MEC RESOURCES LIMITED

A N N U A L R E P O R T 2011

E N E R G Y M I N E R A L S E X P LO R AT I O N

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E N E R G Y M I N E R A L S E X P LO R AT I O N
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Photographs and Images Photographs and images used throughout this report do not depict 2 ANNUAL REPORT assets of the company unless expressly indicated otherwise. 2011

Chairman’s Letter	2
Company Focus and Developments	3
Directors’ Report	10
Auditor Independence Declaration	21
Corporate Governance Statement	22
Statement of Comprehensive Income	29
Statement of Financial Position	30
Statement of Changes in Equity	31
Statement of Cash Flows	32
Notes to the Financial Statements	33
Directors’ Declaration	67
Independent Auditor’s Report	68
Additional Securities Exchange Information	70

Corporate Directory

Directors

H Goh – Non-Executive Chairman D L Breeze – Executive Director K O Yap – Non-Executive Director C T Lim – Non-Executive Director D Ambrosini – Executive Director

Registered Office

14 View Street North Perth WA 6006

Auditor

Deloitte Touche Tohmatsu Level 14 Woodside Plaza 240 St Georges Terrace Perth WA 6000

Share Registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

Principal Business Address

14 View Street North Perth WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 Website: www.mecresources.com.au E-mail: [email protected]

Australian Securities Exchange Listing

Australian Securities Exchange Limited (Home Exchange: Perth, Western Australia) ASX Code: MMR

Australian Business Number

44 113 900 020

ANNUAL REPORT 2011

Chairman’s Letter

Dear Shareholder

MEC Resources’ investments have shown considerable promise over the past year.

Maintaining its position in Advent Energy has been justified following the drilling of PEP11 in December 2010. Advent demonstrated it had the capacity to operate an offshore operation on time and incident free – an essential competence in the evolving offshore petroleum exploration industry.

Despite not encountering hydrocarbons, Advent did demonstrate that the offshore Sydney Basin holds plenty of promise, considering the observation of thick sequences of reservoir rock, identification of Early Permian sequences and interpretation of hydrocarbon maturity following post-drilling studies. This augurs well for further exploration of PEP11.

Importantly, the prospectivity of PEP11’s vast structural targets remains as strong as ever, and Advent now controls 85% of this extensive permit adjacent to Australia’s most populous region and industrial hub.

In the north of Australia, Advent has improved the resource estimate of the Weaber Gas Field in RL1 and generated its first independently audited Contingent Resource assessment. This field has now been assessed to comprise a mean of 18.4 billion cubic feet of natural gas across the 1C, 2C and 3C assessments.

In addition, Advent is progressing its plans to appraise the existing discoveries of Vienta-1 and Waggon Creek-1 in EP386. These discoveries were made in 1998 and 1995 respectively though are yet to be appraised, primarily due to their remote location north of Kununurra in Western Australia. Review of existing data by Advent and its consultants has demonstrated the considerable upside potential this region holds.

The present development of the region encompassing Kununurra, including the Ord River Irrigation Area, the township of Kununurra and the numerous resources projects at advanced stages of development provides an exceptional opportunity for Advent to potentially develop its gas resources. To Advent’s advantage, the Commonwealth and State Governments have invested heavily in the region, including the present installation of all-weather sealed roads just kilometres from Advent’s Vienta-field.

Advent is in the enviable position where it holds 100% of these Bonaparte Basin permits and is working hard towards commercial development of its assets in this rapidly expanding region.

Full of anticipation, we look forward to the exciting year ahead.

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Mr Hock Goh Chairman

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2 ANNUAL REPORT 2011

Company Focus and Developments

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MEC Resources’ investment capital is targeted for new and emerging companies in which investments have the potential to yield significant returns in energy and mineral resources.

MEC will seek to minimise the high risk that is usually associated with extremely large potential rewards by seeking to hold a portfolio of exploration investments. The Company is registered by the Australian Federal Government as a Pooled Development Fund enabling most MEC shareholders to receive tax free capital gains on their shares and tax free dividends.

MEC’s current major investment lies in Advent Energy Ltd, an unlisted oil and gas exploration and development company with onshore and offshore exploration and near term development assets around Australia.

MEC’s investment focus:

ADVENT ENERGY

PEP11 Oil and Gas Permit

MEC Resources’ investee Advent Energy Ltd achieved its objective of increasing its interest to 85% of Petroleum Exploration Permit PEP11 – an exploration permit prospective for natural

gas located in the Offshore Sydney Basin. This was achieved following the drilling of Advent’s maiden offshore exploration well. New Seaclem-1 spudded in December 2010 and was concluded in January 2011. Operations were conducted incident free and on schedule. Under the terms of Advent’s farmin to PEP11 with joint venture partner Bounty Oil and Gas NL (Bounty), Advent (through wholly owned subsidiary Asset Energy Pty Ltd) increased its interest in PEP11 from 25% to 85% by sole funding the drilling of an exploration well within the permit. Bounty thereby reduced its interest in PEP11 to 15%.

Covered by PEP11, a 200km long, 8,250km[2] permit, the Offshore Sydney Basin is a significant exploration area with large scale structuring and potentially multi-Trillion cubic feet (Tcf) gas charged Permo-Triassic reservoirs.

The prospectivity of this proven petroleum basin has been enhanced by the confirmation of the presence of apparent ongoing hydrocarbon seeps. Sub-bottom profile data, swath bathymetry, seismic and echosounder data collected by Geoscience Australia along the continental slope / permit margin has demonstrated active erosional features in conjunction with geophysical indications of gas escape.

ANNUAL REPORT 2011 3

Company Focus and Developments

PEP11 Oil and Gas Permit (continued)

Advent has previously interpreted significant seismically indicated gas features. Key indicators of hydrocarbon accumulation features have been interpreted following review of the 2004 seismic data, reprocessed in 2010. The seismic features include apparent Hydrocarbon Related Diagenetic Zones (HRDZ), Amplitude Versus Offset (AVO) anomalies and potential flat spots.

Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from Australia’s largest energy market, the Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5,000,000 people. Traditionally, all natural gas used in New South Wales has been piped in from South Australia and the Bass Strait. However, studies by the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Australian Petroleum Production and Exploration Association (APPEA) state that those sources may not be able to meet the demand for gas in the medium to longer term.

Although there have been over a thousand wells drilled in offshore Australia, Advent was the first ever company to conduct a petroleum exploration drilling exercise in the offshore Sydney Basin. The New Seaclem-1 well concluded in January 2011. The well obtained a significant volume of valuable and new information about the offshore Sydney Basin – a previously unexplored area off NSW. Hydrocarbons were not recorded. Included in these discoveries was the identification of reservoir rocks consisting of high porosity tertiary sandstones. One such sandstone was interpreted to comprise 40 metres thickness with an average porosity of 30%, with considerable thickening updip potential for future exploration.

Other interpretations derived from the drilling of New Seaclem-1 included sedimentary age dating and hydrocarbon maturity through palynological studies. Results of these studies demonstrated that the sediments were of Early Permian age below the Unconformity separating these sediments and the Cainozoic seabed sediments. These sediments likely correspond with the Branxton Formation. In addition, these Early Permian sediments have been demonstrated to be mature for hydrocarbons.

Advent has demonstrated considerable gas generation and migration elsewhere within PEP11, with the previously observed mapped prospects and leads remaining highly prospective for gas.

Advent and its Joint Venture (JV) partner are discussing the future exploration programme in PEP11 with the excellent foundation of information obtained from New Seaclem-1. The JV is well positioned for future drilling having completed pre-drilling site surveys over four locations in June 2010. These are likely to be enhanced by 3D seismic acquisition prior to further exploration drilling. Details of future works will be advised in due course.

Northern Territory/Western Australia – Onshore Bonaparte Basin

Advent Energy holds 100% of each of EP386 and RL1 in the onshore Bonaparte Basin in northern Australia. The Bonaparte Basin is a hydrocarbon-bearing sedimentary basin straddling the border between the Northern Territory (NT) and Western Australia (WA). Most of the basin is located offshore, covering 250,000 square kilometres, compared to just over 20,000 square kilometres onshore.

In April 2011, Advent successfully renewed EP386 for a further 5 year term.

Advent Energy holds Exploration Permit EP386 (2,568 square kilometres in area) which covers the Western Australian section of the onshore Bonaparte Basin. Since 1960 twelve wells have been drilled in or near EP386 and only sixteen in the whole of the onshore basin. Six exploration wells are classified as gas discoveries. The tenements contain five gas fields which could be advanced to commercial status with additional work, in particular the Garimala Gas Field which may have an areal extent of more than 10km[2] and could trap more than 25 Bcf OGIP. The main exploration target has been sandstone within a late Devonian-early Carboniferous sequence. This thick marine shale dominated sequence is interpreted to be the main source rock sequence for the greater Bonaparte Basin, including the offshore portion where gas resources have been identified.

4 ANNUAL REPORT 2011

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ANNUAL REPORT 2011 5

Company Focus and Developments

Northern Territory/Western Australia – Onshore Bonaparte Basin (continued)

Three modest gas discoveries have been made along the western edge of the basin, in an area characterised by a structural-stratigraphic trapping and active migration known as the Waggon Creek Embayment. In EP386 the three main discoveries made so far, Vienta, Waggon Creek and Bonaparte, contain possible recoverable gas resources of 8 Bcf, 12 Bcf and 4 Bcf, respectively.

Waggon Creek-1, drilled in 1995, and Vienta-1, drilled in 1998, provided strong evidence of significant sweet gas-charged stratigraphic traps with fair to good quality sandstone reservoris within the upper Milligans Formation. Preliminary reviews have indicated that:

potential gas resources could be significantly higher than previously estimated;
severe formation damages due to fines migration may have masked the true gas flow rate potential;
true flow rate could be significantly higher than the calculated undamaged reservoir flow rates as experienced in similarly damaged reservoirs elsewhere in Australia and internationally; and
there is strong evidence from the pressure data that there is considerable upside potential in the area if formation damage can be avoided.

Previous logging of Waggon Creek-1 indicated that it contains 28.5m of gross hydrocarbon bearing sandstone with an average log porosity of 22%. Drill stem testing demonstrated flow rates of over 1.3 million standard cubic feet of natural gas per day, including the recovery of oil of 31° API.

Drilling of Vienta-1 in 1998 demonstrated numerous gas shows within Enga Sandstone units, with dry gas flowed to surface and visual porosity described in the cuttings. A gas show was encountered whilst drilling in Enga shales, resulting in the well being shut in after taking a significant kick (spike in pressure). The well was flowing and gas was flared while circulating out the kick. The early onset of the wet season resulted in early termination of the programme before the Vienta-1 well could be tested.

Both Waggon Creek-1 and Vienta-1 were cased and suspended for future production.

Advent has been preparing to perform workover and production tests on Waggon Creek-1 and Vienta-1 this dry season. The exceptional late wet season experienced around March 2011 hampered early efforts to access the sites, though Advent is on track for these activities to be achieved this dry season.

In the NT, Advent holds Retention Licence RL1 (166 square kilometres in area), which covers the Weaber Gas Field which was originally discovered in 1985.

During the year, Advent undertook a review of all available well data from the Weaber wells, reprocessed all available seismic data covering the Weaber Gas Field and re-mapped the field. An independent resource audit was completed by respected petroleum industry consulting firm RISC Pty Ltd.

Advent has advised that the 2C Contingent Resources* for the Weaber Gas Field in RL1 are 11.5 billion cubic feet (Bcf) of natural gas following an independent audit by RISC. Significant upside 3C Contingent Resources of 45.8 Bcf have also been assessed by RISC.

The results are summarised below:

Weaber Field	1C	2C	3C	Mean1
Gas InitiallyIn Place(Bcf)	0.33	13.9	54.1	21.9
Contingent Resources(Bcf)	0.25	11.5	45.8	18.4

1 The mean is the average of the probabilistic resource distribution
Contingent Resources, as defined under the Society of Petroleum Engineers Petroleum Resource Management System (SPE PRMS) guidelines.

Achieving the resources upgrade has been a major milestone for Advent, and is one of the first steps in unlocking substantial value as Advent moves forward to commercialise its onshore Bonaparte Basin assets.

6 ANNUAL REPORT 2011

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The current rapid development of the Kununurra region in northern Western Australia, including the Ord River Irrigation Area phase 2, the township of Kununurra, and numerous regional resource projects provides an exceptional opportunity for Advent to potentially develop its nearby gas resources.

Advent believes the Ord Expansion project will impact positively on EP386.

The Department of State Development (WA) has described the Ord-East Kimberley Expansion Project as a nation building project to create stronger, sustainable regional communities in the East Kimberley. The $415 million investment includes:

~ $195 million from the Commonwealth Government for the East Kimberley Development Package, and
~ 220 million from the WA Government for the Ord Irrigation Expansion Project.

The initial phase of works is currently underway north of Kununurra and adjacent to Advent’s EP386 permit. The current Ord expansion project will bring road infrastructure to within 15 kilometres of Advent’s Vienta-1 gas well in EP386 and will allow for the development of Advent’s onshore Bonaparte Basin gas assets. The construction of all-weather sealed roads within the Ord phase two project provides for suitable infrastructure developments to support a commercial development of the field.

These important investments by the Commonwealth and WA governments provide the impetus for Advent to pursue its objective of developing its wholly owned petroleum resources within EP386 and RL1. Significantly, these investments will impact markedly on the energy requirements of the Kununurra region which is currently supplied by hydroelectricity from the Lake Argyle hydroelectric facility and diesel power generation.

Advent is in an exceptional position where it remains the operator and 100% owner of the key petroleum permits in the vicinity of this region.

ANNUAL REPORT 2011 7

Company Focus and Developments

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8 ANNUAL REPORT 2011

Western Australia – Exmouth Sub-Basin (EP325)

Advent Energy Ltd has an 8.3% interest (Permit Operator: Strike Energy Ltd) in a shallow, near shore permit in the Exmouth sub-Basin region of the Carnarvon Basin, which contains the undeveloped Rivoli Gas Field. The Rivoli Gas Field contains approximately 6.8 – 18 PJ of gas. The permit also contains the Rivoli Deep prospect and other leads. The Joint Venture is in ongoing discussions with The Department of Defence and Exmouth Power regarding potential gas supply.

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Central Australia – Amadeus, Pedirka, Basins

Advent holds a large shareholding in Australian onshore hydrocarbon explorer Central Petroleum Ltd (ASX: CTP). Central Petroleum is actively exploring in its exploration tenements that cover approximately 270,000km[2] of central Australia.

Advent has reserved its right to claim damages from Central Petroleum Ltd and its subsidiaries following repudiatory breach of contract regarding farmin by Advent to Central’s permits.

BPH Energy Limited

MEC Resources holds 26.8% of BPH Energy Limited (“BPH”) through participation in placements and rights issues.

BPH is a diversified company holding investments in biotechnology and resources. BPH also holds a significant interest (27.4%) in unlisted oil and gas exploration company Advent Energy Ltd. BPH is commercialising a portfolio of Australian biomedical technologies emerging from collaborative research by leading universities, medical institutes and hospitals across Australia.

Biomedical technologies in the commercialisation stage include:

Diagnostic Array Systems; BacTrak (a faster and more effective method for detecting infectious disease)
Cortical Dynamics’ Brain Anaesthesia Response (BAR) Monitor; a device that measures a patient’s brain electrical activity (EEG) to indicate the response to drugs administered during surgery
HLS5 Tumour Suppress Gene; a genetic marker for early and accurate cancer detection
Microtubule drugs that target the tumour vasculature

Molecular Discovery Systems (MDSystems), launched in 2006 and spun off from BPH in 2009, is a subsidiary of BPH for drug discovery and validation of biomarkers for disease, therapy and diagnostics. MDS is intended for IPO

Cortical Dynamics is undergoing an Initial Public Offering of its shares for listing on the Australian Securities Exchange.

NOTE: In accordance with ASX listing requirements, the geological information supplied in this report has been based on information provided by geologists who have had in excess of five years experience in their field of activity.

Asset Energy Pty Ltd is a wholly owned subsidiary of Advent Energy Ltd and is the Operator for PEP11 under the joint operating agreement with Bounty Oil and Gas NL.

MEC is an exploration investment company and relies on the resource and ore reserve statements compiled by the companies in which it invests. All Resource and Reserve Statements have been previously published by the companies concerned. Summary data has been used. Unless otherwise stated all resource and reserve reporting complies with the relevant standards. Resources quoted in this report equal 100% of the resource and do not represent MEC’s investees’ equity share unless stated.

ANNUAL REPORT 2011 9

Directors’ Report

The directors of MEC Resources Ltd present their report on the company for the financial year ended 30 June 2011.

The names of directors in office at any time during or since the end of the year are:

H Goh

Advent’s assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western Australia and Northern Territory, PEP11 (85%) in the offshore Sydney Basin and EP325 (8.3%) in the Exmouth Sub-basin of the Carnarvon Basin near Exmouth in WA. Advent’s portfolio of assets has an estimated AUD 156m invested historically on exploration.

D L Breeze

K O Yap C T Lim D Ambrosini

Company Secretary

Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Financial Controller of the Company and has over 10 years experience in Corporate accounting roles.

Principal Activities

MEC Resources Ltd (“MEC”) is registered as a Pooled Development Fund under the Pooled Development Fund Act (1992). It has been formed to invest into exploration companies that are targeting potentially large energy and mineral resources.

MEC will provide carefully selected companies in the energy and mineral exploration sectors with development and exploration funding. MEC intends to identify investment opportunities with a number of specific characteristics including: large targets; a stage of development that permits a strategic investor or IPO within several years; strong and experienced management team and a definitive competitive advantage.

MEC’s current major investment lies in unlisted Australian oil and gas exploration company Advent Energy Ltd.

A mean contingent Resource of 18.4 Bcf for the Weaber Gas Field (RL1) has recently been assessed by an independent third party as a component of Advent’s drive to commercialise its 100% owned onshore Bonaparte Basin assets. The current rapid development of the Kununurra region in northern Western Australia, including the Ord Irrigation Expansion Project and numerous resource projects, provides an exceptional opportunity for Advent to potentially develop its nearby gas resources for the benefit of the region along with Advent and its shareholders.

The Sydney Basin is a proven petroleum basin with excellent potential for the discovery of gas and oil. The demonstration of an active hydrocarbon system with seeps reported in the offshore area and sampling indicated the presence of thermogenic hydrocarbon gas; this is considered to occur in basins actively generating hydrocarbons and /or that contain excellent migration pathways. Drilling during the period has shown that the early Permian geological sequence is mature for hydrocarbons.

Undiscovered prospective recoverable gas resources for structural targets within the PEP11 offshore permit have been estimated at 6 trillion cubic feet (at the P50 level) or up to 23.5 Tcf on a probabilistic mean calculation. PEP11 lies adjacent to the most populous region of Australia and the major industrial hub of Newcastle where LNG production facilities are being developed (independently of Advent).

Advent Energy Limited -Oil and Gas

MEC has a controlling interest in the unlisted energy explorer Advent Energy Ltd (“Advent”) of 44.89%.

Advent is considering a future listing on a securities exchange.

Advent Energy has assembled a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside.

10 ANNUAL REPORT 2011

Operating Results

Operating loss for the consolidated entity after tax for the year was $4,055,799 (2010: Loss $2,905,010)

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

Financial Position

The net assets of the consolidated entity have increased by $22,221,940 to $46,133,619 at 30 June 2011. The increase can be attributed to the significant uplift in the value of Advent during the year from its drilling operations on PEP11 conducted during the year.

Significant Changes In State Of Affairs

During the year MEC conducted a non renounceable entitlement issue raising a total of $6M. A further placement to a sophisticated investor was made raising an additional $0.3M.

During the year MEC participated in two placements undertaken by BPH Energy Ltd (“BPH”). A combined amount of $6.6M was invested in BPH. BPH is a company listed on the ASX which has investments in Advent and biotechnology companies.

On 9th December 2010 Advent commenced its drilling operations of the New Seaclem-1 well in PEP11. The New Seaclem 1 well was designed to target the Great White and Marlin prospects in the shallow Cainozoic geological sediments in the Offshore Sydney Basin. Advent completed the drilling operations of New Seaclem 1 in early January 2011. Whilst no hydrocarbons were encountered at prognosed target horizons reservoir quality sandstones of considerable thickness were observed. Invaluable information was obtained from the drilling that will allow Advent to further assess the numerous prospects and leads within PEP11. The outcome of the drilling operations are not considered to be by management, impairment triggers of capitalised exploration costs on the statement of financial position.

During the year, Advent successfully closed its book build placing a total of 11,920,000 shares at an issue price of A$1.25 per share. Equity placements under the book build were made to BPH and an Asian based hydrocarbons group.

During the year Advent entered into a conditional agreement with BPH which gave BPH the opportunity to acquire up 27.7% of Advents share capital. On 15 December 2010 BPH invested $11.4M into Advent increasing its holding to 27.4%.

During the year Advent incorporated a 100% interest in Onshore Energy Pty Ltd (“Onshore”). The accounts of Onshore have been included in the Consolidated accounts of the group.

On 7 September 2010 MEC Resources Ltd (“MEC”) sold 3M shares in Advent Energy to BPH at 50c per share. MEC was issued 18.75M ordinary shares in BPH as consideration for this sale.

After Balance Date Events

On 18 July 2011 Advent entered into an agreement with its 100% owned subsidiary Onshore Energy Pty Ltd for the sale of its interest in Petroleum Exploration Permit EP386 and Retention Licence 1. Under the agreement Advent will transfer 100% of its interests in these permits to Onshore Energy in consideration for shares in Onshore Energy.

On 16 August 2011 the Company entered into a selective buyback agreement with BPH. BPH has agreed to buy back up to $1.35 million of MEC’s shareholding in the Company. The number of buy-back shares will be determined by dividing the total consideration by the 5-day volume weighted average closing price of shares prior to the date of the buy-back. The proposed buyback is subject to shareholder approval which is to be sought at an up and coming extraordinary general meeting of BPH.

On 19 August 2011 Advent repaid an amount of $1.8M in full and final settlement of its obligations under the secured loan agreement entered into with BPH on 15 June 2010.

ANNUAL REPORT 2011 11

Directors’ Report

Future Developments

The entity will continue to develop its investee portfolio projects including PEP11 and Advent Energy Ltd and will evaluate and invest in a range of resource projects.

Information on Directors

H Goh

Non-Executive Chairman – Age 56 Shares held in MEC– 5,085,598 Shares held in Advent – 3,000,000 Listed Options held – 4,725,144 Unlisted Options held MEC – nil

Mr Hock Goh was formerly President of Network and Infrastructure Solutions, a division of Schlumberger Limited, based in London with revenue in excess of US$1.5 billion. He had global responsibility of Schlumberger’s outsourcing services, security, business continuity and networked related business units.

Prior to that, Hock was President of Schlumberger Asia based in Beijing, China where he managed their Asian operations consisting of a broad range of services including oil field services, outsourcing, financial software and smartcards. Hock was responsible for US$800 million in revenue and more than 2,000 employees spread across 17 countries.

In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on the rigs in Roma, Queensland, Bass Strait in Victoria and the Northwest Shelf, offshore Western Australia.

Hock is also an operating partner with Baird Capital Partners, the U.S. based buyout fund of Baird Private Equity, providing change-of-control and growth capital to middle-market companies. Baird Private Equity has raised and managed $1.7 billion in capital.

Hock is the Chairman of Netgain Systems, a network monitoring software provider. He also serves on the Board of Xaloy Holdings, a US based steel components manufacturer for the plastic industry, as well as an independent director of THISS Technologies Pte Ltd, a Singapore based satellite communication provider. He received his B Eng (Hons) in Mechanical Engineering from Monash University, Australia. He also completed an Advanced Management Program at INSEAD/ France in 2004.

Hock is a Non Executive director of ASX listed company BPH Energy Limited.

D L Breeze

Executive Director – Age 57

Shares held MEC – 13,183,654 Listed Options – 7,608,228 Unlisted Options held in MEC – nil Unlisted Options held in Advent – 4,000,000

David is Chairman of Grandbridge Limited, a publicly listed investment and advisory company and BPH Energy Limited an ASX listed alternative investment business.

David has extensive experience in transaction structuring, corporate advisory and funding for listed and unlisted companies and has held executive, consulting and/or board positions across a range of stockbroking companies in Australia including Daiwa Securities, Eyres Reed McIntosh and BNZ North’s.

David has provided capital raising, valuation and corporate advisory services for a wide ranging group of resources companies including Independent Experts reports for asset valuation under the provisions of the Australian Securities Exchange Rules and Corporations Law. The advisory function included advice on corporate structure, ASX listing rules and the structuring and running of IPO’s. He has also published in the Australian Securities Industry Journal on resource valuation.

He holds a Bachelor of Economics and a Masters of Business Administration (MBA) and is a Fellow of the Securities Institute of Australia and a Fellow of the Institute of Company Directors of Australia.

12 ANNUAL REPORT 2011

K O Yap

Non-Executive Director – Age 49 Shares held MEC– 4,039,350 Listed options – 3,000,000 Unlisted Options held in MEC – nil

K.O Yap has over 16 years experience in investment banking. Prior to establishing Eton Advisory Services Ltd, K.O was Head of Corporate Finance at Daiwa Securities (H.K.) Ltd. and Executive Director at Alta Financial Group. His career took him from general audit, computer audit and corporate advisory with Ernst & Young in London to investment banking with Barclays de Zoete Wedd Asia Ltd. and then Daiwa Securities (H.K.) Ltd.

His extensive experience covers all aspects of corporate finance, advisory, M&A and capital raisings throughout Asia. These include privatisation, listing and public offerings from the PRC (Northeast Electric, H-Share), Malaysia (Petronas Gas), Thailand (PTTEP); equity-linked issues from HK (Emperor International) and Thailand (Bangkok Land) and debt issues including a samurai bond for Wharf (H.K.).

K.O also has extensive experience in mergers and acquisitions (and related restructurings) with transactional experience in Thailand, Indonesia, Malaysia, Hong Kong and China.

K.O a graduate from the London School of Economics, in 1984, is also a fellow of the Institute of Chartered Accountants in England and Wales.

C T Lim

Non-executive Director – Age 56

Shares held – 3,434,350 Listed options – 2,062,500 Unlisted Options held in MEC – nil

Mr Lim is a founder and director of Encus International Pte Ltd, a contract design and manufacturing company. Mr Lim was also the Chief Executive of Xpress Holdings Ltd during the period from 2001 to August 2005 and its Group Managing Director in 2000. He is currently an Executive Director of Manufacturing Integration Technology Ltd.

For 20 years Mr Lim was with the Singapore Economic Development Board and held various

positions with responsibilities for promoting and developing venture capital, mergers and acquisitions, engineering industries, local enterprises, skills training, automation and overseas investments.

Mr Lim is also involved with several listed and private companies in Singapore.

He is an Independent and Non-Executive Director on the boards of Metal Component Engineering Ltd, Valuetronics Holdings Ltd, Fastube Ltd and FibreChem Technologies Ltd, all of which are listed on the Singapore Exchange.

In the academic area, Mr Lim is a member of the Board of Governors of Nanyang Polytechnic in Singapore.

Mr Lim holds a Bachelor of Science (Honours) Degree in Mechanical Engineering from the University of Leeds and a Diploma in Business Administration from the National University of Singapore. In addition, Mr Lim attended the Program for Management Development at Harvard Business School.

Mr Lim is a Non Executive director of ASX listed company Grandbridge Limited.

D Ambrosini

Executive Director & Company Secretary – Age 37 Shares held – nil Listed options – nil Unlisted Options held in MEC – 800,000 Unlisted Options held in Advent – 500,000

Deborah is a chartered accountant with over 11 years’ experience in accounting and business development spanning the biotechnology, mining, IT communications and financial services sectors. She has extensive experience both nationally and internationally in financial and business planning, compliance and taxation.

Deborah is a member of the Institute of Chartered Accountants and was a state finalist in the 2009 Telstra Business Woman Awards. Deborah was also a recipient of the highly regarded 40 under 40 award held by the WA Business News.

Deborah is also a Director of ASX listed BPH Energy Ltd.

ANNUAL REPORT 2011 13

Directors’ Report

Remuneration Report

This report details the nature and amount of remuneration for each director of MEC Resources Ltd, and for the executives receiving the highest remuneration.

H Goh – Non-Executive Chairman D L Breeze - Executive Director K O Yap - Non-Executive Director C T Lim - Non-Executive Director D Ambrosini – Executive Director and Company Secretary

E H Tan – Non Executive Director of Advent

Remuneration Policy

The remuneration policy of MEC Resources Ltd has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives as determined by the board and/or shareholders. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the economic entity, as well as create goal congruence between directors, executives and shareholders.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is as follows:

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was approved by the board after seeking professional advice from independent external consultants.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives.
The Board reviews executive packages annually by reference to the economic entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

The performance of executives is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the economic entity’s profits and shareholders’ value. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in longterm growth in shareholder wealth.

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

The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration 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. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.

14 ANNUAL REPORT 2011

Compensation Practices

The board’s policy for determining the nature and amount of compensation of key management for the group is as follows:

The compensation structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the company. The contracts for service between the company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued to date of retirement. Key management personnel are paid six months of salary in the event of redundancy options not exercised before or on the date of termination do not lapse.

Employment contracts of directors

The employment conditions of the executive directors are formalised in contracts of employment. The directors are permanent employees of MEC Resources Ltd. The employment contracts stipulate a six month resignation period. The company may terminate an employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component together with a redundancy payment of six months of the individual’s fixed salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse.

The Board determines the proportion of fixed and variable compensation for each key management personnel.

Details of Remuneration for the year ended 30 June 2011

The remuneration for each director of the consolidated entity receiving the highest remuneration during the year was as follows:

2011

Key Management Person	Cash, Salary and Fees	Short-term Benefts Bonus Non-cash beneft	Short-term Benefts Bonus Non-cash beneft	Other	Post- employment Benefts Super- annuation
H Goh	100,000	-	-	-	-
D L Breeze	115,000	-	-	-	-
K O Yap	25,000	-	-	-	-
C T Lim	25,000	-	-	-	-
D Ambrosini	50,000	-	-	-	-
E H Tan	25,000	-	-	-	-

ANNUAL REPORT 2011

Directors’ Report

Details of Remuneration for the year ended 30 June 2011 (continued) 2011 (continued)

Key Management Person	Long- term Benefts Other	Share-based payment Shares Options	Share-based payment Shares Options	Total $	Performance Related %	Compensation relating to options %
H Goh	-	-	-	100,000	-	-
D L Breeze	-	-	356,800	471,800	-	76%
K O Yap	-	-	-	25,000	-	-
C T Lim	-	-	-	25,000	-	-
D Ambrosini	-	-	32,884	82,884	-	40%
E H Tan	-	-	-	25,000	-	-

2010

Key Management Person			Short-term Benefts		Post- employment Benefts
	Cash, Salary and Fees	Bonus Non-cash beneft		Other	Super- annuation
H Goh	85,000	-	-	-	-
S K Yap	8,333	-	-	-	-
D L Breeze	100,000	-	-	-	-
K O Yap	10,000	-	-	-	-
C T Lim	10,000	-	-	-	-
D Ambrosini	12,500	-	-	-	-
E H Tan	25,000	-	-	-	-

2010 (continued)

Key Management Person H Goh	Long-term Benefts Other -	Share-based payment Shares Options 15,000* -	Share-based payment Shares Options 15,000* -	Total $ 100,000	Performance Related % -	Compensation relating to options % -
S K Yap	-	-	-	8,333	-	-
D L Breeze	-	15,000*	-	115,000	-	-
K O Yap	-	15,000*	-	25,000	-	-
C T Lim	-	15,000*	-	25,000	-	-
D Ambrosini	-	-	8,444	20,944	-	40.31%
E H Tan	-	-	-	25,000	-	-

During the prior year, the directors decided to exercise their entitlement under Shareholder Share Purchase Plan completed in October 2010. Payment of shares was via a reduction of director fees payable.

The company has an agreement with Trandcorp Pty Ltd on normal commercial terms procuring the services of David Breeze. The agreement is at the rate of $65,000 per annum, commencing from the time of receiving listing approval. Board payments may be made up to a level of $250,000 per annum. Payments are to be made up to $25,000 per annum per director and $50,000 per annum for the Chairman.

16 ANNUAL REPORT 2011

The following share-based payment arrangements were in existence relating to directors remuneration.

Option Series	Company	Grant date	Expiry date	Grant date fair value	Vesting date	No. of Options
14/05/2008	Advent Energy	14/05/2008	28/12/2012	0.0319	28/12/2009	2,000,000
01/06/2008	MEC Resources	01/06/2008	30/06/2013	0.0304	01/06/2011	800,000
05/08/2010	Advent Energy	05/08/2010	05/08/2015	0.1784	05/08/2010	2,500,000

There are no further service or performance criteria that need to be met in relation to options granted.

The following grants of share based payment compensation to directors and senior management relate to the current financial year:

Name	Option Series	No. Granted	No. Vested	% of grant vested	% of grant forfeited	%of compensation for the year consisting of options
D Breeze	05/08/2010	2,000,000	2,000,000	100%	-	76%
D Ambrosini	05/08/2010	500,000	-	-	-	40%

The following table summarises the value of options granted, exercised or lapsed during the year to directors and senior management:

Name	Value of options granted at grant date (i)	Value of options exercised at the exercise date Value of options lapsed at the date of lapse
D Breeze	356,800	630,000(ii) Nil
D Ambrosini	32,884	Nil Nil

(i) The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian Accounting Standards.

(ii) On 1 December 2010 Mr David Breeze exercised 3M options at an exercise price of 20c per option. The option exercise price was fully paid and 3M ordinary shares were issued.

Company performance, shareholder wealth, and director and executive remuneration

The following table shows the gross revenue and the operating result for the last 5 years for the listed entity, as well as the share price at the end of the respective financial years. Analysis of the actual figures shows an increase in the operating loss in the current year. The Board is of the opinion that the increased loss is in line with expectations as MEC’s investee company, Advent Energy Ltd completed the drilling of the first well in Petroleum Exploration Permit 11.

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2007 2008 2009 2010 2011
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Revenue	105,971	1,067,694	108,306	309,685	670,522
Net Proft/Loss	(765,217)	(433,939)	(3,357,021)	(2,905,010)	(4,055,799)
Shareprice at Year end	$0.115	$0.115	$0.105	$0.385	$0.11
Earningsper share	($1.466)	($0.668)	($3.27)	($2.53)	($2.79)

End of remuneration report.

ANNUAL REPORT 2011 17

Directors’ Report

Meetings of Directors

During the financial year, two meetings of directors (including committees of directors) were held. Attendances by each director during the year were:

		Directors’ Meetings
	Number eligible	to attend Number attended
H Goh	2		2
D L Breeze	2		2
D Ambrosini	2		2
K O Yap	2		2
C T Lim	2		2

Indemnifying Officers or Auditors

During or since the end of the financial year the company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

The company has paid premiums to insure each of the following directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The amount of the premium was $20,410.

D Breeze
D Ambrosini
H Goh
K O Yap
C T Lim

The company has not indemnified the current or former auditor of the Company.

Options

At the date of this report, the unissued ordinary shares of MEC Resources Ltd under unlisted options are as follows:

MEC Resources

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

Grant Date Date of Expiry Exercise Price Number Under Option
----- End of picture text -----

01/06/2008	01/06/2013	$0.15	1,336,667
06/08/2008	06/08/2013	$0.15	833,333
05/08/2010	05/08/2015	$1.25	150,000
06/10/2010	06/10/2015	$1.25	250,000
06/10/2010	06/10/2015	$1.50	250,000
04/11/2010	04/11/2015	$1.25	100,000
21/01/2011	21/01/2016	$0.80	575,000
14/07/2011	14/07/2015	$0.35	1,000,000

18 ANNUAL REPORT 2011

Advent Energy

Grant Date	Date of Expiry	Exercise Price	Number Under Option
14/05/2008	28/12/2012	$0.06	2,000,000
01/06/2008	30/06/2012	$0.06	2,000,000
05/08/2010	05/08/2015	$2.00	3,500,000

Listed Options

MEC Resources Ltd

Grant Date	Date of Expiry	Exercise Price	Number Under Option
07/08/2008	04/07/2013	$0.20	48,954,570

During the year ended 30 June 2011, 8,786,666 ordinary shares of MEC Resources Ltd were issued on the exercise of options granted under the MEC Resources Ltd (2010: 1,683,334). No amounts are unpaid on any of the shares.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the 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.

Environmental Issues

The consolidated group’s operations are subject to significant environmental regulation under Commonwealth and State laws. Details of the consolidated group’s performance in relation to environmental regulation follow.

During the year the Advent (through wholly owned subsidiary Asset Energy) applied for and was granted the approval to drill the first ever petroleum exploration well in the offshore Sydney Basin, New Seaclem-1. An environmental plan was submitted to NSW Industry & Investment (NSW I&I) as a component of the application to drill. Advent also referred the drilling activities under the Environment Protection and Biodiversity Conservation Act (EPBC Act) to the Commonwealth Department of Sustainability, Environment, Water, Population and Communities (DSEWPC, formerly the Department of Environment, Water, Heritage and Arts) for consideration in relation to matters of national environmental significance. Advent’s drilling application was approved by NSW I&I, and its EPBC Act referral was described as ‘not a controlled action subject to a particular manner’ by DSEWPC. The Vertical Seismic Profiling (VSP) performed during wireline logging activities at New Seaclem-1 were monitored and assisted by an independent environmental consulting group, complied with the EPBC Act’s EPBC Act Policy Statement 2.1 – Interaction between offshore seismic exploration and whales (Part A – Standard Management Procedures) and was successfully completed during the drilling activity without any environmental issues. The drilling of New Seaclem-1 concluded without incident and on schedule, confirming Advent’s capacity to conduct and manage an offshore activity in a potentially sensitive environment successfully.

Advent has commenced preparation of an environmental management plan as a component of its applications to re-enter Vienta-1 and Waggon Creek-1 within EP386 in the 2011 dry season for the purposes of performing production testing on these gas discovery wells.

ANNUAL REPORT 2011 19

Directors’ Report

Non-audit Services

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

all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2011. (2010: Nil).

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 21.

The directors’ report is signed in accordance with a resolution of directors made pursuant to S298(2) of the Corporations Act 2001 .

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David Breeze Director

Dated this 25th Day of August 2011

20 ANNUAL REPORT 2011

Auditor’s Independence Declaration

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Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX: 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au

The Board of Directors MEC Resources Limited 14 View Street NORTH PERTH WA 6006

25 August 2011

Dear Board Members

In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of MEC Resources Limited.

As lead audit partner for the audit of the financial statements of MEC Resources Limited for the financial year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff

Partner

Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu

ANNUAL REPORT 2011

Corporate Governance Statement

The Board of Directors of MEC Resources Limited (“MEC or “the Company”) is responsible for the corporate governance of the economic entity. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

To ensure that the Board is well equipped to discharge its responsibilities, it has established guidelines and accountability as the basis for the administration of corporate governance.

Corporate Governance Disclosures

MEC and the board are committed to achieving and demonstrating the highest standards of corporate governance. The board continues to review the framework and practices to ensure they meet the interests of shareholders. The company and its controlled entities together are referred to as the Group in this statement.

Remuneration and Nomination Committees

The Company does not have a formal Remuneration or Nomination Committees. The full Board attends to the matters normally attended to by a Remuneration Committee and a Nomination committee. Remuneration levels are set by the Company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives.

Audit Committee

The Company does not have a formal Audit Committee. The full Board carried out the functions of an Audit Committee. Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors believe that at the moment there would be no additional benefits obtained by establishing such a committee. The Board follows the Audit Committee Charter, a copy of which is available on request.

Composition of the Board

The composition of the Board is determined in accordance with the following principles and guidelines:

the Board should comprise a majority or at least 50% of the Board will be independent non-executive directors;
the Board should comprise of at least one director with an appropriate range of qualifications and expertise; and
the Board shall meet at regular intervals and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the service of a new director with particular skills, the Board selects a candidate or panel of candidates with the appropriate expertise.

Board Responsibilities

As the Board acts on behalf of and is accountable to the shareholders, it seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.

The responsibility for the operation and administration of the economic entity is delegated by the Board to the Managing Director. The Board ensures that the Managing Director is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants.

The Board then appoints the most suitable candidate, who must stand for election at the next general meeting of shareholders. The Company does not have a formal Nomination Committee.

22 ANNUAL REPORT 2011

The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved, including the following:

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and Board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

Monitoring of the Board’s Performance

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is to be reviewed annually by the chairperson. Directors whose performance is unsatisfactory are asked to retire.

Best Practice Recommendation

Outlined below are the 8 Essential Corporate Governance Principles as outlined by the ASX and the Corporate Governance Council. The Company has complied with the Corporate Governance Best Practice Recommendations except as identified below.

Action taken and reasons if not adopted

Principle 1: Lay solid foundations for management and oversight

The relationship between the board and senior management is critical to the Group’s long-term success. The directors are responsible to the shareholders for the performance of the Group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

The responsibilities of the board include:

providing strategic guidance to the Group including contributing to the development of and approving
the corporate strategy;
reviewing and approving business plans, and financial plans including major capital expenditure initiatives;
overseeing and monitoring:
organisational performance and the achievement of the Group’s strategic goals and objectives and
progress of major capital expenditures and other significant corporate projects including any acquisitions or divestments
monitoring financial performance including approval of the annual and half-year financial reports;
appointment, performance assessment and, if necessary, removal of the Managing Director;
ratifying the appointment and/or removal and contributing to the performance assessment for the members of the senior management team including the CFO and the Company Secretary;
ensuring there are effective management processes in place and approving major corporate initiatives;
enhancing and protecting the reputation of the organization;
overseeing the operation of the Group’s system for compliance and risk management reporting to shareholders;

Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the board to the Managing Director and senior executives.

ANNUAL REPORT 2011

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 2: Structure the board to add value

The board operates in accordance with the broad principles set out in its charter. The charter details the board’s composition and responsibilities.

The board seeks to ensure that :

at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Group and directors with an external or fresh perspective; and
the size of the board is conducive to effective discussion and efficient decision-making.

Directors’ independence

The board has adopted specific principles in relation to directors’ independence. These state that when determining independence, a director must be a non-executive and the board should consider whether the director:

is a substantial shareholder of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company;
is or has been employed in an executive capacity by the company or any other Group member within three years before commencing to serve on the board;
within the last three years has been a principal of a material professional adviser or a material consultant to the company or any other Group member, or an employee materially associated with the service provided;
has a material contractual relationship with the company or a controlled entity other than as a director of the Group;
is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s independent exercise of their judgement.

Materiality for these purposes is determined on both quantitative and qualitative bases. A transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the director’s performance.

The board assesses independence each year. To enable this process, the directors must provide all information that may be relevant to the assessment.

Board members

Details of the members of the board, their experience, expertise, qualifications, term of office, relationships affecting their independence and their independent status are set out in the directors’ report under the heading ‘’Information on directors’’. At the date of signing the directors’ report, there are three non-executive directors and two executive directors, four of whom have no relationships adversely affecting independence and so are deemed independent under the principles set out above.

Mr Breeze has business dealings with the Group as disclosed in note 23 to the financial report. However, these are not of a value or significance that adversely affects the directors’ independence.

24 ANNUAL REPORT 2011

Action taken and reasons if not adopted

Term of office

The company’s Constitution specifies that all non-executive directors must retire from office no later than the third annual general meeting (AGM) following their last election. Where eligible, a director may stand for re-election, subject to the following limitations:

on attaining the age of 72 years a director will retire, by agreement, at the next AGM and will not seek re-election.

Chair and Managing Director

The Chair is responsible for leading the board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating board discussions and managing the board’s relationship with the company’s senior executives. In accepting the position, the Chair has acknowledged that it will require a significant time commitment and has confirmed that other positions will not hinder his effective performance in the role of Chair.

The Managing Director is responsible for implementing Group strategies and policies.

Committees

The number of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2011, and the number of meetings attended by each director is disclosed on page 18.

It is the company’s practice to allow its executive directors to accept appointments outside the company. No appointments of this nature were accepted during the year ended 30 June 2011.

The Company is not of a size at the moment that justifies having a separate Nomination Committee. However, matters typically dealt with by such a committee are dealt with by the Board.

Notices of meetings for the election of directors comply with the ASX Corporate Governance Council’s best practice recommendations.

Principle 3: Promote ethical and responsible decision making

The company has developed a statement of values a which has been fully endorsed by the board and applies to all directors and employees. The Statement is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to take into account legal obligations and reasonable expectations of the company’s stakeholders.

The Statement requires that at all times all company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and company policies.

The purchase and sale of company securities by directors and employees is monitored by the Board.

ANNUAL REPORT 2011 25

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 4: Safeguard integrity in financial reporting

Adopted except as follows:-

The Company does not have a separate Audit Committee. The full Board carries out the functions of an Audit Committee. The Board has the authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors at the moment can see no additional benefits to be obtained by establishing such a committee.

The Board follows the Audit Committee Charter, a copy of which is available on request.

The Company is not of a size at the moment that justifies having a internal audit division.

External auditors

The Board’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. Deloitte was appointed as the external auditor in 2010. It is Deloitte’s policy to rotate audit engagement partners on listed companies at least every five years. A partner should not be re-assigned to a listed entity audit engagement if this equates to the partner serving in this role for more than 5 out of 7 successive years.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors’ report and in note 4 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Board.

The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Principle 5&6: Make timely and balanced disclosures and respect the rights of shareholders

Continuous disclosure and shareholder communication

The company has policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the company’s securities. These policies and procedures also include the arrangements the company has in place to promote communication with shareholders and encourage effective participation at general meetings.

The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

26 ANNUAL REPORT 2011

Action taken and reasons if not adopted

All information disclosed to the ASX is posted on the company’s website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released to the ASX and posted on the company’s web site. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately released to the market.

All shareholders receive a copy of the company’s annual (full or concise) and half-yearly reports. In addition, the company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all company announcements, media briefings, details of company meetings, and financial reports available on the company’s website.

Principle 7: Recognise and manage risk

The board and senior executives are responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. In summary, the company policies are designed to ensure strategic, operational, legal, reputational and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Group’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. The board actively promotes a culture of quality and integrity.

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and Board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

Control procedures cover management accounting, financial reporting, project appraisal, IT security, compliance and other risk management issues. The Managing Director is required to ensure that appropriate controls are in place to effectively manage the identified risks. This is monitored by the board on a monthly basis.

ANNUAL REPORT 2011 27

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 7: Recognise and manage risk (continued)

The environment

Information on compliance with significant environmental regulations is set out in the directors’ report.

Corporate reporting

The Managing Director and CFO have made the following certifications to the board:

that the company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the company and Group and are in accordance with relevant accounting standards;
that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board and that the company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects in relation to financial reporting risks.

Principle 8: Remunerate fairly and responsibly

The Company is not of a size at the moment that justifies having a separate Remuneration Committee. However, matters typically dealt with by such a committee are dealt with by the board.

The board makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors.

Each member of the senior executive team signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description.

Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the directors’ report under the heading ‘’Remuneration report’’. In accordance with Group policy, participants in equity-based remuneration plans are not permitted to enter into any transactions that would limit the economic risk of options or other unvested entitlements.

The board with the Chief Executive Office also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programmes and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.

28 ANNUAL REPORT 2011

Statement of Comprehensive Income

for the year ended 30 June 2011

Note Revenue 2 Other gains and losses 2 Other Income 2 Administration expenses Consulting and Legal expenses Depreciation and amortisation expense Share of gains and losses in associate Employee expenses 3 Insurance expenses Interest expenses Data Centre administration Service Fees Travelling expenses Other expenses Operating Loss Before Income Tax Income tax expense 8 Operating Loss for the year Other Comprehensive Income Total Comprehensive income for the period Loss attributable to non-controlling interest Loss attributable to owners of the company Total Comprehensive income attributable to non-controlling interest Total Comprehensive Income attributable to the owners of the Company Earnings Per Share – Basic and diluted earnings per share (cents per share) 6	Consolidated 2011 $ 2010 $
	670,522 309,685 (3,175,465) 154,724 13,073 - (396,740) (364,868) (2,400,263) (1,860,104) (2,625) (3,518) (43,535) - (1,121,173) (559,706) (49,883) (33,587) (178,801) - (21,065) (17,667) (347,040) (347,040) (343,297) (182,813) (609,245) (324,649)
	(8,005,537) (3,538,991) - -
	(8,005,537) (3,538,991) - -
	(8,005,537) (3,538,991)
	(3,949,738) (633,981)
	(4,055,799) (2,905,010)
	(3,949,738) (641,479)
	(4,055,799) (2,905,010)
	(2.79) (2.53)

The accompanying notes form part of these financial statements

ANNUAL REPORT 2011 29

Statement of Financial Position

as at 30 June 2011

Note Current Assets Cash and cash equivalents 7 Trade and other receivables 9 Financial assets 12 Other current assets 10 Total Current Assets Non-Current Assets Other non-current assets 10 Evaluation and exploration expenditure 11 Financial assets 12 Investments in associates 28 Property, plant & equipment 13 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 14 Provisions 15 Financial liabilities 16 Total Current Liabilities Non-Current Liabilities Provisions 15 Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 17 Option Reserve 18 Accumulated losses Total Equity Attributable to Owners Non-controlling Interest Total Equity	Consolidated 2011 $ 2010 $
	12,415,165 17,360,848 277,971 406,618 40,698 1,241,199 18,435 903,106
	12,752,269 19,911,771
	22,673 22,673 29,505,867 5,209,226 477,542 2,158,475 9,673,230 - 4,165 5,163
	39,683,477 7,395,537
	52,435,746 27,307,308
	3,972,732 2,924,245 106,103 102,298 2,219,050 369,086
	6,297,885 3,395,629
	4,242 -
	4,242 -
	6,302,127 3,395,629

	46,133,619 23,911,679
	24,920,661 11,808,203 262,690 293,107 (10,476,815) (7,582,991)
	14,706,536 4,518,319 31,427,083 19,393,360
	46,133,619 23,911,679

The accompanying notes form part of these financial statements.

30 ANNUAL REPORT 2011

Statement of Changes in Equity

for the year ended 30 June 2011

Balance at 1 July 2009 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Shares issued during the fnancial year Issue of shares by subsidiary Capital raising costs Share based payments Balance at 30 June 2010 Balance at 1 July 2010 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Shares issued during the fnancial year Issue of shares by subsidiary Options exercised during the fnancial period Options issued during the fnancial period Capital raising costs Balance at 30 June 2011	Ordinary Share Capital $ Accumu- lated losses $ Option Reserve $ Total attributable to owners $ Non- controlling Interest $ Total $
	8,412,535 (4,677,981) 219,953 3,954,507 186,423 4,140,930 - (2,905,010) - (2,905,010) (633,981) (3,538,991) - - - - - -
	- (2,905,010) - (2,905,010) (633,981) (3,538,991) 3,395,668 - - 3,395,668 - 3,395,668 - - - - 20,429,623 20,429,623 - - - - (588,705) (588,705) - - 73,154 73,154 - 73,154
	11,808,203 (7,582,991) 293,107 4,518,319 19,393,360 23,911,679
	11,808,203 (7,582,991) 293,107 4,518,319 19,393,360 23,911,679 - (4,055,799) - (4,055,799) (3,949,738) (8,005,537) - - - - - -
	- (4,055,799) - (4,055,799) (3,949,738) (8,005,537) 10,984,714 - - 10,984,714 - 10,984,714 - 1,161,975 (148,123) 1,013,852 15,519,481 16,533,333 2,434,744 - - 2,434,744 - 2,434,744 - - 117,706 117,706 463,980 581,686 (307,000) - - (307,000) - (307,000)
	24,920,661 (10,476,815) 262,690 14,706,536 31,427,083 46,133,619

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2011 31

Cash Flow Statement

for the year ended 30 June 2011

Note *Cash Flows From Operating Activities* Receipts from customers Payments to suppliers and employees Payment for deferred exploration expenditure Interest received Net cash used in operating activities 19 Cash Flows From Investing Activities Amounts repaid by/ (loaned to) other entities Payment for investments Payment for property, plant and equipment Payment for deferred expenditure – (net of reimbursements) Net cash used in investing activities *Cash Flows From Financing Activities* Proceeds from capital raising – (net of share issue costs) Proceeds from/(repayment of) borrowings Net cash provided by fnancing activities Net increase (decrease) in Cash Held Cash At the Beginning Of The Financial Year *Cash At The End Of The Financial Year* 7	Consolidated 2011 $ 2010 $
	140,053 - (5,281,619) (1,150,933) - (7,138) 672,191 309,685
	(4,469,375) (848,386)
	3,995,279 (300,012) (6,632,135) (2,612,532) (1,627) (4,304) (23,443,251) (3,437,942)
	(26,081,734) (6,354,790)
	25,605,426 23,083,395 - -
	25,605,426 23,083,395
	(4,945,683) 15,880,219 17,360,848 1,480,629
	12,415,165 17,360,848

The accompanying notes form part of these financial statements.

32 ANNUAL REPORT 2011

Notes to the Financial Statements

for the year ended 30 June 2011

1. Statement of Significant Accounting Policies

Corporate Information

The financial report includes the consolidated financial statements and the notes of MEC Resources Ltd and its controlled entities (‘Consolidated Group’ or ‘Group’).

MEC Resources Ltd is a public listed company on the ASX, which is incorporated and domiciled in Australia.

The financial report was authorised for issue on 25th August 2011 by the board of directors.

Basis of Preparation

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

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

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

Compliance with IFRS

The consolidated financial statements of the MEC Resources Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity MEC Resources Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 24 to the financial statements. All controlled entities have a June financial year-end.

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

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

ANNUAL REPORT 2011 33

Notes to the Financial Statements

for the year ended 30 June 2011

1. Statement of Significant Accounting Policies (continued)

Accounting Policies

(a) Principles of Consolidation

Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of changes in equity and statement of financial position respectively.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

(b) Business Combinations

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

The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Acquisition-related costs are recognised in profit or loss as incurred.

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

(c) Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

34 ANNUAL REPORT 2011

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in the statement of comprehensive income except where it relates to items that may be recognised directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences or unused tax losses and tax credits can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value 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 flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives 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.

Class of Fixed Asset Depreciation Rate Plant and equipment 33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

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 income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

ANNUAL REPORT 2011 35

for the year ended 30 June 2011

Notes to the Financial Statements

1. Statement of Significant Accounting Policies (continued)

Accounting Policies (continued)

(e) Exploration and Development Expenditure

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

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

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

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

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

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

(f) Financial Instruments

Recognition and Initial Measurement

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

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

Derecognition

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

36 ANNUAL REPORT 2011

Classification and Subsequent Measurement

(i) Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit and loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in statement of comprehensive income in the period in which they arise.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories.

The Group also has investments in unlisted shares that are not traded in an active market but that are also classified as AFS financial assets and stated at fair value (because the directors consider that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss.

(v) Financial Liabilities

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

Fair value

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

Impairment

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

ANNUAL REPORT 2011 37

Notes to the Financial Statements

for the year ended 30 June 2011

1. Statement of Significant Accounting Policies (continued)

Accounting Policies (continued)

(g) Derivatives

Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of comprehensive income immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the statement of comprehensive income depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset; a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities

(h) Impairment of Assets

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

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

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.

(i) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other shortterm highly liquid investments, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

(j) Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of a service is recognised by reference to the stage of completion of the contract.

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

38 ANNUAL REPORT 2011

(k) Goods and Services Tax (GST)

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

Receivables and payables in the statement of financial position are shown inclusive of GST.

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

(l) Trade and other payables

Liabilities are recognized for amounts to be paid in the future for goods or services received, whether or not billed to the consolidated entity. The amounts are unsecured and are usually paid within 30 days.

(m) Share based payments

Share based compensation benefits are provided to employees via the Company’s Employee Option plan.

The fair value of options granted under the Company’s Employee Option Plan is recognized as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognized over the period during which the employees become unconditionally entitled to the options.

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

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimate of the number of options that are expected to vest. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

(n) Earnings per share

Basic earnings per share (EPS) is calculated as net profit/loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

ANNUAL REPORT 2011 39

Notes to the Financial Statements

for the year ended 30 June 2011

1. Statement of Significant Accounting Policies (continued)

Accounting Policies (continued)

(o) Foreign Currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

(p) Comparative Figures

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

Critical Accounting Estimates and Judgments

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

(q) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to statement of financial position. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Critical Accounting Estimates and Judgements

Key Judgments —Impairment of capitalised and carried forward exploration expenditure

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at statement of financial position date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, refer to the accounting policy stated in note 1(e).

Key Judgments —Impairment of financial assets

No impairment has been recognised in respect of the Company’s carrying value of its investments in its subsidiaries Advent Energy Ltd and Asset Energy Pty Ltd. After a review of the carrying values, the directors believe that the full amount of these investments is recoverable through the projected activities of each entity and no provision for impairment has been made as at 30 June 2011.

40 ANNUAL REPORT 2011

2. Revenue Revenue Interest revenue : other entities Consulting income Total revenue *Other Income and gains and losses* Net gain/loss on fnancial assets designated as fair value through proft and loss Gain/Loss on Sale of Investments Net Fair Value Gains on Foreign currency derivative Other income 3. Loss For The Year Expenses Employee Expenses Salary Superannuation expense Share-based payments Other payroll expenses 4. Auditors’ Remuneration Remuneration of the auditor of the parent entity for: Deloitte Touche Tohmatsu PKF Remuneration of other auditors of subsidiaries for: - auditing or reviewing the fnancial report of subsidiaries Deloitte Touche Tohmatsu	Consolidated 2011 $ 2010 $
	540,522 255,218 130,000 54,467
	670,522 309,685
	(96,303) (1,268,875) - (2,195) (3,079,162) 1,116,346
	(3,175,465) 154,724 13,073 -
	3,162,392 154,724
	507,698 457,057 20,954 18,450 588,716 83,872 3,805 327
	1,121,173 559,706
	37,368 13,500 - 18,970 7,500 8,000
	44,868 40,470

ANNUAL REPORT 2011 41

Notes to the Financial Statements

for the year ended 30 June 2011

Consolidated	Consolidated
2011	2010
$	$

5. Key Management Personnel Compensation

(a) Names and positions held of economic and parent entity key management personnel in office at any time during the financial year are:

Key Management Personnel

H Goh – Non-Executive Chairman D L Breeze - Executive Director K O Yap - Non-Executive Director C T Lim - Non-Executive Director D Ambrosini – Executive Director E H Tan – Non-Executive Director of Advent Short term employee benefits 340,000 250,833 Share based payments 389,684 68,444 729,684 319,277

Key management personnel remuneration is disclosed in the remuneration report included in the directors report. Key management personnel shareholdings and option holdings are show below:

Options and Rights Holdings

2011 Number of Listed Options Held by Key Management Personnel

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	-able
	1.7.2010	sation	Exercised	Other	30.6.2011	30.6.2011	30.6.2011	30.6.2011
H Goh	4,725,144	-	-	-	4,725,144	4,725,144	4,725,144	-
D Breeze	7,608,228	-	-	-	7,608,228	7,608,228	7,608,228	-
K O Yap	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
C T Lim	2,062,500	-	-	-	2,062,500	2,062,500	2,062,500	-
D Ambrosini	-	-	-	-	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

2010 Number of Listed Options Held by Key Management Personnel

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	-able
	1.7.2009	sation	Exercised	Other	30.6.2010	30.6.2010	30.6.2010	30.6.2010
H Goh	4,725,144	-	-	-	4,725,144	4,725,144	4,725,144	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	7,608,228	-	-	-	7,608,228	7,608,228	7,608,228	-
K O Yap	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
C T Lim	2,062,500	-	-	-	2,062,500	2,062,500	2,062,500	-
D Ambrosini	13,635	-	-	(13,635)	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

42 ANNUAL REPORT 2011

2011 Number of Unlisted Options Held by Key Management Personnel

MEC Resources Ltd

		Granted					Total	Total
		as		Net		Total	Vested and	Unexercis-
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	able
	1.7.2010	sation	Exercised	Other	30.6.2011	30.6.2011	30.6.2011	30.6.2011
H Goh	-	-	-	-	-	-	-	-
D Breeze	3,000,000	-	(3,000,000)	-	-	-	-	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	800,000	-	-	-	800,000	800,000	800,000	-
E H Tan	-	-	-	-	-	-	-	-

2010 Number of Unlisted Options Held by Key Management Personnel

MEC Resources Ltd

		Granted						Total
		as				Total	Total	Unexercis-
	Balance	Compen-	Options	Net Change	Balance	Vested	Exercisable	able
	1.7.2009	sation	Exercised	Other	30.6.2010	30.6.2010	30.6.2010	30.6.2010
H Goh	-	-	-	-	-	-	-	-
S K Yap	3,000,000	-	-	(3,000,000)*	-	-	-	-
D Breeze	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	1,000,000	-	(200,000)	-	800,000	466,667	466,667	333,333
E H Tan	-	-	-	-	-	-	-	-

*relates to resignation of Director.

2011 Number of Unlisted Options Held by Key Management Personnel

Advent Energy Ltd

							Total	Total
	Balance	Granted as		Net		Total	Vested and	Unexercis-
		Compen-	Options	Change	Balance	Vested	Exercisable	able
	1.7.2010	sation	Exercised	Other	30.6.2011	30.6.2011	30.6.2011	30.6.2011
H Goh	-	-	-	-	-	-	-	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	2,000,000	2,000,000	-	-	4,000,000	4,000,000	4,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	-	500,000	-	-	500,000	-	-	500,000
E H Tan	-	-	-	-	-	-	-	-

ANNUAL REPORT 2011 43

Notes to the Financial Statements

for the year ended 30 June 2011

5. Key Management Personnel Compensation (continued)

2010 Number of Unlisted Options Held by Key Management Personnel Advent Energy Ltd

								Total
		Granted as		Net			Total	Unexercis-
	Balance	Compen-	Options	Change	Balance	Total Vested	Exercisable	able
	1.7.2009	sation	Exercised	Other	30.6.2010	30.6.2010	30.6.2010	30.6.2010
H Goh	-	-	-	-	-	-	-	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	2,000,000	-	-	-	2,000,000	2,000,000	2,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	-	-	-	-	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

Shareholdings - MEC Resources

Number of Shares Held by Key Management Personnel 2011

2011
	Balance	Received as	Options	Net Change	Balance
	1.7.2010	Compensation	Exercised	Other	30.6.2011
H Goh	5,135,498	-	-	(50,000)	5,085,498
D L Breeze	10,183,654	-	3,000,000	-	13,183,654
K O Yap	4,039,350	-	-	-	4,039,350
C T Lim	3,434,350	-	-	-	3,434,350
D Ambrosini	-	-	-	-	-
E H Tan	-	-	-	-	-

2010

2010
	Balance	Received as	Options	Net Change	Balance
	1.7.2009	Compensation	Exercised	Other	30.6.2010
H Goh	5,300,192	39,350	-	(204,044)	5,135,498
D L Breeze	10,144,304	39,350	-	-	10,183,654
SK Yap	2,382,250	-	-	(2,382,250)*	-
K O Yap	4,000,000	39,350	-	-	4,039,350
C T Lim	3,395,000	39,350	-	-	3,434,350
D Ambrosini	18,180	-	-	(18,180)	-
E H Tan	-	-	-	-	-

44 ANNUAL REPORT 2011

Shareholdings - Advent Energy

Number of Shares Held by Key Management Personnel

2011
	Balance	Received as	Options	Net Change	Balance
	1.7.2010	Compensation	Exercised	Other	30.6.2011
H Goh	3,000,000	-	-	-	3,000,000
D L Breeze	-	-	-	-	-
K O Yap	-	-	-	-	-
C T Lim	-	-	-	-	-
D Ambrosini	-	-	-	-	-
E H Tan	2,000,000	-	-	-	2,000,000
2010
	Balance	Received as	Options	Net Change	Balance
	1.7.2009	Compensation	Exercised	Other	30.6.2010
H Goh	3,000,000	-	-	-	3,000,000
D L Breeze	-	-	-	-	-
S K Yap	2,000,000	-	-	(2,000,000)*	-
K O Yap	-	-	-	-	-
C T Lim	-	-	-	-	-
D Ambrosini	-	-	-	-	-
E H Tan	2,000,000	-	-	-	2,000,000

*relates to resignation of director

6. Earnings per share

(a) Reconciliation of Earnings to Proft or Loss Net loss attributable to members of the parent Earnings used to calculate basic and diluted EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic and diluted EPS The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these options will result in a decreased net loss per share.	Consolidated 2011 $ 2010 $
	(4,055,799) (2,905,010)
	(4,055,799) (2,905,010)
	145,417,709 118,840,077

7. Cash and cash equivalents

Cash at bank and in hand 12,415,165 17,360,848

Reconciliation of cash

Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows: Cash and cash equivalents 12,415,165 17,360,848

ANNUAL REPORT 2011 45

Notes to the Financial Statements

for the year ended 30 June 2011

8. Income Tax Expense (a) The components of tax expense comprise: Current tax Deferred tax The expense for the year can be reconciled to accounting loss as follows: Loss from continuing operations Prima facie tax payable on proft from ordinary activities before income tax at 30% (2010: 30%) Non deductible expenses Difference in tax rates of parent which is taxed at 25% (due to pooled development fund status) Unused tax losses not recognised as deferred tax assets Weighted average rate of tax (b) The following deferred tax balances at 30% (2010: 30%) have not been recognised Deferred Tax Assets: Temporary differences Carry forward revenue losses The tax benefts of the above Deferred Tax Assets will only be obtained if: (i) company derives future assessable income in a nature and of an amount suffcient to enable the benefts to be utilised; (ii) the company continues to comply with the conditions for deductibility imposed by law; and (iii) no changes in income tax legislation adversely affect the company in utilising the benefts. (c) Unrecognised deferred liabilities Fair value movement in investments Exploration Expenditure The above Deferred Tax Liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the Deferred Tax Asset has not been recognised.	Consolidated 2011 $ 2010 $
	- - - - (8,005,537) (3,538,991) (2,401,661) (1,061,697) 59,153 52,822 40,789 48,603 2,301,719 960,273
	- -
	-% -% 313,944 571,872 5,522,576 2,551,984 123,586 523,478 8,858,474 1,569,569

46 ANNUAL REPORT 2011

9. Trade and other receivables CURRENT Trade receivables Net GST receivables Ageing of past due but not impaired 60-90 days 90-120 days 120 days and over Total 10. Other Assets Current Prepaid expenses Prepaid deposit Non Current Other Assets Total Other Assets 11. Capitalised Exploration Costs Exploration expenditure capitalised Exploration and evaluation phases Reconciliation of movement during the year Opening balance at 1 July Capitalised expenditure – EP325 Capitalised expenditure – PEP11 Capitalised expenditure – EP386 Less reimbursements – PEP11 Balance at 30 June	Consolidated 2011 $ 2010 $
	105,007 59,960 172,964 346,658
	277,971 406,618
	- 37,453 - - 105,007 22,507
	105,007 59,960
	18,435 49,712 - 853,392
	18,435 903,106
	22,673 22,673
	22,673 22,673
	29,505,867 5,209,226
	29,505,867 5,209,226
	5,209,226 2,617,507 4,564 8,383 26,320,220 2,583,336 131,857 - (2,160,000) -
	29,505,867 5,209,226

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of natural gas.

Capitalised costs amounting to $nil (2010:$nil) have been included in cash flows from operating activities in the statement of cashflows.

ANNUAL REPORT 2011 47

Notes to the Financial Statements

for the year ended 30 June 2011

Financial Assets Current Derivative fnancial instruments - forward exchange contracts (a) Loan receivable Total Loans receivable Loan to Grandbridge Limited Non current Fair Value through Proft and Loss Financial Assets Investment in Central Petroleum Ltd Investment in BPH Energy Ltd Available for sale fnancial assets Investment in Molecular Discovery Systems Ltd	Consolidated 2011 $ 2010 $
	- 1,116,346 40,698 124,853
	40,698 1,241,199
	40,698 124,853 407,631 503,934 - 1,584,630 69,911 69,911
	477,542 2,158,475

12. Financial Assets

The loan to Grandbridge Limited is unsecured non-interest bearing and repayable on demand.

(a) Instruments used by the group

The group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates in accordance with the group’s financial risk management policies.

Forward exchange contracts - held for trading

The group has entered into forward exchange contracts which are economic hedges but do not satisfy the requirements for hedge accounting. Refer to note 1 for the accounting policies of these contracts.

13. Property, Plant and Equipment

Plant and Equipment: At cost Accumulated depreciation Total Property, Plant and Equipment	15,882 14,255 (11,717) (9,092)
	4,165 5,163

Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year.

48 ANNUAL REPORT 2011

Consolidated Entity: Balance at the beginning of the year Additions Disposals Depreciation expense Carrying amount at the end of the year 14. Trade and other payables Trade payables Sundry payables and accrued expenses 15. Provisions Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June Share sale agreement Opening balance at 1 July Increase in provision Balance at 30 June Total Provisions Provision for Employee Entitlements A provision has been recognised for employee entitlements relating to annual leave and long service leave. The measurement and recognition criteria relating to employee benefts has been included in Note 1 to this report. Provision for Share Sale Agreement A provision has been recognised for the payment of fees to relevant parties upon the successful listing of Advent Energy Ltd. Non Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June	Consolidated 2011 $ 2010 $
	5,163 4,378 1,627 4,303 - - (2,625) (3,518)
	4,165 5,163
	2,998,630 1,994,529 974,102 929,716
	3,972,232 2,924,245
	20,454 20,127 3,806 327
	24,260 20,454 81,843 81,843 - -
	81,843 81,843
	106,103 102,298
	- - 4,242 -
	4,242 -

ANNUAL REPORT 2011 49

Notes to the Financial Statements

for the year ended 30 June 2011

16. Financial Liabilities Loans payable Loan from BPH Energy Limited (ii) Loan from Grandbridge Limited (i) Loans from other entities (i)	Consolidated 2011 $ 2010 $
	2,219,050 369,086
	1,822,916 - 394,776 356,986 1,358 12,100
	2,219,050 369,086

(i) Loans payable are unsecured, non-interest bearing and repayable on demand.

(ii) The Loan from BPH Energy Ltd is secured by a fixed and floating charge over Advent Energy’s present and future undertakings, assets and rights.

17. Issued Capital 155,803,150 (2010: 118,149,377) fully paid ordinary shares Less: Capital raising costs Issued Capital The Company does not have an authorized capital and issued shares have no par value. Ordinary Shares At the beginning of reporting period Issued 14 October 2010 as part of MEC Resources entitlement issue Placement to sophisticated investor on 8 October 2010 Payment for consultancy services Placement to sophisticated investor on 15 September 2010 Shares issued during the year on conversion of options Capital raising costs incurred At reporting date	2011 2010	25,950,810 12,541,352 (1,030,149) (733,149)
		24,920,661 11,808,203
		2011 2010
	$ $ 11,808,203 8,412,535 6,017,881 - 275,000 - 191,833 2,908,000 4,500,000 - 2,434,744 487,668 (307,000) -	No No 118,149,377 105,897,963 12,035,762 - 500,000 - 488,491 7,770,769 12,857,143 - 11,772,377 4,480,645 - -
	24,920,661 11,808,203	155,803,150 118,149,377

Fully Paid Ordinary Share Capital

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

50 ANNUAL REPORT 2011

(a) Options

There were 11,005,000 unlisted employee options on issue at the end of the year: Advent Energy

Advent Energy
Total number	Exercise price	Expiry date
2,000,000	$0.06	30 June 2012
2,000,000	$0.06	28 December 2012
3,500,000	$2.00	05 August 2015
7,500,000
MEC Resources
1,346,667	$0.15	01 June 2013
833,333	$0.15	06 August 2013
150,000	$1.25	05 August 2015
250,000	$1.25	06 October 2015
250,000	$1.50	06 October 2015
100,000	$1.25	04 November 2015
575,000	$0.80	21 January 2016
3,505,000

There were 48,954,570 listed options on issue at the end of the year: MEC Resources

MEC Resources
Total number	Exercise price	Expiry date
48,954,570	$0.20	04 July 2013
48,954,570

The market price of the company’s ordinary shares at 30 June 2011 was 11 cents.

The holders of options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme.

(b) Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders.

The focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group and the parent entity at 30 June 2011 and 30 June 2010 are as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position	Consolidated 2011 $ 2010 $
	12,415,165 17,360,848 277,971 406,618 (3,972,732) (2,924,245)
	8,720,404 14,843,221

ANNUAL REPORT 2011 51

Notes to the Financial Statements

for the year ended 30 June 2011

18. Reserves Options Reserve (a) Option Reserve The option reserve records items recognised as expenses in respect of the granting of Director and Employee share options. Reconciliation of movement Opening balance Options charged during the year Dilution due to shares by subsidiary Expired options Closing balance 19. Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Proft after income tax Operating loss after income tax Non-cash fows in proft: Depreciation Gain/Loss on disposal of investments Revaluation of investments Share based payments Net gain on FV of forward contract Share of associated loss Interest expense Administration recharges Changes in net assets and liabilities, net of effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and term receivables (Increase)/decrease in other assets Increase/(decrease) in trade payables and accruals Increase/(decrease) in provisions Net cash fow from operating activities	Consolidated 2011 $ 2010 $
	262,690 293,107
	293,107 219,953 117,706 83,872 (148,123) - - (10,718)
	262,690 293,107
	(8,005,537) (3,538,991) 2,625 3,518 - 2,195 96,303 1,271,005 588,716 226,284 1,309,416 (1,116,346) 43,535 - 178,801 - 133,630 140,441 128,648 (375,220) 31,280 (37,760) 1,015,160 2,576,161 8,048 327
	(4,469,375) (848,386)

52 ANNUAL REPORT 2011

20. Financial Risk Management

(a) Financial Risk Management

The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, and loans to and from related parties. The main purpose of nonderivative financial instruments is to raise finance for group operations policies.

i. Financial Risk Exposures and Management

The main risks the group is exposed to through its financial instruments are interest rate risk, liquidity risk, credit risk and equity price risk.

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate debt.

Liquidity risk

The group manages liquidity risk by monitoring forecast cash flows.

Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements.

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

The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity.

Equity Price Risk

The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Equity Price Sensitivity Analysis

The sensitivity analyses below has been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower:

Net loss for the year ended 30 June 2011 would decrease/increase $20,382 (2010:increase/ decrease by $104,388) as a result of the changes in fair value of financial assets through the profit and loss; and

The Group’s sensitivity to equity prices has not changed significantly from the prior year.

All listed investment are to be accounted at fair value through the profit and loss in accordance with the current Risk Management Policy.

ANNUAL REPORT 2011 53

Notes to the Financial Statements

for the year ended 30 June 2011

20. Financial Risk Management (continued)

(b) Financial Instruments

i. Interest rate risk

The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

2011 Effective Average Interest Rate Payable %	Floating Interest Rate $ Non- Interest Bearing $ Total $	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 4.50% Trade and other receivables - Financial Assets -current - Financial Assets- non current - *Financial Liabilities* Trade and sundry Payables - Financial liabilities 9.25% 2010 Effective Average Interest Rate Payable %		12,415,165 - 12,415,165 - 277,971 277,971 - 40,698 40,698 - 477,542 477,542
		12,415,165 796,211 13,211,376
		- 3,972,732 3,972,732 1,822,916 396,134 2,219,050
		1,822,916 4,368,866 6,191,782
		Floating Interest Rate $ Non-Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 4.25% Trade and other receivables - Financial Assets -current - Financial Assets –non current - *Financial Liabilities* Trade and sundry Payables - Other loans -		17,360,848 - 17,360,848 - 406,618 406,618 - 1,241,199 1,241,199 - 2,158,475 2,158,475
		17,360,848 3,806,292 21,167,140
		- 2,924,245 2,924,245 - 369,086 369,086
		- 3,293,331 3,293,331

ii. Fair Values

The fair values of:

Term receivables are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value.
Listed investments have been valued at the quoted market bid price at balance date. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment.
Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings to their present value.
Other assets and liabilities approximate their carrying value.

54 ANNUAL REPORT 2011

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

Aggregate fair values and carrying amounts of financial assets and financial liabilities at balance date:

*Financial Assets* Financial assets at fair value through proft or loss Available for sale fnancial assets Derivative fnancial assets Loans and receivables *Financial Liabilities* Other loans and amounts due Other liabilities	2011 2010 Carrying Amount Fair Value Carrying Amount Fair Value
	407,631 407,631 2,088,564 2,088,564 69,911 69,911 69,911 69,911 - - 1,116,346 1,116,346 318,669 318,669 531,471 531,471
	796,211 796,211 3,806,167 3,806,167
	2,219,050 2,219,050 369,086 369,086 3,972,732 3,972,732 2,924,245 2,924,245
	6,191,782 6,191,782 3,293,331 3,293,331

iii. Sensitivity Analysis

Interest Rate Risk

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

Interest Rate Sensitivity Analysis

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

Change in proft – Increase in interest rate by 1% – Decrease in interest rate by 0.5%	Consolidated Group 2011 2010
	120,116 60,051 (60,058) (30,026)

ANNUAL REPORT 2011 55

Notes to the Financial Statements

for the year ended 30 June 2011

20. Financial Risk Management (continued)

(c) Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

30 June 2011

30 June 2011
Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Derivative fnancial instruments – Forward exchange contracts Total 30 June 2010 Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Derivative fnancial instruments – Forward exchange contracts Total	Level 1 Level 2 Level 3 Total
	407,631 - - 407,631 - - 69,911 69,911 - - - -
	407,631 - 69,911 477,542
	Level 1 Level 2 Level 3 Total
	2,088,564 - - 2,088,564 - - 69,911 69,911 - 1,116,346 - 1,116,346
	2,088,564 1,116,346 69,911 3,274,821

Reconciliation of Level 3 fair value measurements of financial assets:

Opening balance Add: Purchases Total gains or loss in the proft and loss Closing balance	2011 2010 Available for sale (Level 3) Available for sale (Level 3)
	69,911 - - 69,911 - -
	69,911 69,911

The Company received through an in specie distribution an investment in Molecular Discovery Systems Ltd in January 2010. Management have made an assessment and believe that there is no material change in the fair value of their investments at reporting date. The investment in Molecular Discovery Systems Ltd was an arm’s length transaction.

56 ANNUAL REPORT 2011

(d) Forward foreign exchange contracts

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts.

The Group also enters into forward foreign exchange contracts to manage the risk associated with anticipated purchase transactions. Basis adjustments are made to the carrying amounts of nonfinancial hedged items when the anticipated purchase transaction takes place.

In the prior year, the Group entered into forward contracts as a hedge of its committed expenditure for the PEP11 drilling costs, which has US Currency as its functional currency.

The following table details the forward foreign currency (FC) contracts outstanding at the end of the year:

Outstanding	Average	Average	Foreign	Currency	Notional Value	Notional Value	Fair	Value
contracts	exchange rate
	30/06/11	30/06/10	30/06/11	30/06/10	30/06/11	30/06/10	30/06/11	30/06/10
Buy Currency
Less than 3 months	-	0.8514	-	16,638,853	-	19,542,933	-	1,116,346
							-	1,116,346

In the current year, the Groups forward contracts were fully utilised.

At 30 June 2011, the aggregate amount of gains under forward foreign exchange contracts relating to these anticipated future purchase transactions is $nil (2010: $1,116,346).

21. Operating Segment

Identification of reportable segments

The group has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director and his management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on their investment in exploration companies. Discrete financial information about each of these operating segments is reported to the chief executive officer and his management team on at least a monthly basis. Currently, management’s focus is on the exploration program of Advent Energy project PEP11, EP386 and RL -1

The Group operates predominantly in one industry, namely investments in the mining and resources. These activities are predominantly in Australia.

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments are the same as those contained in note one to the accounts and in the prior period.

ANNUAL REPORT 2011 57

for the year ended 30 June 2011

Notes to the Financial Statements

22. Events after the Balance Sheet Date

On 18 July 2011 Advent entered into an agreement with its 100% owned subsidiary Onshore Energy Pty Ltd for the sale of its interest in Petroleum Exploration Permit EP386 and Retention Licence 1. Under the agreement Advent will transfer 100% of its interests in these permit to Onshore Energy in consideration for shares in Onshore Energy.

On 16 August 2011 the Company entered into a selective buyback agreement with BPH. BPH has agreed to buy back up to $1.35 million of MEC’s shareholding in the Company. The number of buyback shares will be determined by dividing the total consideration by the 5-day volume weighted average closing price of shares prior to the date of the buy-back. The proposed buyback is subject to shareholder approval which is to be sought at an up and coming extraordinary general meeting of BPH.

On 19 August 2011 Advent Energy repaid an amount of $1.8M in full and final settlement of its obligations under the secured loan agreement entered into with BPH on 15 June 2010.

23. Related Party Transactions

(a) Directors’ Remuneration

Details of directors’ remuneration and retirement benefits are disclosed in the remuneration report in the Directors report and note 5.

(b) Directors’ Equity Holdings Ordinary Shares Held as at the date of this report by directors and their director-related entities in: MEC Resources Ltd Advent Energy Ltd Other Equity Instruments Listed Options Held as at the date of this report by directors and their director-related entities in: MEC Resources Ltd Unlisted Options Held as at the date of this report by key management personnel and their key management personnel-related entities in: MEC Resources Ltd Advent Energy Ltd	Parent 2011 2010 $ $
	25,742,852 22,792,852 5,000,000 5,000,000
	17,395,872 17,395,872
	800,000 3,800,000 4,500,000 2,000,000

58 ANNUAL REPORT 2011

(c) Related entities

A loan facility exists between Advent and its parent entity, MEC $3,600,000 (2010: $nil). The loan is secured by a second charge over all of the assets and rights of Advent Energy including by not limited to, all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan is due and payable on the earlier a successful capital raising or the date the MEC issues a notice for repayment.

A convertible loan agreement exists between Advent and BPH of $1,778,801 (2010:$nil) The loan is secured by a fixed and floating charge over Advent’s present and future undertakings, assets and rights. Interest charged on the loan totalled $178,801 (2010: Nil).

In December 2010, BPH converted $2,400,000 of its loan receivable from Advent into ordinary shares of Advent.

Further, a loan payable exists between Advent and BPH of $ 41,666 (2010:$8,333). This amount is unsecured, non interest bearing and repayable on demand.

A loan payable exists between MEC and BPH of $2,449 (2010:$2,408). This amount is unsecured, non interest bearing and repayable on demand.

(d) Directors

The Company has an agreement with Trandcorp Pty Limited on normal commercial terms procuring the services of David Breeze to provide product development services $65,000 (2010: $65,000) was paid during the year.

24. Controlled Entities

24. Controlled Entities
Name of Entity	Principal Activity	Country of	Ownership Interest
		Incorporation	%
Parent Entity			2011 2010
MEC Resources Limited	Investment	Australia
Subsidiaries of MEC Resources Ltd
Advent Energy Limited	Oil and Gas	Australia	44.89 52.22
	exploration and
	development
Asset Energy Proprietary Limited	Oil and Gas	Australia	44.89 52.22
	exploration and
	development
Onshore Energy Pty Ltd	Oil and Gas	Australia	44.89 -
	exploration and
	development

ANNUAL REPORT 2011 59

Notes to the Financial Statements

for the year ended 30 June 2011

25. Share-Based Payments

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

There were 11,005,000 unlisted employee options on issue at the end of the year:

Advent Energy				Fair Value at
Total number	Exercise price	Expiry date	Grant Date	grant date
2,000,000	$0.06	30 June 2012	01 June 2008	$0.0302
2,000,000	$0.06	28 December 2012	14 May 2008	$0.0319
3,500,000	$2.00	05 August 2015	05 August 2010	$0.1784
7,500,000
MEC Resources
1,346,667	$0.15	01 June 2013	01 June 2008	$0.0304
833,333	$0.15	06 August 2013	06 August 2008	$0.0463
150,000	$1.25	05 August 2015	05 August 2010	$0.3032
250,000	$1.25	06 October 2015	06 October 2010	$0.3011
250,000	$1.50	06 October 2015	06 October 2010	$0.2780
100,000	$1.25	04 November 2015	04 November 2010	$0.3255
575,000	$0.80	21 January 2016	21 January 2011	$0.1000
3,505,000

At balance date, 8,786,668 MEC share options have been exercised (2010: 1,683,334).

All options granted to key management personnel are ordinary shares in MEC Resources Ltd or its subsidiary Advent Energy Ltd, which confer a right of one ordinary share for every option held.

Outstanding at the beginning of the year Granted Granted Granted Exercised Exercised Expired Outstanding at year-end Exercisable at year-end	MEC Resources Ltd 2011 2010 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	11,966,666 0.15 13,150,000 0.19 500,000 1.25 500,000 0.20 250,000 1.50 - - 575,000 0.80 - - (786,666) 0.15 (683,334) 0.15 (8,000,000) 0.21 (1,000,000) 0.21 (1,000,000) 0.20 - -
	3,505,000 0.51 11,966,666 0.19
	2,929,999 0.45 7,933,333 0.17

60 ANNUAL REPORT 2011

Outstanding at the beginning of the year Granted Exercised Expired Outstanding at year-end Exercisable at year-end	Advent Energy Limited 2011 2010 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	5,500,000 0.06 18,325,000 0.16 3,500,000 2.00 - - - - (2,760,000) 0.20 (1,500,000) 0.06 (10,065,000) 0.20
	7,500,000 0.97 5,500,000 0.06
	6,000,000 0.71 4,333,333 0.06

On 5 August 2010 3,500,000 options were issued in Advent to Mr David Breeze, Ms Deborah Ambrosini and a consultant of the Company. The options are exercisable at $2 with an expiry date of 5 August 2015. The options had a fair value of $624,400. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $624,400.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$2.00
Life of the option	5 years
Underlying share price	$0.50
Expected share price volatility	75%
Dividends	0%
Risk free interest rate	5.25%

On 21 January 2011 575,000 options were issued to the employees of MEC Resources Ltd. The options are exercisable at 80 cents with an expiry date of 21 January 2016, vesting over 36 months. The options had a fair value of $57,500. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $57,500.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$0.80
Life of the option	5 years
Underlying share price	$0.38
Expected share price volatility	50%
Dividends	0%
Risk free interest rate	5.25%

ANNUAL REPORT 2011 61

Notes to the Financial Statements

for the year ended 30 June 2011

25. Share-Based Payments (continued)

On 4 November 2010 100,000 options were issued under the Employee Incentive Option Scheme of MEC Resources Ltd. The options are exercisable at $1.25 with an expiry date of 4 November 2015, vesting over 36 months. The options had a fair value of $32,550. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $32,550.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$1.25
Life of the option	5 years
Underlying share price	$0.625
Expected share price volatility	75%
Dividends	0%
Risk free interest rate	5.25%

On 6 October 2010 250,000 options were issued under the Employee Incentive Option Scheme of MEC Resources Ltd. The options are exercisable at $1.25 with an expiry date of 6 October 2015, vesting over 36 months. The options had a fair value of $75,275. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $75,275.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$1.25
Life of the option	5 years
Underlying share price	$0.60
Expected share price volatility	75%
Dividends	0%
Risk free interest rate	5.25%

On 6 October 2010 250,000 options were issued under the Employee Incentive Option Scheme of MEC Resources Ltd. The options are exercisable at $1.50 with an expiry date of 6 October 2015, vesting over 36 months. The options had a fair value of $69,500. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $69,500.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$1.50
Life of the option	5 years
Underlying share price	$0.60
Expected share price volatility	75%
Dividends	0%
Risk free interest rate	5.25%

62 ANNUAL REPORT 2011

On 5 August 2010 150,000 options were issued under the Employee Incentive Option Scheme of MEC Resources Ltd. The options are exercisable at $1.25 with an expiry date of 5 August 2015, vesting over 36 months. The options had a fair value of $45,480. The fair value of the options was determined using the Black Scholes option pricing model.

The weighted average fair value of the options granted during the year was $45,480.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Exercise price	$1.25
Life of the option	5 years
Underlying share price	$0.61
Expected share price volatility	75%
Dividends	0%
Risk free interest rate	5.25%

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

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits expense in the statement of comprehensive income is $588,716 (2010: $83,872), and relates, in full, to equity.

26. Contingent Liabilities

Advent has entered into a secured loan agreement with BPH. The principal amount of the loan is $1 million, with further advances of up to an additional $3 million payable at the BPH’s discretion. The Loan is secured by a fixed and floating charge over Advent Energy’s present and future undertakings, assets and rights. As at 30 June 2011 $1.778M (2010: nil) had been drawn down.

A claim for outstanding consulting fees has been brought against Asset Energy Pty Ltd. The case is currently in pre trial stages. The claim is being vigorously defended by Asset and a counterclaim has been lodged.

27. Commitments

Capital Commitments

In order to maintain an interest in the exploration tenements in which the Company is involved, the Company is committed to meet the conditions under which the tenements were granted.

Capital expenditure forecasted for at the reporting date but not recognised as liabilities as follows:

Capital expenditure forecasted for at the reporting date but not recognised as	liabilities as follows:
Work Program Commitments – Exploration permits Payable: Within one year Greater than one year less than fve years Total	Consolidated 2011 $ 2010 $
	1,000,000 29,250,000 2,800,000 900,000
	3,800,000 30,150,000

ANNUAL REPORT 2011 63

Notes to the Financial Statements

for the year ended 30 June 2011

28. Investments accounted for using the equity method

28. Investments accounted for using the equity method
Shares in Associates	30 June 2011 $ 30 June 2010 $
	9,673,230 -

(a) Shares in associates

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting.

Name of Entity	Nature of Operations	Country of	Ownership Interest	Ownership Interest
		Incorporation		%
			30 June	30 Jun
			2011	2010
BPH EnergyLtd	Alternative Investment Company	Australia	26.85	11.26

MEC Resources increased its holding in BPH Energy Ltd (formerly BPH Corporate Ltd) by sub underwriting BPH’s entitlement issue and placement. A total of $5,700,000 was invested into BPH through these commitments. MEC Resources currently holds 26.85% of BPH and BPH is now an associate of MEC Resources for reporting purposes only.

(b) Summarised financial information of associates

The results of its associates aggregated assets (including goodwill) and liabilities, including the group’s share of net assets and net loss for the period are as follows:

Total: Groups Share of Ownership interest % Assets Liabilities Profts/ Losses Revenues Net Assets Net Loss for the Period since becoming an associate	Total: Groups Share of Ownership interest % Assets Liabilities Profts/ Losses Revenues Net Assets Net Loss for the Period since becoming an associate
30 June 2011 BPH Energy Ltd 26.85	56,329,812 5,435,894 (267,884) 604,748 13,665,017 (43,535)
	56,329,812 5,435,894 (267,884) 604,748 13,665,017 (43,535)

64 ANNUAL REPORT 2011

29. Parent Entity Disclosures

Financial Position Assets Current assets Non-current assets Total asset Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued Capital Retained earnings Reserves Option Reserve Total equity Financial Performance Proft/Loss for the year Other comprehensive income Total comprehensive income	2011 $ 2010 $
	6,453,213 752,804 13,104,630 6,522,598
	19,557,843 7,275,402
	179,937 286,664 - 3,767
	179,937 290,431
	24,920,661 11,808,203 (5,805,445) (4,968,216) 262,690 144,984
	19,377,906 6,984,971
	(837,229) (2,115,985) - -
	(837,229) (2,115,985)

30. Adoption of New and Revised Accounting Standards

(a) New standards and Interpretations Adopted

The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period beginning 1 July 2011.

Significant new and revised standards and interpretations effective for the current financial reporting period that are relevant to the consolidated entity are:

AASB 2009-5: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process;
AASB 2009-8: Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions AASB 2.
AASB 2009-10: Amendments to Australian Accounting Standards - Classification of Rights Issues
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project:
Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments.

ANNUAL REPORT 2011 65

for the year ended 30 June 2011

Notes to the Financial Statements

30. Adoption of New and Revised Accounting Standards (continued)

(b) Accounting Standards and Interpretations issued but not yet effective

The following Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the consolidated entity for the year ended 30 June 2011.

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

Standard / Interpretation Effective for annual Expected to be applied
reporting periods be consolidated entity
beginning/ending on
or after
----- End of picture text -----

AASB 124 Related Party Disclosures (2009)	1 January 2011	30 June 2012
and AASB 2009-12 Amendments to Australian
Accounting Standards
AASB 9: Financial Instruments, AASB 2009-	1 January 2013	30 June 2014
11 Amendments to Australian Accounting
Standards arising from AASB 9 and AASB
2010-9 Amendments to Australian Accounting
Standards arising from AASB 9 (December
2010)
AASB 2010-4 Further Amendments to	1 January 2011	30 June 2012
Australian Accounting Standards arising from
Annual Improvements Project
AASB 2010-5 Amendments to Australian	1 January 2011	30 June 2012
Accounting Standards
AASB 2010-6 Amendments to Australian	1 July 2011	30 June 2012
Accounting Standards – Disclosures on
Transfers of Financial Assets
AASB 2010-8 Amendments to Australian	1 January 2012	30 June 2013
Accounting Standards – Deferred Tax:
Recovery of Underlying Assets’
AASB 2011-4 Amendments to Australian	1 July 2013	30 June 2014
Accounting Standards to Remove Individual
Key Management Personnel Disclosure
Requirements
IFRS 10 Consolidated Financial Statements	1 January 2013	30 June 2014
IFRS 11 Joint Arrangements	1 January 2013	30 June 2014
IFRS 12 Disclosure of Interests in Other	1 January 2013	30 June 2014
Entities
IFRS 13 Fair Value Measurement	1 January 2013	30 June 2014

The impact of these recently issued or amended Standards and Interpretation has not been determined as yet by the consolidated entity.

66 ANNUAL REPORT 2011

Directors Declaration

The directors of the company declare that:

the financial statements and notes, as set out on pages 29 to 66, are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the consolidated entity;
the Financial Statements and Notes comply with International Accounting Standards as disclosed in Note 1;
the directors have been given the declarations required by S295A of the Corporations Act 2001
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.

Signed in accordance with a resolution of the directors made pursuant to S295(5) of the Corporations Act 2001 .

Director

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David Breeze Executive Director

Dated this 25th Day of August 2011

ANNUAL REPORT 2011 67

Independent Auditor’s Report

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Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX: 206 Tel: +61 (8) 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au

Independent Auditor’s Report to the members of MEC Resources Limited

Report on the Financial Report

We have audited the accompanying financial report of MEC Resources Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant 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 financial year as set out on pages 29 to 67.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the consolidated financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

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

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

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

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu

68 ANNUAL REPORT 2011

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of MEC Resources Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

(a) the financial report of MEC Resources Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 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 consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included on pages 14 to 17 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of MEC Resources Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001 .

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner

Chartered Accountants Perth, 25 August 2011

ANNUAL REPORT 2011 69

Additional Securities Exchange Information

Additional information required by Australian Securities Exchange Limited and not shown elsewhere in this report as follows. The information is made up to 19th August 2011.

1. Substantial Shareholder

The name of the substantial shareholder listed in the company’s register is:

Shareholder	Shares	%
David Breeze	13,183,654	8.46

2. Distribution of Shareholders

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Range of Holding Shareholders Number Ordinary %
Shares
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Range of Holding	Shareholders Number Ordinary Shares %
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	495 230,281 0.15 614 1,879,604 1.21 623 5,454,985 3.50 1479 50,906,987 32.67 223 97,341,293 62.47
	3434 155,813,150 100.00

3. (a) Distribution of Listed Optionholders

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

Range of Holding Optionholders Number Ordinary %
Shares
----- End of picture text -----

Range of Holding	Optionholders Number Ordinary Shares %
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	24 12,270 0.03 42 111,380 0.23 40 304,776 0.62 312 11,796,201 24.10 59 36,729,943 75.03
	477 48,954,570 100.00

3. (b) Distribution of Unlisted Optionholders

Range of Holding	Optionholders Number of Options %
MEC Resources 10,001 to 100,000 100,001 and over	1 45,000 0.13 10 3,460,000 99.87
	13 3,505,000 100.00

Range of Holding	Optionholders Number of Options %
Advent Energy 100,001 and over	4 7,500,000 100.00
	4 7,500,000 100.00

70 ANNUAL REPORT 2011

4. Voting Rights - Shares

All ordinary shares issued by MEC Resources Ltd carry one vote per share without restriction.

5. Voting Rights - Options

The holders of employee options do not have the right to vote.

6. Restricted Securities

Restricted Securities
Shares- Number of Shares free of escrow		155,813,150
	Total Shares	155,813,150
Options
Number of Employee options not subject to		48,954,570
Escrow (Listed)
Number of Employee options not subject to		11,005,000
Escrow (Not Listed)
	Total Options	59,959,570

7. Tenements and Interests Held

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Permit Details Interest Held Entity
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Petroleum Exploration Permit 386 Petroleum Exploration Permit 11 Petroleum Exploration Permit 325 Retention Lease 1	100% Advent Energy
	85% Advent Energy
	8.3% Advent Energy
	100% Advent Energy

ANNUAL REPORT 2011 71

Additional Securities Exchange Information

8. Twenty Largest Shareholders (as at 19 August 2011)

The names of the twenty largest shareholders of the ordinary shares of the company are:

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Name Number of ordinary % held of issued
fully paid shares ordinary capital
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Grandbridge Ltd Healy Robert Anthony Citicorp Nom PL Breeze David Merrill Lynch Aust Nom PL Trandcorp PL DMG & Ptnrs Sec Pte Ltd Trandcorp PL Ming Ding Gui HSBC Custody NOM Aust Ltd Pado John Thomas Protax Nom PL Birch Lawrence M and JF Websdale Antony Brian Edward YI Financial Services Avatar Energy PL Moore Rhonda Kate Avco PL JP Morgan Nom Aust Ltd Viney Julie	9,747,362 7,915,723 6,669,183 6,234,438 5,458,978 3,849,216 3,434,350 3,100,000 2,000,000 1,418,500 1,007,952 1,000,000 892,373 850,000 694,000 687,500 666,667 612,375 577,619 507,701 6.26 5.08 4.28 4.00 3.50 2.47 2.20 1.99 1.28 0.91 0.65 0.64 0.57 0.55 0.45 0.44 0.43 0.39 0.37 0.33
	57,323,937 36.79

72 ANNUAL REPORT 2011

9. Twenty Largest Listed Option Holders (as at 19 August 2011)

The names of the twenty largest listed Option Holders of the company are:

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Name Number of listed % held of issued
options ordinary capital
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Grandbridge Ltd Trandcorp PL Merrill Lynch Aust Nom PL Healy Robert Anthony Citicorp Nom PL Lim Chin Tong Breeze David David E Perks and Assoc PL Basser Braham M and MD Sargent Ian Sykes Frederick and J Lee Biau Luan and Patricia Scanlon Damian Sykes Jacqueline and F Chin Peter Coyler Simon James Guiterrez Joe O’Gorman Richard Borthwick Bruce and SP Fixed Interest Data PL LE	7,310,522 5,773,824 4,725,144 3,545,000 3,000,000 2,062,500 1,759,404 500,000 350,000 287,436 275,000 273,375 242,250 225,000 225,000 200,500 195,483 192,380 180,000 176,250 14.93 11.79 9.65 7.24 6.13 4.21 3.59 1.02 0.71 0.59 0.56 0.56 0.49 0.46 0.46 0.41 0.40 0.39 0.37 0.36
	31,499,068 64.34

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ACN 113 900 020

14 View Street North Perth WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 [email protected]

www.mecresources.com.au

AI assistant

MEC RESOURCES LIMITED — Annual Report 2011

65353_rns_2011-10-11_3fc0d39a-6f1e-4405-8560-6662ddd33212.pdf

Contents

Corporate Directory

Directors

Registered Office

Auditor

Share Registry

Principal Business Address

Australian Securities Exchange Listing

Australian Business Number

Chairman’s Letter

Dear Shareholder

MEC Resources’ investments have shown considerable promise over the past year.

Company Focus and Developments

MEC’s investment focus:

ADVENT ENERGY

PEP11 Oil and Gas Permit

Company Focus and Developments

PEP11 Oil and Gas Permit (continued)

Northern Territory/Western Australia – Onshore Bonaparte Basin

Company Focus and Developments

Northern Territory/Western Australia – Onshore Bonaparte Basin (continued)

Company Focus and Developments

Western Australia – Exmouth Sub-Basin (EP325)

Central Australia – Amadeus, Pedirka, Basins

BPH Energy Limited

The directors of MEC Resources Ltd present their report on the company for the financial year ended 30 June 2011.

Company Secretary

Principal Activities

Advent Energy Limited -Oil and Gas

Operating Results

Dividends

Financial Position

Significant Changes In State Of Affairs

After Balance Date Events

Future Developments

Information on Directors

H Goh

D L Breeze

K O Yap

C T Lim

D Ambrosini

Remuneration Report

Remuneration Policy

Compensation Practices

Employment contracts of directors

Details of Remuneration for the year ended 30 June 2011

2011

Details of Remuneration for the year ended 30 June 2011 (continued) 2011 (continued)

2010

Company performance, shareholder wealth, and director and executive remuneration

Meetings of Directors

Indemnifying Officers or Auditors

Options

MEC Resources

Advent Energy

Listed Options

MEC Resources Ltd

Proceedings on Behalf of Company

Environmental Issues

Directors’ Report

Non-audit Services

Auditor’s Independence Declaration

David Breeze Director

Auditor’s Independence Declaration