segment liabilities to group liabilities Total group liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768	MINERAL EXPLORATION UNALLOCATED TOTAL 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 12 MONTHS ENDED 31 DECEMBER 2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ $ $ $ $ i. Segment performance Other income 785 1,354 350,124 66,341 350,909 67,695 Total segment revenue 785 1,354 350,124 66,341 350,909 67,695 Total group revenue 785 1,354 350,124 66,341 350,909 67,695 Segment loss before tax 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Loss before tax from continuing operations 2,257,250 980,744 6,520,056 10,359,654 8,777,306 11,340,398 Depreciation and amortisation expense included in segment result 112,670 77,050 36,265 1,958 148,935 79,008 MINERAL EXPLORATION UNALLOCATED TOTAL 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2011 31 DECEMBER 2010 $ $ $ $ $ $ ii. Segment assets Segment assets 196,083,034 111,319,144 44,367,177 26,647,233 240,450,211 137,966,377 Segment asset increases for the period – capital expenditure 21,951,379 3,394,353 19,897 5,158 21,971,276 3,399,511 – acquisitions 80,512,559 – – 21,755,171 80,512,559 21,755,171 102,463,938 3,394,353 19,897 21,760,329 102,483,835 25,154,682 Included in segment assets are: – Equity accounted associates and joint ventures 2,947,726 4,160,154 – – 2,947,726 4,160,154 iii. Segment liabilities Segment liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768 Reconciliation of segment liabilities to group liabilities Total group liabilities 3,374,730 842,819 1,009,899 2,953,949 4,384,629 3,796,768
	21,951,379 3,394,353 19,897 5,158 21,971,276 80,512,559 – – 21,755,171 80,512,559	3,399,511 21,755,171
	102,463,938 3,394,353 19,897 21,760,329 102,483,835	25,154,682
	2,947,726 4,160,154 – – 2,947,726	4,160,154
	3,374,730 842,819 1,009,899 2,953,949 4,384,629	3,796,768
	3,374,730 842,819 1,009,899 2,953,949 4,384,629	3,796,768

iv. Other income by geographical region

Revenue attributable to external customers is disclosed below, based on the location of the external customer:

Australia South America Total revenue v. Assets by geographical region The location of segment assets by geographical location of the assets is disclosed below: Australia South America Total assets	31 DECEMBER 2011 31 DECEMBER 2010 350,124 66,341 785 1,354
	350,909 67,695
	44,367,177 26,647,233 196,083,034 111,319,143
	240,450,211 137,966,376

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67

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 24: NOTES TO THE STATEMENT OF CASH FLOWS a. Reconciliation of Cash Cash at the end of the f nancial year as shown in the statement of cash f ows is reconciled to items in the statement of f nancial position as follows: Cash and cash equivalents b. Reconciliation of loss from ordinary activities after Income Tax to net cash used in operating activities Loss from ordinary activities after income tax Add/(less) non-cash items: Depreciation and amortisation Fair value loss on convertible notes Share of net loss of associates Exchange loss/(gains) Fair value of receivables loss/(gain) Impairment of exploration properties Expense on grant of options Shares issued in lieu of payment for services Finance costs Changes in assets and liabilities, net of the ef ects of purchase and disposal of controlled entities during the f nancial year: Increase in receivables Decrease in prepayments Increase/(decrease) in payables Increase in provisions Net cash used in operating activities	CONSOLIDATED 12 MONTHS ENDED 31 DECEMBER2011 6 MONTHS ENDED 31 DECEMBER 2010 $ $ 44,030,949 23,189,432
	44,030,949 23,189,432
	(8,777,306) (11,340,398) 148,935 79,008 66,649 5,882,403 – 7,181 (317,596) 334,224 1,029,297 (2,208,666) 53,148 9,875 203,585 2,730,028 – 405,000 528,908 730,357 (110,453) (227,111) 182,076 19,123 614,845 (541,969) 143,423 4,863
	(6,234,489) (4,116,082)

68 METMINCO LIMITED Annual Report 31 December 2011

c. Acquisition of Entities During the year ended 31 December 2011 the Company increased its interest in SCM Ovalle from 50% to 100% ownership and paid stamp duty with respect to the purchase of Hampton Mining Limited completed in 2010. Details of this transaction are: Purchase consideration for SCM Ovalle Consisting of: – Cash consideration – Ordinary shares Total consideration Purchase consideration for Hampton Mining Limited Consisting of: – Cash consideration – Ordinary shares Total consideration Cash consideration Cash outf ow1 Assets and liabilities held at acquisition date: Exploration Acquisition reserve	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 9,414,800 – 24,510,523 –
	33,925,323 –
	729,561 4,150,000 – 45,792,752
	729,561 49,942,752
	10,144,361 4,150,000
	9,414,800 4,150,000
	33,925,323 – – (41,506,662)
	– 8,436,090

d. Non-cash Financing and Investing Activities

Share issue

During the full year ended 31 December 2011, 145,250,855 ordinary fully paid shares were issued at an average price of $0.37 per share as part of the consideration for the purchase of a further 50% ownership interest in SCM Ovalle and as consideration for the surrender by Barrick Corporation of its potential buy back right with respect to the Los Calatos project.The share issue was based on the fair value of these acquisitions prior to the purchase.

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69

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE

Matters that have arisen in the interval between the end of the year and the date of this report of a material or unusual nature likely, in the opinion of the Directors of the Company, to signifi cantly aff ect the operations of the Group, the results of those operations, or the state of aff airs of the Group, in future fi nancial years are as follows:

a . Settlement of Conditional Placing of A$10.3 million

On 25 November 2011 the Company announced a A$40 (£25.1) million placement consisting of a Firm Placement (211,850,000 Shares to raise A$29.7 million) settled on 2 December 2011 and a Conditional Placement (73,864,286 Shares to raise A$10.3 million).

The Conditional Placement was approved by shareholders at the Company’s Extraordinary General Meeting on 4 January 2012 and settled on 6 January 2012.

b) Rights Issue

On 24 November 2011, the Company announced a Rights Issue of one new share (New Share) for every twenty Shares held by Australian and New Zealand resident shareholders (Eligible Shareholders) in Metminco on 14 December 2011 at an off er price of A$0.14 per New Share. The Rights Issue closed on 3 January 2012 with 1,211,141 New Shares (approximately 2% of the Right Issue off er) subscribed for by Eligible Shareholders raising approximately A$0.2 million. The Rights Issue was undersubscribed by 67,349,599 Shares (Shortfall Shares). The Directors resolved not to place the Shortfall.

Other than the matters noted above, no other matters have arisen in the interval between the end of the full year and the date of this report of a material or unusual nature likely, in the opinion of the directors of the Company, to signifi cantly aff ect the operations of the Group, the results of those operations, or the state of aff airs of the Group, in future fi nancial years.

NOTE 26: RELATED PARTIES

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

Directors

The names of each person holding the position of Director of Metminco Limited during the full year are:

John Fillmore (resigned 16 March 2011) , Antonio Ortúzar (appointed 16 March 2011) , Phillip Wing, William J Howe, William S Etheridge, Tim Read and Francisco Vergara-Irarrazaval.

Details of Key Management Personnel remuneration are set out in Note 5.

Transactions with related parties:

a. Directors

Apart from the details disclosed in this Note, no Directors entered into a material contract with the Company or the Consolidated Group since the end of the previous fi nancial year and, there were no material contracts involving Directors’ interests existing at year end.

Directors’ and Executive Offi cer’s holdings of shares and options

The aggregate interests of Directors and the Executive Offi cers of the reporting entity and their Director-related entities in shares and share options of entities within the Consolidated Group at year end are set out in the Directors’ Report and at Note 5.

b. Associated joint venture companies

Advances by Hampton Chile to SCM San Lorenzo are in USD and are non interest bearing with no fi xed repayment terms. Total advances to the associated companies as at 31 December 2011 was nil (31 Dec 2010: nil). Refer Notes 12 and 13.

c. Subsidiaries

Advances by Metminco are in AUD and are non interest bearing with no fi xed repayment terms. Total advances to the subsidiary companies as at 31 December 2011 was $25,756,719 (6 months to 31 Dec 2010: 2,657,274).

70 METMINCO LIMITED Annual Report 31 December 2011

NOTE 27: FINANCIAL RISK MANAGEMENT

The Group’s fi nancial instruments consist mainly of deposits with banks, local money market instruments, trade and other receivables, trade and other payables and convertible notes.

The totals for each category of fi nancial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these fi nancial statements, are as follows:

NOTE Financial Assets Cash and cash equivalents 8 Trade and other receivables 9 Fair value of equity swap derivative 9 Total Financial Assets Financial Liabilities Financial liabilities at amortised cost – Trade and other payables 16 – Borrowings 17 Total Financial Liabilities	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 44,030,949 23,189,432 5,917,821 5,339,846 109,613 2,113,535
	50,058,383 30,642,813
	4,167,824 2,021,494 – 1,701,892
	4,167,824 3,723,386

Financial Risk Management Policies

The Board of Directors is responsible for, amongst other issues, monitoring and managing fi nancial risk exposures of the Group. The Board monitors the Group’s fi nancial risk management policies and exposures and approves fi nancial transactions within the scope of its authority. It also reviews the eff ectiveness of internal controls relating to counterparty credit risk, currency risk, fi nancing risk and interest rate risk.

The Board’s overall risk management strategy seeks to assist the consolidated group in meeting its fi nancial targets, while minimising potential adverse eff ects on fi nancial performance. Its functions include the review of the credit risk policies and future cash fl ow requirements.

Specifi c Financial Risk Exposures and Management

The main risks the Group is exposed to through its fi nancial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk.

a. Credit risk

Exposure to credit risk relating to fi nancial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a fi nancial loss to the Group.

Credit risk is managed through the maintenance of procedures (such procedures include the regular monitoring of exposures and monitoring of the fi nancial stability of signifi cant customers and counterparties), ensuring to the extent possible, that customers and counterparties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment.

Risk is also minimised through investing surplus funds in fi nancial institutions that maintain a high credit rating, or in entities that the Board has otherwise cleared as being fi nancially sound.

Credit Risk Exposures

The maximum exposure to credit risk by class of recognised fi nancial assets at reporting date, excluding the value of any collateral or other security held, is equivalent to the carrying value and classifi cation of those fi nancial assets (net of any provisions) as presented in the statement of fi nancial position.

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71

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 27: FINANCIAL RISK MANAGEMENT continued

a. Credit risk continued

With the exception of the receivable from the equity swap which is secured (Note 9), the Group has no signifi cant concentration of credit risk with any single counterparty or group of counterparties. However, on a geographical basis, the Group has signifi cant credit risk exposures to South America given the substantial operations in those regions.

Trade and other receivables are neither past due nor impaired and are considered to be of high credit quality. Aggregates of such amounts are as detailed in Note 9. No impairment has been applied to trade and other receivables. Derivative instruments are held at fair value and not considered impaired.

b. Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter diffi culty in settling its debts or otherwise meeting its obligations related to fi nancial liabilities. The Group manages this risk through the following mechanisms:

• preparing forward looking cash fl ow analysis in relation to its operational, investing and fi nancing activities;

• maintaining a reputable credit profi le;

• managing credit risk related to fi nancial assets;

• only investing surplus cash with major fi nancial institutions; and

• comparing the maturity profi le of fi nancial liabilities with the realisation profi le of fi nancial assets.

The tables below refl ect an undiscounted contractual maturity analysis for fi nancial liabilities.

Cash fl ows realised from fi nancial assets refl ect management’s expectation as to the timing of realisation. Actual timing may therefore diff er from that disclosed. The timing of cash fl ows presented in the table to settle fi nancial liabilities refl ects the earliest contractual settlement dates.

Financial Liability and Financial Asset Maturity Analysis

WITHIN 1 YEAR 1 TO 5 YEARS OVER 5 YEARS TOTAL 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 $ $ $ $ $ $ $ $ Consolidated Group Financial liabilities due for payment Convertible notes – – – 1,701,892 – – – 1,701,892 Trade and other payables (excluding est. annual leave) 4,167,824 2,021,494 – – – – 4,167,824 2,021,494 Total contractual outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Total expected outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Financial assets – cash f ows realisable Cash and cash equivalents 44,030,949 23,189,432 – – – – 44,030,949 23,189,432 Trade, term and loans receivables 2,512,029 3,648,216 3,515,405 3,805,165 – – 6,027,434 7,453,381 Total anticipated inf ows 46,542,978 26,837,648 3,515,405 3,805,165 – – 50,058,383 30,642,813 Net (outf ow)/inf ow on f nancial instruments 42,375,154 24,816,154 3,515,405 2,103,273 – – 45,890,559 26,919,427	WITHIN 1 YEAR 1 TO 5 YEARS OVER 5 YEARS TOTAL 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 $ $ $ $ $ $ $ $ Consolidated Group Financial liabilities due for payment Convertible notes – – – 1,701,892 – – – 1,701,892 Trade and other payables (excluding est. annual leave) 4,167,824 2,021,494 – – – – 4,167,824 2,021,494 Total contractual outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Total expected outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Financial assets – cash f ows realisable Cash and cash equivalents 44,030,949 23,189,432 – – – – 44,030,949 23,189,432 Trade, term and loans receivables 2,512,029 3,648,216 3,515,405 3,805,165 – – 6,027,434 7,453,381 Total anticipated inf ows 46,542,978 26,837,648 3,515,405 3,805,165 – – 50,058,383 30,642,813 Net (outf ow)/inf ow on f nancial instruments 42,375,154 24,816,154 3,515,405 2,103,273 – – 45,890,559 26,919,427	WITHIN 1 YEAR 1 TO 5 YEARS OVER 5 YEARS TOTAL 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 31 DEC 2011 31 DEC 2010 $ $ $ $ $ $ $ $ Consolidated Group Financial liabilities due for payment Convertible notes – – – 1,701,892 – – – 1,701,892 Trade and other payables (excluding est. annual leave) 4,167,824 2,021,494 – – – – 4,167,824 2,021,494 Total contractual outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Total expected outf ows 4,167,824 2,021,494 – 1,701,892 – – 4,167,824 3,723,386 Financial assets – cash f ows realisable Cash and cash equivalents 44,030,949 23,189,432 – – – – 44,030,949 23,189,432 Trade, term and loans receivables 2,512,029 3,648,216 3,515,405 3,805,165 – – 6,027,434 7,453,381 Total anticipated inf ows 46,542,978 26,837,648 3,515,405 3,805,165 – – 50,058,383 30,642,813 Net (outf ow)/inf ow on f nancial instruments 42,375,154 24,816,154 3,515,405 2,103,273 – – 45,890,559 26,919,427
	4,167,824 2,021,494 – 1,701,892 – – 4,167,824	3,723,386
	4,167,824 2,021,494 – 1,701,892 – – 4,167,824	3,723,386
	44,030,949 23,189,432 – – – – 44,030,949 2,512,029 3,648,216 3,515,405 3,805,165 – – 6,027,434	23,189,432 7,453,381
	46,542,978 26,837,648 3,515,405 3,805,165 – – 50,058,383	30,642,813
	42,375,154 24,816,154 3,515,405 2,103,273 – – 45,890,559	26,919,427

72 METMINCO LIMITED Annual Report 31 December 2011

c. Market Risk

i. Interest rate risk

Exposure to interest rate risk arises on fi nancial assets and fi nancial liabilities recognised at the end of the reporting period whereby a future change in interest rates will aff ect future cash fl ows or the fair value of fi xed rate fi nancial instruments. The Group is also exposed to earnings volatility on fl oating rate instruments.

ii. Foreign exchange risk

Exposure to foreign exchange risk may result in the fair value or future cash fl ows of a fi nancial instrument fl uctuating due to movement in foreign exchange rates of currencies in which the Group holds fi nancial instruments which are other than the AUD functional currency of the Group.

The Consolidated Group is exposed to interest rate and foreign exchange risk through cash assets held and fi nancial liabilities owed as at the reporting date.

Cash assets held in Australian dollars and subject to f oating interest rate Australian currency equivalent of cash assets held in US dollars and subject to f oating interest rate Australian currency equivalent of cash assets held in US dollars and subject to f oating interest rate Australian currency equivalent of cash assets held in Chilean pesos and subject to f oating interest rate Total cash assets Financial liabilities repayble in US dollars Convertible notes

CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 6,464,772 9,418,236 37,167,874 12,867,164 124,097 904,032 274,206 –

44,030,949 23,189,432 – 491,981

Sensitivity Analysis

The following table illustrates sensitivities to the Group’s exposures to changes in interest rates and exchange rates. The table indicates the impact on how profi t and equity values reported at reporting date would have been aff ected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.

Interest Rate Sensitivity Analysis

At 31 December 2011, the eff ect on profi t and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

constant would be as follows:
Change in prof t
Increase in interest rate by 2%	880,619	188,365
Decrease in interest rate by 2%	(880,619)	(188,365)
Change in equity
Increase in interest rate by 2%	880,619	188,365
Decrease in interest rate by 2%	(880,619)	(188,365)

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73

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 27: FINANCIAL RISK MANAGEMENT continued

Foreign Currency Risk Sensitivity Analysis

At 31 December 2011, the eff ect on profi t and equity as a result of changes in the value of the Australian dollar (AUD) compared to the US dollar (USD), the UK pound (GBP) and the Chilean peso (CLP), with all other variables remaining constant, would be as follows:

	CONSOLIDATED
	31 DECEMBER 2011	31 DECEMBER 2010
	$	$
Change in prof t
Improvement in AUD to USD by 5%	(1,858,394)	(612,722)
Decline in AUD to USD by 5%	1,858,394	612,722
Change in equity
Improvement in AUD to USD by 5%	(1,858,394)	(612,722)
Decline in AUD to USD by 5%	1,858,394	612,722
Change in prof t
Improvement in AUD to GBP by 5%	(6,205)	(43,049)
Decline in AUD to GBP by 5%	6,205	43,049
Change in equity
Improvement in AUD to GBP by 5%	(6,205)	(43,049)
Decline in AUD to GBP by 5%	6,205	43,049
Change in prof t
Improvement in AUD to CLP by 5%	(13,710)	–
Decline in AUD to CLP by 5%	13,710	–
Change in equity
Improvement in AUD to CLP by 5%	(13,710)	–
Decline in AUD to CLP by 5%	13,710	–

Net Fair Values

Fair value estimation

The fair values of fi nancial assets and fi nancial liabilities are presented in the statement of fi nancial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash fl ow analysis and other valuation techniques commonly used by market participants.

Diff erences between fair values and carrying values of fi nancial instruments with fi xed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Most of these instruments which are

carried at amortised cost (i.e. term receivables, held-to-maturity assets, loan liabilities) are to be held until maturity and therefore the net fair value fi gures calculated bear little relevance to the Group.

74 METMINCO LIMITED Annual Report 31 December 2011

31 DECEMBER 2011 31 DECEMBER 2010 FOOTNOTE NET CARRYING VALUE NET FAIR VALUE NET CARRYING VALUE NET FAIR VALUE $ $ $ $ Consolidated Group Financial assets Cash and cash equivalents (i) 44,030,949 44,030,949 23,189,432 23,189,432 Loans and receivables (i) 2,512,029 2,512,029 3,648,216 3,648,216 Financial assets at fair value (ii) 3,515,405 3,515,405 3,805,165 3,805,165 Total f nancial assets 50,058,383 50,058,383 30,642,813 30,642,813 Financial liabilities Financial liabilities at amortised cost (i) 4,167,824 4,167,824 2,021,494 2,021,494 Financial liabilities at fair value (iii) – – 1,701,892 1,701,892 Total f nancial liabilities 4,167,824 4,167,824 3,723,386 3,723,386	31 DECEMBER 2011 31 DECEMBER 2010 FOOTNOTE NET CARRYING VALUE NET FAIR VALUE NET CARRYING VALUE NET FAIR VALUE $ $ $ $ Consolidated Group Financial assets Cash and cash equivalents (i) 44,030,949 44,030,949 23,189,432 23,189,432 Loans and receivables (i) 2,512,029 2,512,029 3,648,216 3,648,216 Financial assets at fair value (ii) 3,515,405 3,515,405 3,805,165 3,805,165 Total f nancial assets 50,058,383 50,058,383 30,642,813 30,642,813 Financial liabilities Financial liabilities at amortised cost (i) 4,167,824 4,167,824 2,021,494 2,021,494 Financial liabilities at fair value (iii) – – 1,701,892 1,701,892 Total f nancial liabilities 4,167,824 4,167,824 3,723,386 3,723,386	31 DECEMBER 2011 31 DECEMBER 2010 FOOTNOTE NET CARRYING VALUE NET FAIR VALUE NET CARRYING VALUE NET FAIR VALUE $ $ $ $ Consolidated Group Financial assets Cash and cash equivalents (i) 44,030,949 44,030,949 23,189,432 23,189,432 Loans and receivables (i) 2,512,029 2,512,029 3,648,216 3,648,216 Financial assets at fair value (ii) 3,515,405 3,515,405 3,805,165 3,805,165 Total f nancial assets 50,058,383 50,058,383 30,642,813 30,642,813 Financial liabilities Financial liabilities at amortised cost (i) 4,167,824 4,167,824 2,021,494 2,021,494 Financial liabilities at fair value (iii) – – 1,701,892 1,701,892 Total f nancial liabilities 4,167,824 4,167,824 3,723,386 3,723,386
	50,058,383 50,058,383 30,642,813	30,642,813
	4,167,824 4,167,824 2,021,494 – – 1,701,892	2,021,494 1,701,892
	4,167,824 4,167,824 3,723,386	3,723,386

The fair values disclosed in the above table have been determined based on the following methodologies:

• (i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value. Trade and other payables exclude amounts provided for annual leave, which is not considered a fi nancial instrument.

• (ii) The fair value of term receivables generally approximates carrying value.

• (iii) The convertible notes are valued at face value plus an adjustment to refl ect the value of the option to convert to fully paid ordinary shares using the Company’s prevailing price quoted on the ASX.

d. Financial Instruments Measured at Fair Value

The fi nancial instruments recognised at fair value in the statement of fi nancial position have been analysed and classifi ed using a fair value hierarchy refl ecting the signifi cance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels:

• quoted prices in active markets for identical assets or liabilities (Level 1);

• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

• inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The Company only has level 3 categories and the basis for valuation is set out in the notes to the accounts.

NOTE 28: RESERVES

a. Foreign Currency Translation Reserve

The foreign currency translation reserve records exchange diff erences arising on translation of a foreign controlled subsidiary.

b. Option Reserve

The option reserve records items recognised as expenses on valuation of employee share options.

c. Acquisition Reserve

The acquistion reserve records items recognised on the subsequent acquisition of the Hampton minority interest.

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75

NOTES TO THE FINANCIAL STATEMENTS continued

NOTE 29: PARENT ENTITY INFORMATION

NOTE 29: PARENT ENTITY INFORMATION
Statement of Financial Position Current assets Total assets Current liabilities Total liabilities Issued capital Retained earnings Reserves Statement of Comprehensive Income Loss for the year Total comprehensive loss	CONSOLIDATED 31 DECEMBER 2011 31 DECEMBER 2010 $ $ 44,059,385 25,230,792 284,876,896 181,738,675 1,009,897 2,779,256 1,009,897 2,953,949 307,900,070 196,501,824 (27,269,812) (20,749,754) 3,236,241 3,032,656
	283,866,499 178,784,726
	6,520,058 10,359,655
	6,520,058 10,359,655

The parent entity has lease commitments of A$208,494. The parent entity has not entered into a deed of cross guarantee nor are there any contigent liabilities at the year end.

NOTE 30: COMPANY DETAILS

Metminco Limited is a company domiciled in Australia and its registered offi ce is located at:

Level 6 122 Walker Street North Sydney NSW 2060 Australia

The Company’s principal offi ce is located at:

Isidora Goyenechea 3162 Ofi cina 201 Las Condes Chile.

The Group’s principal activities are exploration and development of mineral prospects primarily located in Chile and Peru, South America.

76 METMINCO LIMITED Annual Report 31 December 2011

DIRECTORS’ DECLARATION

The directors of the company declare that:

1. the fi nancial statements and notes, as set out on pages 36 to 76, are in accordance with the Corporations Act 2001 and:

2. a. comply with Accounting Standards;

3. b. give a true and fair view of the fi nancial position as at 31 December 2011 and of the performance for the full year ended on that date of the Consolidated Group; and

4. c. comply with International Financial Reporting Standards as discussed in Note 1.

5. the Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Offi cer for the fi nancial year ended 31 December 2011

6. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

William S Etheridge Director

Dated this 20th day of March 2012

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77

INDEPENDENT AUDITOR’S REPORT to the Members of Metminco Limited

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Grant Thornton Audit Pty Ltd ACN 130 913 594

Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Offi ce Sydney NSW 1230

T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au

Report on the fi nancial report

We have audited the accompanying fi nancial report of Metminco Limited (the “Company”), which comprises the consolidated statement of fi nancial position as at 31 December 2011, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash fl ows for the year then ended, notes comprising a summary of signifi cant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the fi nancial year.

Directors’ responsibility for the fi nancial report

Th e Directors of the Company are responsible for the preparation of the fi nancial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. Th is responsibility includes such internal controls as the Directors determine are necessary to enable the preparation of the fi nancial report to be free from material misstatement, whether due to fraud or error. Th e Directors also state, in the notes to the fi nancial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the fi nancial report, comprising the fi nancial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

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

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

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

Liability limited by a scheme approved under Professional Standards Legislation

78 METMINCO LIMITED Annual Report 31 December 2011

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In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the Company’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 fi nancial report.

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

Independence

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

Auditor’s opinion

In our opinion:

• a the fi nancial report of Metminco Limited is in accordance with the Corporations Act 2001, including:

• i giving a true and fair view of the consolidated entity’s fi nancial position as at 31 December 2011 and of its performance for the year ended on that date; and

• ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and

• b the fi nancial report also complies with International Financial Reporting Standards as disclosed in the notes to the

Report on the remuneration report

We have audited the remuneration report included in pages 31 to 34 of the directors’ report for the year ended 31 December 2011. Th e 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 on the remuneration report

In our opinion, the remuneration report of Metminco Limited for the year ended 31 December 2011, complies with section 300A of the Corporations Act 2001.

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GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

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A G Rigele Director – Audit & Assurance

Sydney, 20 March 2012

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79