METALS AUSTRALIA LTD

MLS

ACN: 008 982 474

ANNUAL REPORT

2012

METALS AUSTRALIA LTD

	Page No.
	Corporate Directory 1
	Review of Operations 2
	Directors' Report 12
	Consolidated Statement of Comprehensive Income 17
	Consolidated Statement of Financial Position 18
	Statement of Changes in Equity 19
	Statement of Cash Flows 20
	Notes to the Financial Statements 21
	Directors' Declaration 47
	Independent Audit Report 48
	Auditor’s Independence Declaration 51
	Corporate Governance Statement 52
	Shareholder Information 66

Contents

METALS AUSTRALIA LTD

CORPORATE DIRECTORY

DIRECTORS

Hersh Solomon Majteles (Chairman) Michael Scivolo (appointed 23.07.2012) David Zukerman Alex Clemens (resigned 23.07.2012)

COMPANY SECRETARY

Norman Grafton

REGISTERED OFFICE

1[st] Floor, 8 Parliament Place West Perth WA 6005

Telephone: (08) 9481 7833 Facsimile: (08) 9481 7835 Email: [email protected] Website: www.metalsaustralia.com.au

SOLICITORS

Gilbert & Tobin 1202 Hay Street West Perth WA 6005

AUDITORS

Grant Thornton (WA) Partnership 10 Kings Park Road West Perth WA 6005

BANKERS

Westpac Banking Corporation Level 6, 109 40 St Georges Terrace Perth WA 6000

SHARE REGISTRY

Advanced Share Registry Limited 109 St Georges Terrace Perth WA 6000

Telephone: (08) 9389 8033 Facsimile: (08) 9389 7871

SECURITIES EXCHANGE LISTING

The Company is listed on the Australian Securities Exchange

Home Exchange: Perth, Western Australia

ASX code for shares: MLS ASX code for listed options : MLSO

Corporate Directory

Page No . 1

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

A N NU A L AC T IVIT I ES R E POR T

URANI U M PROJECTS, N A MIBIA

During the June 2012 quarter, ve r y positive r e sults were returned in the final ba t ch of 154 a s says recei v ed from the trench sampling at the Mile 72 Pr o ject in Na m ibia (Figure 1). Assays were also r eceived fro m the pilot s hallow RC drilling pro g ramme of 2 31 drillhole s for 1,023 m at Mile 72 which sho w ed strong anomalism away fro m the main Kudu-Impala prospect.

At the En g o Valley P r oject (Figur e 1) the environmental clearance a nd access permit for s u rface expl o ration work was recen t ly received, opening the way for on-ground exploration .

THE MILE 7 2 URANIUM PROJEC T

The Mile 7 2 Uranium P roject is a l a rge uraniu m project on the coast o f Namibia, north of th e city of S w akopmund. Some of t h e highest u ranium grades in the world have been recor d ed in outcr o p and in sh a llow pits at M ile 72.

==> picture [169 x 205] intentionally omitted <==

Figure 1 – Loca t ion of the Mile 72 uraniu m project, Na m ibia.

Metals ha s entered i n to a new phase of exploration, targeting a large high-tonnage moderate gr a de primary deposit of a similar style to the Rö s sing and Husab mines to the sout h .

During the y ear, a serie s of progra m mes have aimed to:

Ful l y capture the extent of surface urani u m mi n eralisation
Te s t various mi n eralisation models as e x ploration co n tinues.

Surface tr e nching

Surface tr e nching at M ile 72 was significantl y expanded this year, g oing from a round 360 samples to over 1,250 samples. T his resulte d in extensi o n of the K udu-Impala surface ur a nium anomalism over t he entire 10 km strike length loca t ed within th e licence area.

Grades ac h ieved from the 2011/ 2 012 surfac e trenching programmes were am o ngst the highest recor d ed at Mile 72, with r e sults as h i gh as 13, 9 12 ppm U 3 O8 (1.39% U3O8).

==> picture [29 x 114] intentionally omitted <==

==> picture [55 x 58] intentionally omitted <==

==> picture [54 x 58] intentionally omitted <==

==> picture [33 x 114] intentionally omitted <==

==> picture [55 x 57] intentionally omitted <==

==> picture [54 x 57] intentionally omitted <==

==> picture [29 x 114] intentionally omitted <==

==> picture [33 x 114] intentionally omitted <==

==> picture [55 x 58] intentionally omitted <==

==> picture [54 x 58] intentionally omitted <==

==> picture [55 x 57] intentionally omitted <==

==> picture [54 x 57] intentionally omitted <==

Figure 2 – Hand-dug s ampling of su b cropping weather e d rocks in the NE Extension a rea.

Review of Operations

Page No . 2

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

A high pro p ortion of sa m ples exce e ded 1,000 p pm U3O8 at surface. In addition, si g nificant int e rvals of high urani u m values w ere recorded. For exa m ple, interv a ls of up to nearly 300 m in length with in excess of 900 ppm U3 O 8 were identified on Lin e 5.

All of the h i gh-grade z o nes are in a reas of out c ropping or s ubcropping schists, gr a nites and alaskites, and in som e cases in a r eas of bas a ltic cover. T h e mineralis a tion occurs as carnotit e within gypcrete, as at all other l ocalities of h igh grade m ineralisatio n at Mile 72.

It is appare n t that the s u rface mineralisation is a concentration of uraniu m and gypc r ete that has formed by evapor a tion at surf a ce. Evapo r ated groun d waters are therefore rich in urani u m and ref l ect the presence o f uranium in the subsurf a ce in the vi c inity of the surface ano m alies.

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [19 x 165] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [19 x 165] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [19 x 165] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [55 x 63] intentionally omitted <==

==> picture [54 x 63] intentionally omitted <==

==> picture [44 x 83] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [448 x 30] intentionally omitted <==

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

Figure 3 – Uranium distri b utions determined by Metals Australia thro u ghout the Mil e 72 licence a r ea. Assay res u lts are
plott e d over a contoured plot of U3 O 8 [ distributions] . Total strike length of uraniu m anomalism n o w exceeds 10 k m and
width is over 2km in places.
----- End of picture text -----

Review of Operations

Page No . 3

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

Radon cup and EM su r veys

A radon cup survey w a s carried o u t at Mile 7 2 to detect m ineralisation in sand-c o vered area s of the licence ar e a. Simultaneously, an EM (electr o magnetic) s urvey was performed to underst a nd the architectur e of the overlying sands i n case they h osted uranium minerali s ation.

Radon cu p surveys a re widely considered to be an effective m ethod for i dentifying u ranium mineralisation in the s u bsurface, t o a depth o f up to 100 m beneath c over. The p articular te c hnique used at Mil e 72, Radon X TM, has b e en used pr e viously to s u ccessfully delineate bur i ed minerali s ation at the Husab (Rössing S o uth) and Et a ngo depos i ts in the N a mibian Da m aran Urani u m Province, where Mile 72 is l o cated. The results of th e RadonX s u rvey show t hat there m u st be signif i cant uraniu m in the subsurface in the sand- c overed par t s of the Mil e 72 licence.

==> picture [14 x 154] intentionally omitted <==

==> picture [40 x 77] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [40 x 78] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [14 x 153] intentionally omitted <==

==> picture [40 x 77] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [40 x 77] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [23 x 154] intentionally omitted <==

==> picture [31 x 103] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [31 x 102] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [23 x 153] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [31 x 103] intentionally omitted <==

==> picture [55 x 62] intentionally omitted <==

==> picture [54 x 62] intentionally omitted <==

==> picture [268 x 8] intentionally omitted <==

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

Figure 4 – Resul t s of the Radon cup survey (lef t ) and the EM survey (right).
----- End of picture text -----

The results of the Radon cup surve y directly le d to the disc o very of nea r -surface ur a nium miner a lisation to the no r theast of K udu-Impal a . Considering that th e technique detects s u bsurface u ranium mineralisation to a dept h of around 1 00 m, the a nomalies d e tected remain untested t o date.

Pilot shallo w RC drilling programme

A short pilo t programm e of shallow RC drilling w as complet e d at Mile 7 2 , late in the March quar t er. The programme was desig n ed to test f o r shallow s e condary c a lcrete-hosted uranium m ineralisatio n within channels; t h at is, miner a lisation of a similar styl e to Langer- H einrich in N amibia and Y eelirrie in W estern Australia. M ost holes w ere less than 5 m deep. The pro g ramme is part of the s y stematic a p proach being take n by the Co m pany to th o roughly exp l ore all pos s ible styles of uranium m ineralisation at Mile 72.

Although s o me very encouraging r e sults were r eceived, it i s clear that, in the area s tested, there is no significant c alcrete-hosted deposit present in the shallo w est subsurf a ce. The p re sence of u ranium mineralisation within the bottom-of - hole sampl e s suggests that there i s ample op p ortunity for deeper Rössing-st y le mineralis a tion in the d rilled areas . This is furt h er backed u p by the pr e sence of e x tensive radon cup a nomalies.

Review of Operations

Page No . 4

METALS AUSTRALIA LTD

REVIEW OF OPERATIONS

==> picture [55 x 70] intentionally omitted <==

==> picture [54 x 70] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [40 x 87] intentionally omitted <==

==> picture [22 x 173] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [54 x 70] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [40 x 87] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [54 x 70] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [40 x 88] intentionally omitted <==

==> picture [22 x 174] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [54 x 70] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [40 x 87] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [54 x 70] intentionally omitted <==

==> picture [55 x 70] intentionally omitted <==

==> picture [342 x 41] intentionally omitted <==

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

Figure 5 – S atellite image of the Mile 72 licence area, showing the rec e nt RC drill fe n ces. At
K u du-Impala, NE Extension, an d Central Area s , “weathered rock” areas ha v e been
tr e nch sampled a nd an initial 231 drillhole pr o gramme has b een complete d in the
“g r avel” areas in t he current pro g ramme.
----- End of picture text -----

Assay results from the drilling sho w ed that se v enteen (17) samples exceeded 100 ppm U3O8 (Figure 5). Despite the wide sp a cing of the lines, there are distinct north-easterly correlatio n s of bottom-of-hole results bet w een lines. T hese correl a tions direct l y follow the north-easte r ly strike of t he schists, g ranites and alaskit e s througho u t the Projec t area.

A new pha s e of exploration at Mile 7 2

The elimin a tion of Lan g er Heinrich-style calcre t e-hosted mineralisation from the list of targets a t KuduImpala me a ns that Met a ls has mov e d into a ne w phase of e x ploration at Mile 72. Th e clear target is now primary u r anium min e ralisation w ithin the granite-schist-alaskite basement s equence. Primary mineralisation within th e licence ar e a is most l i kely to be o f a similar s tyle to the R össing an d Husab deposits.

Granite-ho s ted primary uranium de p osits are ty p ically high t onnage an d moderate g rade (250-600 ppm or 0.25-0.6 kg/t U3O8). As such, the grades e n countered a t surface at Mile 72 are not expect e d to be encountere d at depth b u t are, rathe r , a surface e nrichment f e ature indic a tive of mine r alisation at depth.

Review of Operations

Page No . 5

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

==> picture [366 x 450] intentionally omitted <==

==> picture [7 x 448] intentionally omitted <==

Figure 6 – Diagr a m showing ar e as of alaskite g enesis in relation to the alaskite-hosted uran i um deposits of the r egion. Mile 72 is clearly loca t ed in the heart of the same z one as the m a jor uranium deposi t s of “Alaskite A lley”. The outer red area mar k s the zone in w hich geologic a l conditions peake d at the pressur e s and temper a tures required to generate al a skites. The in n er pink area repres e nts where g e ological cond i tions passed through and exceeded pr e ssures and temper a tures required to generate al a skites, but wh i ch may have generated alask i tes at some point in their history.

Metals is p r esently revi e wing in det a il all histori c and recent data collect e d at and ar o und Mile 7 2 . Some of the key findings to d a te include:

A regional g eological a s sessment shows that the Mile 72 ar e a has an e q uivalent pr o pensity to generate alaskites (t h e hosts to uranium mineralisation) as the Ala s kite Alley a rea that co n tains Rössing and Husab (Fig u re 6).

Interpretati o n of the K u du-Impala geology fro m geophysi c s shows t h at unique g eological f e atures, which may be importa n t in the concentration o f uranium m ineralisatio n , do not ex t end far bey o nd the EPL3308 li c ence boun d ary.

Uranium th a t is concen t rated at sur f ace at Kud u -Impala must be sourc e d from the b asement s e quence within the li c ence area, and has not been trans p orted in fro m elsewhere.

Review of Operations

Page No . 6

METALS AUSTRALIA LTD

REVIEW OF OPERATIONS

Primary granite-hosted mineralisation is present at the historic Mile 72 mine around 5 km east of KuduImpala (outside of EPL3308).

Groundwaters may have shifted the surface uranium anomalies relative to subsurface mineralisation to a limited extent.

For a mineralised profile in this type of weathering environment, we will expect to see very high grades at surface, followed by a zone of depletion (maybe 20-50 m depth) that contains very little or no mineralisation, followed by fresh primary mineralisation.

Several targets have been identified that require further refining and analysis prior to drilling and we expect to identify several more as work progresses.

Metals will continue to assess and investigate the Mile 72 licence using all methods necessary. A highresolution aeromagnetic survey is scheduled to be undertaken as soon as possible. This will be used to refine targeting in identified drill target areas. The forthcoming drilling programme will comprise an array of deep (around 80-100 m), widely spaced holes over the chosen target areas. This first pass drilling programme will serve as a precursor to subsequent more substantial resource definition programmes.

THE ENGO VALLEY URANIUM PROJECT

The Engo Valley project (EPL3306) is located in the remote northwest of Namibia in the Skeleton Coast (National) Park. Access Permits are required to visit the Skeleton Coast Park and there are no roads and no habitable sites within the 16,000 km2 park.

The Company has only recently been granted an Environmental Clearance and Access Permit to explore the Engo Valley area. An initial programme of mapping and surface sampling will provide a basis for further future work.

ANGRA FRIA PORT PROPOSAL

The Ministry of Works and Transport is proposing location of a new deep water port facility at Angra Fria, immediately adjacent to the licence area. This port will service northern Namibia as well as the mining areas of the DRC and Zambia. The feasibility study is expected to be completed in March 2013. At present, the proposal is for excavation of the Brakpan salt lake in order to create an inland harbour, with access to the ocean at Angra Fria (). The study will also assess requirements for additional infrastructure such as railways, roads, power and water supply, as well as location of population centres to operate the port.

The location of a major port immediately adjacent to the Engo Valley licence area is likely to facilitate access to the area and, should a uranium deposit be defined, be greatly advantageous for exploitation.

Review of Operations

Page No . 7

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

==> picture [294 x 455] intentionally omitted <==

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

Proposed port area
Figure 7 – T h e Engo Valley ( EPL3306) lice n ce area and s u rrounds.
----- End of picture text -----

==> picture [4 x 445] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

==> picture [55 x 65] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

==> picture [55 x 65] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

BASE M E TAL PR O JECTS, WESTER N AUST R ALIA

Metals curr e ntly holds a n interest in two base m e tals project s in Wester n Australia () .

The Manin d i zinc proje c t is located around 500 km northeast of Perth a nd is being explored b y Metals with a view to expandin g the existin g resources a nd examining the proje c t's copper p otential.

The Sherlo c k Bay base metal joint v enture proj e ct is locate d in the Pilbara region an d is being managed and explor e d by Austr a lasian Resources Ltd ( A RH). The p r oject surrounds ARH’s S herlock Ba y nickel deposit.

Review of Operations

Page No . 8

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

MANINDI ZINC PROJECT

This year a t Manindi, t he project w as progres s ed by an i n -depth revi e w of all d a ta and geo p hysical surveys ov e r the entire t enement p a ckage.

Metals is o f the opinion that only a s mall portion of the depo s it has been r e cognised t o date. Past d rilling has b een relativ e ly shallow, a n d a numbe r of geologi c al indicator s suggest that the known m ineralisation may be p a rt of a muc h larger, zon e d copper-lea d -zinc(-silver - gold) system. With thi s outlook, t h e Company i s investiga t ing the po t ential for e xtensions o r outliers of mineralisati o n that will significantly increase t h e resource at Manindi. A series o f geophysic a l anomalie s suggest t h at there m a y indeed b e extensio n s to Ma n indi that will requi r e investigatio n . A Ver s atile Time - domain El e ctroMagne t ic (VTEM) ge o physical s u rvey was undertaken o v er the enti r e group of tenements. T h is type of s urvey dete c ts conducti v e material a t depth, which ca n contain base me t al Figure 8 – Location of t h e Western Au s tralian mineralisation. In addi t ion to the e xpected anomalism ov e r ba s e metals proje c ts. defined mi n eralisation, an additio n al 3 subst a ntial target s have bee n defined b a sed on conductor strength, g e ological set t ing and coi n cidence wit h other geophysical data s ets.

These areas were subj e ct to a seri e s of Fixed- L oop Time-d o main Elect o Magnetic ( F LTEM) geo p hysical surveys. T h e FLTEM s urveys con f irmed eac h of the VT E M anomali e s, providin g a number of drill targets at M anindi. The s e targets h a ve the pote n tial to signi f icantly upgr a de the reso u rce at Man i ndi and have been r anked for f u ture drill tes t ing

The Manin d i zinc proje c t is a signifi c ant resour c e located in the Murchison District o f Western A u stralia, 20 km sout h west of the defunct Youanmi gold m ine.

The deposit is a vol c anogenic m assive sul p hide zinc d eposit, co m prising a s eries of le n ses of mineralisation that have been folded, sheare d , faulted, a n d possibly intruded by later doleri t es and gabbros. T h e style of mineralisati o n is simila r to other b a se metal s u lphide dep o sits in the Yilgarn Craton, pa r ticularly Golden Grove t o the west o f Manindi a t Yalgoo, a n d Teutonic Bore-Jagu a r in the Eastern Goldfields.

Metals has previously delineated a J ORC resou r ce of:

1.354 million tonnes @ 6.04% Zinc, 0.25% Copper, 3.4 g/t Silver & 0.25 g/t Gold

The resou r ce is divid e d into the f ollowing c a tegories (a t a 1% Zin c cut-off): Measured 497,000 tonnes @ 7.32% Zinc Indicated 438,000 tonnes @ 6.38% Zinc Inferred 419,000 tonnes @ 4.14% Zinc

Review of Operations

Page No . 9

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

SHERLOCK BAY EXTENDED BASE METAL PROJECT

The Sherlo c k Bay Exte n ded project is compose d of two Exploration Licences (E47/1 7 69 and E4 7 /1770), which surr o und the main Sherlock Bay nickel d eposit (wh o lly owned by Australasi a n Resourc e s Ltd - ‘ARH’). Th e project is p r ospective f o r nickel, co p per, silver a n d gold min e ralisation.

The projec t is a joint v enture bet w een ARH ( 7 0% interes t ) and Metals (30% int e rest). ARH are the managers o f the proj e ct, with Me t als being ‘ f ree-carried’ through to the compl e tion of a b a nkable feasibility s t udy and the decision to c ommence c ommercial m ining.

A series of studies wer e undertake n over the p r oject during the year. T h ese includ e d a biogeochemical survey of t h e licence a r eas in order to define s ubtle geoc h emical ano m alies that m ay be indi c ative of subsurface mineralisa t ion. Interpretation of the biog e ochemical sample r e sults requi r es an understand i ng of local topography and draina g e in order to identify a reas of po t ential dislo c ated or smeared a n omalism (for example, w here an an o maly is rec o gnised along a drainag e system bu t relates to minerali s ation at a c e rtain point w ithin that dr a inage).

Work is continuing on identifying a nomalies w ithin the licence areas. Biogeoche m ical sampling has been show n to identify n ickel anom a lism associated with th e Sherlock B ay Nickel D e posit. With several areas of anomalism identified beyo n d the Sherl o ck deposit a rea by pre v ious sampli n g program m es it is hoped the currently pl a nned work will genera t e a numbe r of targets sufficient to justify a c o mbined drilling pro g ramme.

GOLD PROJECT S , VICTORIA

Metals h o lds two low impact exploration licences in west e rn Victoria ( ) . The S outh Arn a ud (EL5242) a nd Wedder b urn (EL52 4 3), projects c o ntain significant hist o ric workings t hat have received little modern an d systematic exploration.

During th e year W e dderburn a nd South Arnaud were the focus of fieldwork a nd resea r ch aimed at assessing their re s pective gold prospectivities. On bot h projects, i t is clear that there is considerable potential f o r gold min e ralisation both as an ext e nsion to hi s toric worki n gs and benea t h the broa d areas of s oil cover on e a ch licence.

==> picture [26 x 96] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

==> picture [54 x 64] intentionally omitted <==

==> picture [35 x 96] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

==> picture [54 x 64] intentionally omitted <==

==> picture [26 x 95] intentionally omitted <==

==> picture [35 x 95] intentionally omitted <==

==> picture [55 x 64] intentionally omitted <==

==> picture [54 x 64] intentionally omitted <==

Figure 9 – Location of the Wedd e rburn and S o uth Arnaud p r ojects in w estern Victori a . Yellow dots r epresent gold deposits and p rospects, a nd their distrib u tion highlights t he rich gold b e lts of Victoria.

Both Wed d erburn and South Arn a ud underw e nt requisite 25% drop-offs of thei r respective licence areas. Ext e nsive on-ground and historical as s essment of two other p rojects hel d by the C o mpany, Moyston a n d Scarsda l e, indicate d that they did not m e et the Co m pany’s crit e ria for ex p loration potential, a n d were sur r endered.

Detailed a e romagnetic surveys w e re underta k en on the Wedderbur n and Sout h Arnaud li c ences. Historic gol d mines beneath the to w n of Wedderburn are s o me of the most northerl y in Victoria. Further north within the Wedde r burn licenc e , the gold-b e aring host r ocks that ar e exposed i n town are o b scured by the ove r lying sands and clays o f the Murr a y Basin. T h e new geo p hysical sur v eys have targeted these cove r ed areas b e cause they were not e x plored duri n g the Victo r ian gold ru s h of the mi d -1800s and hold th e potential f o r a virgin g o ld discover y . The data f r om the aer o magnetic s u rveys (Figu r e 10) is

Review of Operations

Page No . 10

METALS AUSTRALIA LTD REVIEW OF OPERATIONS

of very hig h quality an d will enable identificatio n of gold ta r gets throug h out the pro j ect areas. A nalysis and interpr e tation of th e data is und e rway.

The Victori a n Goldfield s were disc o vered in th e gold rush e s of the mi d -1800s, wit h all signific a nt gold mining acti v ity ceasing by 1930. G o vernment r e cords sho w that nume r ous gold pr o spects, mi n es and occurrence s are documented within the licence a reas.

==> picture [55 x 66] intentionally omitted <==

==> picture [54 x 66] intentionally omitted <==

==> picture [55 x 66] intentionally omitted <==

==> picture [7 x 325] intentionally omitted <==

==> picture [24 x 163] intentionally omitted <==

==> picture [55 x 65] intentionally omitted <==

==> picture [54 x 65] intentionally omitted <==

==> picture [55 x 65] intentionally omitted <==

==> picture [54 x 65] intentionally omitted <==

==> picture [55 x 65] intentionally omitted <==

==> picture [24 x 163] intentionally omitted <==

==> picture [55 x 66] intentionally omitted <==

==> picture [54 x 66] intentionally omitted <==

==> picture [55 x 66] intentionally omitted <==

==> picture [54 x 66] intentionally omitted <==

==> picture [55 x 66] intentionally omitted <==

Figure 10 – Results of the magneti c surveys over the Wedderbu r n (top right) a n d South Arna u d (bottom left) projects in western Victoria.

Competent Persons Declaration The information in this release re l ating to the geol o gy and explorati o n results of the p rojects owned b y Metals Australia Ltd is based on i nformation compiled by Dr M atthew Painter, Consulting Geologist for Metals A u stralia and a par t time consultant to Metals Australiaa. Dr Painter is a member of The Australian Institute of Geos c ientists, a Reco g nised Professio n al Organisation b y the Australasi a n Joint Ore Resserves Committe e , who has sufficient experi e nce relevant to t h e style of mineralisation and type s of deposits und e r consideration a n d to the activity wwhich is being un d ertaken to qualify as a Co m petent Person a s defined in the 2 0 04 Edition of the “Australasian Co d e for Reporting o f Exploration Ressults, Mineral Res o urces and Ore Reserves”. D r Painter conse n ts to the inclusio n in this report of t he matters base d on his informati o n in the form andd context in which it appears.

Forward-Looking Statements This document m ay include forw a rd-looking state m ents. Forward-l o oking statement s include, but are not limited to, staatements concer n ing Metals Australia Ltd’s planned explorati o n programme an d other statemen t s that are not hi s torical facts. Wh e n used in this doocument, the wor d s such as "could," "plan," " estimate," "expe c t," "intend," "ma y ”, "potential," "sh o uld," and simila r expressions are forward-looking sstatements. Altho u gh Metals Australia Ltd b e lieves that its e x pectations refle c ted in these fo r ward-looking sta t ements are rea s onable, such staatements involve risks and uncertainties an d no assurance c a n be given that actual results will b e consistent with these forward-lo o king statements.

Review of Operations

Page No . 11

METALS AUSTRALIA LTD

DIRECTORS’ REPORT

The Directors present their report on the consolidated entity consisting of Metals Australia Ltd and its controlled entities for the year ended 30 June 2012.

DIRECTORS

The following were Directors of Metals Australia Ltd during the financial year (with the exception of Mr Clemen who died in July 2012) and up to the date of this report:

Hersh Solomon Majteles (Chairman) David Zukerman Alexander Clemen

Mr Michael Scivolo was appointed on the 23 July 2012 to fill the vacancy arising from the death of Mr Clemen.

PRINCIPAL ACTIVITIES

The principal continuing activities of the consolidated entity are the exploration of mineral deposits and investment.

RESULTS

The Group profit/(loss) for the financial year after providing for income tax amounted to ($1,178,651) (2011: $747,778 profit).

DIVIDENDS

Since the end of the previous financial year, no dividend has been declared or paid by the Company.

FINANCIAL POSITION

The net assets of the group have increased by $1,276,127 from $6,387,390 at 30 June 2011 to $7,663,517 at 30 June 2012.

SIGNIFICANT CHANGES

There have not been any significant changes in the state of affairs of the Group during the financial year, other than as noted in this financial report.

LIKELY DEVELOPMENTS

The Group will continue to focus on its exploration and investment activities.

INFORMATION ON DIRECTORS AND COMPANY SECRETARY

(a) Qualifications, experience and special responsibilities of Directors:-
(i) Hersh Solomon Majteles LLB

Mr Majteles is a commercial lawyer and has been in private practice in Western Australia since 1972. He has been a board member of a number of publicly listed companies involved in the mining, resources, energy and biotech sectors for over twenty five years. Mr Majteles is also a Director of Blaze International Ltd, Prime Minerals Ltd, Power Resources Ltd and Chairman of Promesa Limited.

(ii) Alexander Clemen B.Sc (Hons), FAusIMM

Mr Clemen was a Director until 23 July 2012 and was a qualified geologist with over thirty years experience practising in this field. He worked for several large international mining companies in various parts of the world and gained experience in exploring for gold, base metals, industrial

Directors’ Report

Page No . 12

METALS AUSTRALIA LTD DIRECTORS’ REPORT

minerals and diamonds. During the past three years he served as a Director of Golden Deeps Ltd and Sabre Resources Ltd.

(iii) David Zukerman

Mr Zukerman has an accounting and finance background. He has held a number of public company directorships in Australia and Asia during the past twenty five years. During the past three years he has served as a Director of Golden Deeps Ltd and Sabre Resources.

(iv) Michael Scivolo B, Com, FCPA

Mr Scivolo has extensive experience in the fields of accounting and taxation in both corporate and non-corporate entities and was appointed as a Director on 23 July 2012. He is also a Director of Victory West Metals Ltd, Blaze International Ltd, Prime Minerals Ltd, Power Resources Ltd, Metals Australia Ltd and Golden Deeps Limited.

(b) The Company Secretary was in office for the entire period, and his qualifications and experience are as follows:-

Norman Grafton FCIS

Mr Grafton has extensive experience in both Australian and international commerce, having previously been based in Singapore, Papua New Guinea and Jamaica. Prior to returning to Australia, he was Director of Finance and Company Secretary of the largest agro-industrial operation in Jamaica, on secondment from a major UK firm of corporate managers.

Name	Ordinary Shares	Options
H S Majteles	2,950,000	-
D Zukerman	-	-
M Scivolo	-	25,000

(d) Directors' interest in contracts:-

No Director has an interest, whether directly or indirectly, in a contract or proposed contract with the Company.

REMUNERATION REPORT (AUDITED) 2012

2012
Key Management				Share-based
Personnel	Short-term	Benefits	Superannuation	Payment
	Directors	Consulting		Options	Total
	Fees	Fees
	$	$		$	$
H S Majteles	58,344	-	2,700	-	61,044
A Clemen	12,000	99,250	-	-	111,250
D Zukerman	-	7,440	9,383	-	16,823
N Grafton	-	28,236	9,240	-	37,476
TOTAL	70,344	134,926	21,323	-	226,593

Directors’ Report

Page No . 13

METALS AUSTRALIA LTD

DIRECTORS’ REPORT

2011

2011
Key Management	Short-term	Benefits		Share-based
Personnel			Superannuation	Payment
	Directors	Consulting		Options	Total
	Fees	Fees
	$	$		$	$
H S Majteles	25,000	-	2,250	-	27,250
A Clemen	12,000	54,589	-	-	66,589
D Zukerman	-	6,860	8,000	-	14,680
N Grafton	-	21,846	8,154	-	30,000
TOTAL	37,000	83,295	18,404	-	138,699

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.

Directors receive a fixed fee (plus statutory superannuation where appropriate), with executive directors being remunerated for any professional service conducted for the Company. Directors did not receive any benefits in the form of share-based payments during the year under review.

There are no retirement schemes for any directors or any loans or any other type of compensation.

Board policy on the remuneration for this exploration Company is influenced by comparing fees paid to directors in other companies within the exploration industry, and then set at a level to attract qualified people, to accept the responsibilities of Directorship. No Director, executive or employee has an employment contract.

Being an exploration company, with no earnings, a relationship is yet to be established between an emolument policy and the company’s performance.

ANALYSIS OF MOVEMENT IN OPTIONS

There was no movement of options over ordinary shares in the Company held by each Company Director during the reporting period, as detailed below.

Name H S Majteles A Clemen D Zukerman	Held at 1 July 2011 $ - - - -	Granted During Year $ - - - -	Value of Options Exercised Expired In Year In Year $ $ - - - - - - - -	Sold In Year $ - - - -	Held at 30 June 2012 $ - - -
					-

No options were granted to Directors during the year under review.

Directors’ Report

Page No . 14

METALS AUSTRALIA LTD

DIRECTORS’ REPORT

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's Directors held during the year ended 30 June 2012 and the number of meetings attended by each Director.

Name	Eligible to attend	Attended
H S Majteles	6	6
A Clemen	6	6
D Zukerman	6	6

The Company does not have a formally appointed audit committee as all Directors are involved in all activities of the Company and the size and scope of operations does not warrant its formation.

RETIREMENT, ELECTION AND CONTINUATION IN OFFICE OF DIRECTORS

Alex Clemen retired by rotation as a Director at the Annual General Meeting on 30 November 2011 and was re-elected. The Directors record, with great regret, that Mr Clemen died in July 2012.

Michael Scivolo, who was appointed to fill a casual vacancy on the death of Mr Clemen on the 23 July 2012, he offers himself for election.

At the forthcoming Annual General Meeting, David Zukerman retires by rotation as a Director and offers himself for re-election.

ENVIRONMENTAL ISSUES

The Company's objective is to ensure that a high standard of environmental care is achieved and maintained on all properties. There are no known environmental issues outstanding.

EVENTS SUBSEQUENT TO BALANCE DATE

No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years

INDEMNIFYING OFFICER OR AUDITORS

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

OPTIONS

As at the date of this report, the unissued ordinary shares of Metals Australia Ltd under option are as follows:

	Grant Date	Listed/Unlisted	ASX	Date of expiry	Exercise	Number under
			Code		Price	option
15	September 2011	Listed	MLSO	30 September 2013	$0.02	163,665,000
20	January 2012	Unlisted	MLSAI	1 December 2013	$0.05	14,881,579
29	February 2012	Unlisted	MLSAI	1 December 2013	$0.05	19,905,405
22	March 2012	Unlisted	MLSAI	1 December 2013	$0.05	28,983,783
22	March 2012	Unlisted	MLSAM	14 November 2013	$0.04	6,000,000

Option holders do not have any rights to participate in any issues of shares or other interests in the company or any other entity,

There have been no unissued shares or interest under option of any controlled entity within the group during or since the reporting date.

Directors’ Report

Page No . 15

METALS AUSTRALIA LTD

DIRECTORS’ REPORT

For details o f options is s ued to dire c tors and ex e cutives as r emuneratio n , refer to R e muneration Report.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person h as applied for leave of court to bring proceedin g s on behal f of the Company or intervene in an y proceeding s to which t he Compa n y is a part y for the p u rpose of taking respo n sibility on b ehalf of th e Company f o r all or any p art of thos e proceeding s .

AUDITOR’S INDEPENDENCE DECLARATION

A copy of t h e independent auditor’ s declaration as required by section 3 07c of the C orporation s Act 2001 i s set out on p age 51.

DIRECTORS' BENEFITS

Except as d etailed in n o te 6, no Di r ector of the Company h a s received or become e ntitled to r e ceive durin g or since th e end of the previous fi n ancial year, any benefi t (other than a benefit i n cluded in the aggregat e amounts o f emolumen t s received o r due and receivable b y Directors shown in t h e accounts or the fixe d salary of a full time em p loyee of th e Company o r of a relat e d corporati o n) by reas o n of a contr a ct made b y the Company or a related corpora t ion with th e Director or with a firm of which h e is a mem b er or with a company in which he h a s a substantial financial interest.

AUDIT COMMITTEE

No Audit C o mmittee h a s been for m ed as the D irectors believe that th e Company i s not of a s ize to justif y having a s e parate Au d it Committ e e. Given t h e small siz e of the Board, the Di r ectors believe an Audi t Committee structure to be inefficien t .

NON AUDIT SERVICES

The Board o f Directors, is satisfied t hat the pro v ision of non - audit servic e s during th e year is co m patible wit h the general standard o f independe n ce for audit o rs imposed by the Cor p orations Ac t 2001. The d irectors ar e satisfied th a t the servi c es disclose d below did n ot compro m ise the ext e rnal audito r ’s independence for th e following reasons;

All n on-audit s e rvices are r e viewed and approved b y the Direct o rs prior to c o mmencem e nt to ensur e the y do not adversely affect the integrit y and objecti v ity of the auditor; and
Th e nature of t h e services provided does not com p romise the general principles relati n g to audito r ind e pendence in accordance with APE S 110: Code of Ethics for Profession a l Accountants set by th e Ac c ounting Pro f essional an d Ethical St a ndards Boa r d.

During the y ear under r e view, Gran t Thornton also provided services in r elation to ta x ation matters. Details o f the amount s paid and p ayable to th e auditor of t he compan y , Grant Thornton (WA) P artnership f or audit an d non-audit s e rvices prov i ded during the year are s et out in N o te 5 to the F inancial Sta t ements.

This report is made in accordance w ith a resolu t ion of the Directors.

==> picture [50 x 49] intentionally omitted <==

==> picture [42 x 49] intentionally omitted <==

D Zukerma n DIRECTO R

Dated this t w enty sixth d ay of September 2012 Perth, Wes t ern Australi a

Directors’ Report

Page No . 16

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

Notes Revenue Interest earned Re-instatement of Tenement 11 Other income Expenditure Change in fair value of investments Loss on disposal of assets Impairment of exploration costs Management fees Directors’ fees and services Stock exchange fees Administration costs Consulting Fees Other operating costs Options expense Depreciation expense Profit/(loss) before income tax Income tax benefit 4 Profit/(loss) after income tax Attributable to: Minority interest Members of the parent entity 15 Other Comprehensive Income: Exchange differences on translating foreign controlled entities Total Comprehensive Profit/(loss) for the year Total Comprehensive Income attributable to: Minority interest 16 Members of the parent entity Total Comprehensive Income Earnings per share Basic and diluted profit/(loss) per share 17	Consolidated 2012 2011 $ $ 87,835 125,878 - 1,265,080 - 35,178 87,835 1,426,136 259,696 (86,325) - 40,592 22,178 13,726 246,779 238,154 89,867 77,284 40,171 23,956 176,879 176,131 123,465 - 236,960 166,584 70,800 - 49,817 28,256	Consolidated 2012 2011 $ $ 87,835 125,878 - 1,265,080 - 35,178 87,835 1,426,136 259,696 (86,325) - 40,592 22,178 13,726 246,779 238,154 89,867 77,284 40,171 23,956 176,879 176,131 123,465 - 236,960 166,584 70,800 - 49,817 28,256
		1,426,136 (86,325) 40,592 13,726 238,154 77,284 23,956 176,131 - 166,584 - 28,256
	1,316,612 (1,228,777) (50,126) (1,178,651) - (1,178,651) (102,947) (1,281,598) - (1,281,598) (1,281,598) 2012 Cents (0.17)	678,358
		747,778 -
		747,778
		- 747,778 (44,540)
		703,238
		- 703,238
		703,238
		2011 Cents 0.11

The statement above should be read in conjunction with the accompanying notes.

Consolidated Statement of Comprehensive Income Page No . 17

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

Notes CURRENT ASSETS Cash and cash equivalents 7 Trade and other receivables 8 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment 9 Financial assets 10 Exploration and evaluation expenditure 11 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 12 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 13 Share option reserve 14 Foreign currency translation reserve Accumulated losses 15 PARENT EQUITY INTEREST Minority interest 16 TOTAL EQUITY	Consolidated 2012 2011 $ $ 2,216,314 1,659,752 75,560 57,740 2,291,874 1,717,492 49,506 55,461 288,379 548,076 5,163,431 4,197,560 5,501,316 4,801,097 7,793,190 6,518,589 129,673 131,199 129,673 131,199 129,673 131,199 7,663,517 6,387,390 24,613,601 22,126,676 2,351,206 2,280,406 271,472 374,419 (19,572,762) (18,394,111) 7,663,517 6,387,390 - - 7,663,517 6,387,390	Consolidated 2012 2011 $ $ 2,216,314 1,659,752 75,560 57,740 2,291,874 1,717,492 49,506 55,461 288,379 548,076 5,163,431 4,197,560 5,501,316 4,801,097 7,793,190 6,518,589 129,673 131,199 129,673 131,199 129,673 131,199 7,663,517 6,387,390 24,613,601 22,126,676 2,351,206 2,280,406 271,472 374,419 (19,572,762) (18,394,111) 7,663,517 6,387,390 - - 7,663,517 6,387,390
		1,717,492
		55,461 548,076 4,197,560
		4,801,097

		6,518,589
		131,199
		131,199
		131,199
		6,387,390
		22,126,676 2,280,406 374,419 (18,394,111)
		6,387,390 -
		6,387,390

The statement above should be read in conjunction with the accompanying notes.

Consolidated Statement of Financial Position Page No . 18

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012

CONSOLIDATED ENTITY Balance as at 1 July 2010 Total other comprehensive income for the year Shares/options issued Loss attributable to members of parent entity Balance as at 30 June 2011 Total other comprehensive income/(loss) for the year Shares/options issued Share Issue Costs Profit/(loss) attributable to members of parent entity Balance as at 30 June 2012	Issued Capital $ Option Reserve $ Foreign Currency Translation Reserve $ Accumulated Losses $ Total $ 22,010,523 2,265,406 418,959 (19,141,889) 5,552,999 - - (44,540) - (44,540) 116,153 15,000 - - 131,153 - - - 747,778 747,778
	22,126,676 2,280,406 374,419 (18,394,111) 6,387,390 - - (102,947) - (102,947) 2,512,400 70,800 - - 2,583,200 (25,475) (25,475) - - - (1,178,651) (1,178,651)
	24,613,601 2,351,206 271,472 (19,572,762) 7,663,517

The statement above should be read in conjunction with the accompanying notes.

Consolidated Statement of Changes in Equity

Page No . 19

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

Notes Cash flow from operating activities Payments to suppliers Sundry Income Interest received Net cash used in operating activities 18(a) Cash flow from investing activities Exploration and evaluation expenditure Purchase of property, plant and equipment Purchase of shares Net cash used in from investing activities Cash flow from financing activities Proceeds from issue of shares Share issue costs Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year Effect of exchange rates on cash holdings in foreign currencies Cash and cash equivalents at the end of the financial year 7	Consolidated 2012 2011 $ $ (797,645) (677,045) 50,126 35,178 90,012 99,959 (657,507) (541,908) (1,096,916) (488,366) (43,862) (94,843) - (86,667) (1,140,778) (669,876) 2,374,400 116,153 (25,475) 15,000 2,348,925 131,153 550,640 (1,080,631) 1,659,752 2,737,856 5,919 2,527 2,216,314 1,659,752	Consolidated 2012 2011 $ $ (797,645) (677,045) 50,126 35,178 90,012 99,959 (657,507) (541,908) (1,096,916) (488,366) (43,862) (94,843) - (86,667) (1,140,778) (669,876) 2,374,400 116,153 (25,475) 15,000 2,348,925 131,153 550,640 (1,080,631) 1,659,752 2,737,856 5,919 2,527 2,216,314 1,659,752
		(541,908)
		(488,366) (94,843) (86,667)
		(669,876)
		116,153 15,000
		131,153
		(1,080,631) 2,737,856 2,527
		1,659,752

The statement above should be read in conjunction with the accompanying notes.

Notes to the Financial Statements Page No . 20

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The financial report of Metals Australia Ltd and its subsidiaries Karrilea Holdings Pty Ltd and Metals Namibia (Pty) Ltd (the Group) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the Directors on 26 September 2012.

Metals Australia Ltd is a company incorporated and domiciled in Australia, limited by shares which are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the Group are mineral exploration and investment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and complies with other requirements of the law. The financial report has also been prepared on an accruals basis and on a historical cost basis, except for financial assets and liabilities, which have been measured at fair value.

The financial report is presented in Australian Dollars.

The financial statements of the Company and Group have been prepared on a going concern basis which anticipates the ability of the Company and Group to meet its obligations in the normal course of the business. It is considered that the Company should obtain sufficient funds from capital raising to enable it to meet its obligations. If the Company is unable to continue as a going concern then it may be required to realise its assets and extinguish its liabilities, other than in the normal course of business and amounts different from those stated in the financial statements.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).

(c) Changes in accounting policies on initial application of Accounting Standards

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2011:

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project;
AASB 2009-8 Amendments to Australian Accounting Standards – Group cash-settled Sharebased Payment Transactions;
AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues;
AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments;
AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19 ; and
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project.

The adoption of these standards did not have any impact on the amounts for the current period or prior periods.

(d) New Accounting standards and interpretation

The AASB has issued new, revised and amended standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Group follows:

Notes to the Financial Statements Page No . 21

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

The Group does not anticipate early adoption of any of the above reporting requirements and does not expect these requirements to have any material effect on the Group’s financial Statements.

New/revised pronounce ment	Superseded pronouncement	Explanation of amendments	Effective date (i.e. annual reporting periods ending on or after)	Example disclosure of impact of new standard on the financial report (if standard is not adopted early)	Related pronouncem ent which must be early adopted if this standard is early adopted	Likely impact
AASB 9 Financial Instruments AASB 2009- 11 Amendments to Australian Accounting Standards arising from AASB 9	AASB 139 Financial Instruments: Recognition and Measurement (part)	AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. AASB 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in AASB 139 and removes the impairment requirement for financial assets held at fair value. In addition, the majority of requirements from AASB 139 for the classification and measurement of financial liabilities has been carried forward unchanged, except in relation to own credit risk where an entity takes the option to measure financial liabilities at fair value. AASB 9 requires the amount of the change in fair value due to changes in the entity’s own credit risk to be presented in other comprehensive income (OCI), unless there is an accounting mismatch in the profit or loss, in which case all gains or losses are to be presented in the profit or loss. The requirements from AASB 139 related to the derecognition of financial assets and liabilities have been incorporated unchanged into AASB 9.	31 December 2013	AASB 9 amends the classification and measurement of financial assets; the effect on the entity will be that more assets are held at fair value and the need for impairment testing has been limited to assets held at amortised cost only. Minimal changes have been made in relation to the classification and measurement of financial liabilities, except ‘own credit risk’ instruments. The effect on the entity will be that the volatility in the profit or loss will be moved to the OCI, unless there is an accounting mismatch.	AASB 2009- 11 AASB 2010-7	Depending on assets held, there may be significant movement of assets between fair value and cost categories and ceasing of impairment testing on available for sale assets. If the entity holds any ‘own credit risk’ financial liabilities, the fair value gain or loss will be incorporated in the OCI, rather than profit or loss, unless accounting mismatch.
AASB 124 Disclosures AASB 2009- 12 Amendments to Australian Accounting Standards arising from AASB 124.	AASB 124 Related Party Disclosures	This revision amends the disclosure requirements for government related entities and the definition of a related party.	31 December 2011	Since the entity is not a government related entity; there is not expected to be any changes arising from this standard.	AASB 2009- 12	Unlikely to have significant impact in Australia.
AASB 2010- 4 Further Amendments to Australian Accounting Standards arising from	None	Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments. Clarifies that an entity will present an analysis of other	31 December 2011	Given the number of standards amended by AASB 2010-4, an example disclosure is not included. Entities assess the impact ofeachofthe	None	Varies depending on relevance, however impact is unlikely to be significant.

Notes to the Financial Statements Page No . 22

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

the Annual Improvement s Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]		comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions. Clarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken in account.		amendments on their organisation.
AASB 2010- 6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (AASB 1 & AASB 7)	None	The Standard amends the disclosures required, to help users of financial statements evaluate the risk exposures relating to more complex transfers of financial assets (eg. securitisations) and the effect of those risks on an entity’s financial position.	30 June 2012	The Amendments will introduce more extensive and onerous quantitative and qualitative disclosure requirements for de- recognition of financial assets.	AASB 7	More extensive and onerous quantitative and qualitative disclosure requirements for de-recognition of financial assets.
AASB 2010- 7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretation s 2, 5, 10, 12, 19 & 127]	None	The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: ► The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ► The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.	31 December 2013	This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9.	AASB 9 AASB 2009- 11	Unlikely to have significant impact in Australia.
Consolidated Financial Statements	IAS 27	IFRS 10 establishes a new control model that applies to all entities. It replaces parts of IAS 27_Consolidated and Separate_ Financial Statements_dealing with the accounting for consolidated financial statements and SIC-12_Consolidation – Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, theimpact of	31 December 2013	It introduces a new, principle-based definition of control which will apply to all investees to determine the scope of consolidation. Traditional control assessments based on majority ownership of voting rights will very rarely be affected. However, 'borderline' consolidation decisions will need to be reviewed and some will need to be changed taking into consideration potential	IFRS 11 IFRS 12 IAS 27 IAS 28 IAS 31	Entities most likely to be impacted are those that: - have significant, but not a majority equity interests in other entities; - hold potential voting rights over investments, such as options or convertible debt.

Notes to the Financial Statements Page No . 23

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

		potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group.		voting rights and substantive rights.
Disclosure of Interests in Other Entities	IAS 27 IAS 28 IAS 31	IFRS 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.	31 December 2013	IFRS 12 combines the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosure standard. It aims to provide more transparency on 'borderline' consolidation decisions and enhance disclosures about unconsolidated structured entities in which an investor or sponsor has involvement.	None	There are some additional enhanced disclosures centred around significant judgements and assumptions made around determining control, joint control and significant influence.
Fair Value Measuremen t	None	IFRS 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this definition may result in different fair values being determined for the relevant assets. IFRS 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.	31 December 2013	IFRS 13 has been created to:  establish a single source of guidance for all fair value measurements;  clarify the definition of fair value and related guidance; and  enhance disclosures about fair value measurements (new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value).	None	For financial assets, IFRS 13's guidance is broadly consistent with existing practice. It will however also apply to the measurement of fair value for non- financial assets and will make a significant change to existing guidance in the applicable standards.

The Group does not anticipate early adoption of any of the above reporting requirements and does not expect these requirements to have any material effect on the Group’s Financial Statements.

(e) Basis of consolidation

The consolidated financial statements comprise the financial statements of Metals Australia Ltd and its subsidiaries, Karrilea Holdings Pty Ltd and Metals Namibia (Pty) Ltd ('the Group').

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

All intercompany balances and transactions, including unrealised profits arising from intra-group

Notes to the Financial Statements Page No . 24

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Metals Australia Ltd has control.

Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately for the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

(f) Interest in joint venture operation

The Group’s interest in any joint venture operation is accounted for by recognising the Group's assets and liabilities from the joint venture, as well as expenses incurred by the Group and the Group's share of income earned from the joint venture, in the consolidated financial statements.

(g) Foreign currency translation

Both the functional and presentation currency of Metals Australia Ltd and its Australian subsidiary is the Australian Dollar (A$). The functional currency of the Namibian subsidiary is the Namibian Dollar (N$).

Cash remittances from the parent entity to the Namibian subsidiary are either sent in Australian dollars or converted by the remitting bank into South African Rand (Rand) and then converted to Namibian dollars using the same rate of exchange. That is, once the A$ is translated to Rand by the bank, which then converts it to the same balance in Namibian dollars. As such, foreign currency transactions are initially recorded in the functional currency at the date of the transaction using the Rand. Monetary assets and liabilities denominated in the foreign currencies are retranslated at the rate of exchange at the reporting date.

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

All differences in the consolidated financial report are taken to the Statement of Comprehensive Income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

As at the reporting date the assets and liabilities of any overseas subsidiaries would be translated into the presentation currency of Metals Australia Ltd at the rate of exchange ruling at the reporting date and the Statement of Comprehensive Income are translated at the weighted average exchange rates for the period.

The exchange differences arising on the retranslation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Statement of Comprehensive Income.

Notes to the Financial Statements Page No . 25

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

(h) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Plant and equipment – over 3 to 5 years

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the period the item is derecognised.

(i) Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised.

Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Notes to the Financial Statements Page No . 26

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

(j) Impairment of non-financial assets

At each reporting date, the Group assesses whether there is any indication that a non-financial asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(k) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-tomaturity investments, or available-for-sale financial assets. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial yearend.

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. that date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or conversion in the market place.

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

Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payment that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Notes to the Financial Statements Page No . 27

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

(iv) Available-for-sale-investments

Available-for-sale-investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition, available-for-sale investments are measured at fair value with gains or losses being recognised as a separate economic component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

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 the end of each reporting period, 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 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.

(l) Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development, or sale, 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 on a discounted basis.

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

(m) Trade and other receivables

Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that the Group will not be able

Notes to the Financial Statements Page No . 28

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

to collect the debts. Bad debts are written off when identified.

(n) Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(o) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(p) Share-based payment transactions

( i) Equity settled transactions:

The Group provides benefits to Directors and consultants of the Group in the form of share-based payments whereby personnel render services in exchange for shares.

The cost of these equity-settled transactions was measured by reference to the fair value of the equity instruments at the date on which they were granted. The fair value was determined using the Black Scholes formula.

In valuing equity-settled transactions, no account was taken of any performance conditions, other than conditions linked to the price of the shares of Metals Australia Ltd (market conditions). The cost of equity-settled transactions was recognised, together with the corresponding increase in equity, on the date of grant of the options.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(ii) Cash settled transactions:

The Group does not provide benefits to employees in the form of cash-settled share based payments.

Any cash-settled transactions would be measured initially at fair value at the grant date using the Black-Scholes formula taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date with changes in fair value recognised in profit or loss.

(q) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Notes to the Financial Statements Page No . 29

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

Dividends

Revenue is recognised when the shareholders’ right to receive the payment is established.

(r) Income tax

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised:

except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and,
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the Statement of Comprehensive Income.

(s) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

Notes to the Financial Statements Page No . 30

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

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

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(t) Trade and other payables

Trade and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

(u) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(v) Earnings per share

Basic earnings per share is calculated as net profit/(loss) attributable to members of the parent, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit/(loss) attributable to members of the parent, adjusted for:

the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(w) Comparatives

Comparatives are reclassified where necessary to be consistent with the current year’s disclosures.

3. Significant Accounting Judgments, Estimates and Assumptions

In applying the Group’s accounting policies, management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(i) Significant accounting judgments include:

(a) Classification of and value of investments The Group has decided to classify investments in listed securities as “held for trading” investments and movements in fair value are recognised directly in the Statement of Comprehensive Income. The fair value of listed shares has been determined by reference to published price quotations in an active market.

Notes to the Financial Statements Page No . 31

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

(b) Provision in and loans to subsidiaries

Investments in and loans to subsidiaries are fully provided for until such time as subsidiaries are in a position to repay loans.

(c) Exploration expenditure

The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet concluded. Such capitalised expenditure is carried at the end of the reporting period at $5,163,431.

(ii) Significant accounting estimates and assumptions include:
(a) Share-based payment transactions

The Group measures the cost of equity-settled transactions with Directors, employees and consultants by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black Scholes formula, with the assumptions detailed in note 6. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

The Group measure the cost of cash-settled share-based payments at fair value at the grant date using the Black-Scholes formula taking into account the terms and conditions upon which the instruments were granted.

(b) Provision for rehabilitation

Where applicable, the Group makes provision for material restoration obligations. The amount recognised includes the cost of reclamation and site rehabilitation after taking into account any restoration works which are carried out during exploration. The provision for rehabilitation costs is determined from an estimate of future costs which may be incurred in rehabilitating exploration sites.

(c) Estimation of useful lives of assets

The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for plant and equipment) and turnover policies (for motor vehicles). In addition, the condition of assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful life are made when considered necessary.

Notes to the Financial Statements Page No . 32

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

4. Income Tax

4. Income Tax
The prima facie tax on profit/(loss) from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax on profit/(loss) from ordinary activities before income tax at 30% (2011: 30%) follows: Consolidated Add: Tax effect of: Other non-allowable items Other assessable items Provisions Deferred tax asset not brought to account Recoupment of prior years losses not previously brought to account Less: Tax effect of: Research and development tax offset Effect of overseas tax rate Income tax attributable to entity Unrecognised Deferred Tax Assets - Tax losses: operating losses - Temporary differences Unrecognised Deferred Tax Liabilities The benefits will only be obtained if: -	Consolidated 2012 2011 $ $ (368,633) 224,333 131,379 14,730 - (246,160) - - - - 244,221 (7,177) (50,126) -
	(6,967) 14,274
	(50,126) -
	3,194,754 2,910,153 4,500 3,150
	3,199,254 2,913,303
	(906,447) (818,093)

(i) The companies derive future assessable income of a nature and of an amount sufficient to enable the benefit from the deduction for the losses to be realised; (ii) The companies continue to comply with the conditions for deductibility purposes imposed by the Law; and

(iii) No changes in tax legislation adversely affect the companies in realising the benefits from the deductions for the losses.

Notes to the Financial Statements Page No . 33

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

5. Auditor’s Remuneration

5. Auditor’s Remuneration
Remuneration of the auditor of the parent entity, Grant Thornton (WA) Partnership - auditing or reviewing the financial report - taxation services provided by a related practice of the auditor Remuneration of other auditors of subsidiaries for: - auditing or reviewing the financial reports of subsidiaries	2012 $ 22,661 12,000 9,025 43,686	2011 $ 21,959 5,200 11,070
		38,229

6. Interests of Key Management Personnel (KMP)

Refer to the Remuneration Report contained in the Directors’ Report for Details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2012.

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

Short-term employee benefits Superannuation Share-based payments	2012 $ 205,270 21,323 70,800 297,393	2011 $ 120,295 18,404 -
		138,699

KMP Options and Rights Holdings

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

30 June 2012 H S Majteles A Clemen D Zukerman N Grafton K Munro Total 30 June 2011 H S Majteles A Clemen D Zukerman N Grafton Total	Balance 1 July 2011 Granted as Compensation Options Exercised Options Expired Other changes during the year Balance 30 June 2012 - - - - - - - - - - - - - - - 350,000 - - - (125,000) 225,000 - 5,000,000 - - - 5,000,000
	350,000 5,000,000 - - (125,000) 5,225,000
	Balance 1 July 2010 Granted as Compensation Options Exercised Options Expired Other changes during the year Balance 30 June 2011 1,400,000 - - (1,400,000) - 1,400,000 - - (1,400,000) - 1,400,000 - - (1,400,000) - 1,400,000 - - (1,400,000) 350,000 350,000
	5,600,000 - - (5,600,000) 350,000 350,000

Notes to the Financial Statements Page No . 34

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

KMP Shareholdings

The number of ordinary shares in Metals Australia Ltd held by each KMP during the financial year is as follows:

30 June 2012 H S Majteles A Clemen D Zukerman N Grafton K Munro Total 30 June 2011 H S Majteles A Clemen D Zukerman N Grafton Total		Balance 1 July 2011 Granted as Compensation Issued on exercise of options during the year Other changes during the year Balance 30 June 2012 2,950,000 - - - 2,950,000 450,010 - - - 450,010 - - - - - 350,000 - - - 350,000 - - - - -
		3,750,010 - - 3,750,010
		Balance 1 July 2010 Granted as Compensation Issued on exercise of options during the year Other changes during the year Balance 30 June 2011 2,950,000 - - - 2,950,000 450,010 - - - 450,010 - - - - - - - - 350,000 350,000
		3,400,010 - - 350,000 3,750,010

There are no retirement schemes for any Directors or any loans or any other type of compensation.

Directors’ fees are paid on a quarterly basis. Consulting fees for professional services are paid as events occur.

7 . Cash and Cash Equivalents

Represented by Cash at bank Bank term deposits Trade and Other Receivables Current Other debtors	Consolidated 2012 2011 $ $ 66,314 159,752 2,150,000 1,500,000 2,216,314 1,659,752 75,560 57,740	Consolidated 2012 2011 $ $ 66,314 159,752 2,150,000 1,500,000 2,216,314 1,659,752 75,560 57,740
		1,659,752
		57,740

8. Trade and Other Receivables

Notes to the Financial Statements Page No . 35

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

9. Plant and Equipment

Plant and equipment, at cost Less: accumulated depreciation Movement: Opening written down value Additions Disposals Depreciation Closing written down value 10. Other financial assets Financial assets at fair value through profit or loss 11. Exploration and Evaluation Expenditure Opening balance Reversal/(Provision) for impairment Expenditure for the year Impairment of exploration expenditure	Consolidated 2012 2011 $ $ 194,169 180,692 (144,663) (125,231) 49,506 55,461 55,461 29,467 43,862 92,097 - (37,847) (49,817) (28,256) 49,506 55,461 288,379 548,076 4,197,560 2,504,909 - 1,265,080 984,518 441,297 (18,647) (13,726) 5,163,431 4,197,560	Consolidated 2012 2011 $ $ 194,169 180,692 (144,663) (125,231) 49,506 55,461 55,461 29,467 43,862 92,097 - (37,847) (49,817) (28,256) 49,506 55,461 288,379 548,076 4,197,560 2,504,909 - 1,265,080 984,518 441,297 (18,647) (13,726) 5,163,431 4,197,560
		55,461
		29,467 92,097 (37,847) (28,256)
		55,461
		548,076
		2,504,909 1,265,080 441,297 (13,726)
		4,197,560

The company regained title to its Namibian tenements in 2011, and reversed the provision for impairment. The company's Australian exploration properties may be subject to claim(s) under native title, or contain sacred sites or sites of significance to Aboriginal people. As a result exploration properties or areas within the tenement may be subject to exploration and/or mining restrictions or incur a liability for compensation. It is not possible to quantify these restrictions and liabilities at this time.

12. Trade and other Payables

Current Payables	129,673 131,199

13. Issued Capital

The Company’s capital consists of Ordinary Shares. The Company does not have a limited amount of authorised share capital. The Shares have no par value and are entitled to participate in dividends and the proceeds on any winding up of the Company in proportion to the number of Shares held. At shareholders’ meetings each fully paid ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

Notes to the Financial Statements Page No . 36

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

The following movement in ordinary share capital of the Company occurred during the last two years.

Date Details 1 July 2010 Balance 15 September 2010 Shares issued 30 June 2011 Balance 5 January 2012 Shares issued 20 January 2012 Shares issued 29 February 2012 Shares issued 22 March 2012 Shares issued 22 March 2012 Shares issued 29 March 2012 Capital Raising Costs 30 June 2012 Balance	Number of Shares Issue Price (cents) 669,608,765 13,665,000 0.85 683,273,765 5,000,000 2.3 29,763,157 1.9 19,905,405 3.7 1,000,000 2.3 28,983,783 3.7 - - 767,926,110	Amount $ 22,010,523 116,153 22,126,676 115,000 565,500 736,500 23,000 1,072,400 (25,475)
		24,613,601

14. Share Option Reserve

Date Details 1 July 2010 Balance 15 September 2010 Options granted 15 September 2010 Options granted 31 December 2010 Options expired 30 June 2011 Balance 20 January 2012 Options granted 29 February 2012 Options granted 22 March 2012 Options granted 22 March 2012 Options granted 30 June 2012 Balance	Number of Options Unit Price (cents) 28,400,000 150,000,000 0.01 13,665,000 - (28,400,000) 163,665,000 14,881,579 - 19,905,405 - 28,983,783 - 6,000,000 - 233,435,767	Amount $ 2,265,406 15,000 - - 2,280,406 - - - 70,800
		2,351,206

There were three classes of options at year end:

(i) 163,665,000 options (MLSOA) expiring on 30 September 2013 with an exercise price of 2 cents per option. These options were previously unlisted, but have been tradeable since 26 March 2012.
(ii) 63,770,767 unlisted options (MLSAI) expiring on 1 December 2013 with an exercise price of 5 cents per option.
(iii) 6,000,000 unlisted options (MLSAM) expiring on 14 November 2013 with an exercise price of 4 cents per option.

The weighted average remaining contractual life of options outstanding at year end was 1.30 years.

Notes to the Financial Statements Page No . 37

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

Capital Management

Management controls the capital of the group in order to maintain a good debt to equity ratio, and to ensure that the group can fund its operations and continue as a going concern. The group’s debt and capital includes ordinary share capital, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include distributions to shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the

group since the prior year.

15. Accumulated Losses

Accumulated losses at the beginning of the year Profit/(loss) for year Accumulated losses at the end of the financial year Minority Interest Comprises: Share capital Accumulated losses		Consolidated 2012 2011 $ $ (18,394,111) (19,141,889) (1,178,651) 747,778 (19,572,762) (18,394,111) 2 2 (2) (2) - -	Consolidated 2012 2011 $ $ (18,394,111) (19,141,889) (1,178,651) 747,778 (19,572,762) (18,394,111) 2 2 (2) (2) - -
			(18,394,111)
			2 (2)
			-

16. Minority Interest

The parent company has taken over the losses of its subsidiaries as there is no firm commitment from the minority shareholders to provide additional funding to the subsidiary.

17. Earnings per Share

Weighted average number of shares on issue during the financial year used in the calculation of basic earnings per share Basic and diluted profit/(loss) per share – cents	2012 2011 Number Number 713,214,938 680,428,450 (0.17) 0.11

Notes to the Financial Statements Page No . 38

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

18(a). Cashflow Information

Reconciliation to Statement of Cash Flows

). Cashflow Information Reconciliation to Statement of Cash Flows
Operating profit/(loss) after income tax Non-cash items in profit/(loss) Share based payments expense Write back of exploration expenditure Impairment of Exploration and evaluation expenditure Revaluation of shares Option expensed Depreciation Loss on disposal of property, plant and equipment Changes in assets and liabilities Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Net cash flows (used in) operating activities	Consolidated 2012 2011 $ $ (1,178,651) 747,778 138,000 22,178 (1,265,080) - 13,726 259,696 (86,325) 70,800 - 49,817 28,256 - 40,592 (17,820) (22,435) (1,527) 1,580 (657,507) (541,908)
		(541,908)

18(b). Non cash share based payments

The following non-cash share based payments were made during the year under review:

(i) 5,000,000 shares were issued to the Company’s barrister in relation to the Namibian court proceedings relating to the successful outcome of the proceedings,
(ii) 1,000,000 shares and 1,000,000 options (exercisable at 4 cents at any time up to 14 November 2013) were issued to a Namibian employee as an incentive, and
(iii) 5,000,000 options (exercisable at 4 cents at any time up to 14 November 2013) were issued to the Company’s Exploration Manager as an incentive.

Notes to the Financial Statements Page No . 39

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

19. Financial Instruments

(a) Interest Rate Risk

The consolidated 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 those financial assets and financial liabilities, is as follows:

Financial Assets Cash and cash equivalents Loans and Receivables Held for trading investments Total Financial Assets Financial Liabilities (at amortised cost) Trade and other payables Net Financial Assets	Floating Interest Rate Non-Interest Bearing Total 2012 $ 2011 $ 2012 $ 2011 $ 2012 $ 2011 $ 0.00% - 6.11% 0.00% - 6.11% 2,216,314 1,659,752 - - 2,216,314 1,659,752 - - 75,560 57,740 75,560 57,740 - - 288,379 548,076 288,379 548,076
	2,216,314 1,659,752 363,939 605,816 2,580,253 2,265,568
	- - (129,673) (131,199) (129,673) (131,199)
	2,216,314 1,659,752 234,266 474,617 2,450,580 2,134,369

Reconciliation of Financial Assets to Net Assets

Net financial assets Exploration and evaluation expenditure Plant & equipment	Consolidated 2012 2011 $ $ 2,450,580 2,134,369 5,163,431 4,197,560 49,506 55,461 7,663,517 6,387,390	Consolidated 2012 2011 $ $ 2,450,580 2,134,369 5,163,431 4,197,560 49,506 55,461 7,663,517 6,387,390
		6,387,390

(b) 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 of those assets, net of any provision for doubtful debts, as disclosed in the Statement of Financial Position and notes to the financial report.

The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity.

(c) Net Fair Values

The carrying amount of financial assets and financial liabilities recorded in the financial statements represent their respective net fair values determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.

(d) Financial Risk Management

The Group’s financial instruments consist mainly of deposits with recognised banks, investments in bank bills up to 90 days, accounts receivable and accounts payable, and loans to subsidiaries. Liquidity is managed, when sufficient funds are available, by holding sufficient funds in a current account to service current obligations and surplus funds invested

Notes to the Financial Statements Page No . 40

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

in bank bills. The Directors analyse interest rate exposure and evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The main risks the Group is exposed to through its financial instruments are the depository banking institution itself, holding the funds, and interest rates. The Group’s credit risk is minimal, as being an exploration company, no goods are sold, or services provided, for which consideration is claimed.

(e) Liquidity Risk

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

preparing forward looking cash flow analysis in relation to its operational, investing and financing activities;
maintaining a reputable credit profile;
managing credit risk related to financial assets;
only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
(f) Sensitivity Analysis

Interest Rate Risk, Foreign Currency Risk and Price Risk

The group has performed sensitivity analysis relating to its exposure to interest rate risk, foreign currency risk and price 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

At 30 June 2012, 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:

		Consolidated	Consolidated
		2012	2011
		$000	$000
Change	in profit/(loss)
-	Increase in interest rate by 2%	38	55
-	Decrease in interest rate by 2%	(38)	(55)
Change	in equity
-	Increase in interest rate by 2%	38	55
-	Decrease in interest rate by 2%	(38)	(55)

Foreign Currency Risk Sensitivity Analysis

There is minimal foreign currency risk as insignificant balances of foreign currency are held.

The tables below reflect an undiscounted contractual maturity analysis for financial liabilities.

Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward.

Notes to the Financial Statements Page No . 41

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

Consolidated Group	Within	1	Year	1 to	5	Years	Over 5 Years	Over 5 Years	Total	Total
	2012		2011	2012		2011	2012	2011	2012		2011
	$		$	$		$	$	$	$		$
Financial Liabilities - Due for Payment
Trade and other payables	129,673		131,199		-	-	-	-	129,673		131,199
Total expected outflows	129,673		131,199		-	-	-	-	129,673		131,199
Financial Assets - Cash Flows Realisable
Cash and cash equivalents	66,314		159,752		-	-	-	-	66,314		159,752
Bank deposits over 3 months	2,150,000	1,500,000			-	-	-	-	2,150,000	1,500,000
Receivables	75,560		57,740		-	-	-	-	75,560		57,740
Held-for-trading investments	-		-	288,379		548,076	-	-	288,379		548,076
Total anticipated inflows	2,291,874	1,717,492		288,379		548,076	-	-	2,580,253	2,265,568

Net (outflow)/inflow on financial instruments	2,162,201	1,586,293		288,379		548,076	-	-	2,450,580	2,134,369

(f) Price risk

Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors for commodities.

The Group is also exposed to securities price risk on investments held for trading or for medium to longer terms. Such risk is managed through diversification of investments across industries and geographical locations.

Financial Instruments Measured at Fair Value

The financial instruments recognised at fair value in the Statement of Financial Position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels:

quoted prices in active markets for identical assets or liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

Consolidated Group 2012 Financial assets Financial assets at fair value through profit or loss:- Investments: held for trading	Level 1 Level 2 Level 3 Total $000 $000 $000 $000 288 - - 288
	288 - - 288

2011

Financial assets

Financial assets at fair value through profit or loss:-

Notes to the Financial Statements Page No . 42

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

Investments: held for trading

	548	-	-	548
	548	-	-	548

Included within Level 1 of the hierarchy are listed investments. The fair values of these financial assets have been based on the closing quoted bid prices at reporting date, excluding transaction costs.

20. Investment in controlled entities

Name of Entity	Country of	Class	Equity	Equity	Book Value	Book Value		Contribution to	Contribution to
	Incorporation	of	Holding		of Investment			Consolidated	Result
		Shares	(%)
			2012	2011	2012	2011		2012	2011
			%	%	$	$		$	$
Karrilea Holdings Pty Ltd	Australia	Ordinary	80	80		-	-	-	-
Metals Namibia (Pty) Ltd	Namibia	Ordinary	100	100		-	-	(174,178)	356,833

21. Related Parties

The Groups related parties include its subsidiaries, key management and others as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were received or given.

			Year ended	30 June 2012	Year ended 30	June 2011
		Nature Of
Related Party	Relationship	Transaction	Transaction	Balance	Transaction	Balance
Karrilea Holdings		Exploration
Pty Ltd	Subsidiary	assets	229,044	3,185,488	103,444	2,956,444
Metals Namibia		Exploration
(Pty) Ltd	Subsidiary	assets	510,492	1,858,905	400,756	1,551,612
Karrilea Holdings
Pty Ltd	Subsidiary	Provisions	(229,044)	(3,185,488)	(103,444)	(2,956,444)
Metals Namibia
(Pty) Ltd	Subsidiary	Provisions	(510,492	(1,858,905)	(400,756)	(1,551,612)
Sabre Resources	Common	Employee
Limited	directorship	Costs	66,998	(10,023)	(39,067)	(6,618)
Golden Deeps	Common	Employee
Limited	directorship	Costs	59,010	(2,468)	(19,658)	(1,866)

All transactions with Directors are disclosed in Note 6.

22. Operating Segments

Segment Information

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (Chief Operating decision makers) in assessing performance and determining the allocation of resources. As the Group is focused on mineral exploration, the Board monitors the Group based on actual versus budgeted exploration expenditure incurred by area of interest. The internal reporting framework is the most relevant to assist the Board with making decisions regarding the Group and its ongoing exploration activities, while also taking into consideration the results of exploration work that has been performed to date.

Notes to the Financial Statements Page No . 43

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

The Company is managed on the basis of area of interest. Operating segments are therefore determined on the same basis.

Segments

The three reportable segments are as follows:

(i) Western Australian Base Metal Projects;

(ii) Victorian Gold Projects; and (iii) Namibian Uranium Projects.

Basis of Accounting for purposes of reporting by operating segments

Accounting Policies Adopted

All amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

There are no inter-segment transactions. Segment assets are clearly identifiable on the basis of their nature. Segment liabilities include trade and other payables and the provision for rehabilitation.

Unallocated items

Corporate costs are not considered core operations of any segment.

Comparative information

This is the first reporting period in which AASB 8: Operating Segments has been adopted. Comparative information has been restated to conform to the requirements of the Standard.

Segment Performance

Segment Performance
2012 Western Australian Base Metals $ *Revenue from external sources* Unallocated - Interest revenue Unallocated - Gain/(loss) on investments Total Group Revenue Segment Profit/(loss) - Unallocated items - corporate charges Total Group profit/(loss) Segment Assets 2,805,903 Unallocated - cash, receivables, plant & equipment Total Group Assets Segment Liabilities Unallocated - corporate trade payables 123,557 Total Group Liabilities	Victorian Gold $ - 180,101 -	Namibian Uranium $ (174,178) 2,465,806 6,116		Total $ 87,835 (259,696)

			(171,861) (174,178) (1,004,473)
			(1,178,651)
			5,451,810 2,341,380
			7,793,190
			129,673
			129,673

Notes to the Financial Statements Page No . 44

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

2011 Western Australian Base Metals $ *Revenue from external sources* Unallocated - Interest revenue Unallocated - Gain/(loss) on investments Other income Loss on sale of assets Exploration expense written back Total Group Revenue Segment Profit/(loss) Unallocated items - corporate charges - Total Group profit/(loss) Segment Assets 2,576,860 Unallocated - cash, receivables, plant & equipment Total Group Assets Segment Liabilities Unallocated - corporate trade payables Total Group Liabilities	Victorian Gold $ - 51,804	Namibian Uranium $ 1,265,080 356,833 1,568,896	Total $ 125,878 86,325 35,178 (40,592) 1,265,080

			1,471,869 (705,268)
			(1,430,631)
			356,833 (1,104,611)
			(747,778)
			4,197,560 2,300,952 6,498,512
			129,619

			131,199
			131,199

23. Commitments

(i) Mining Tenements

As part of ongoing activities, the consolidated entity is required to commit to minimum expenditures to retain its interest in its mining tenements. Over the next five years this amounts to $1,080,500, as follows:

ollows:
Year Ending 30 June 2013 2014 2015 2016 2017	Amount $ 261,400 298,100 208,000 158,000 158,000
	1,083,500

(ii) Management Agreement

The Company has an agreement with a management service company for the provision of services at $220,000 per annum plus CPI. Charges are at commercial terms in accordance with the agreement entered into on 14 November 2007 for a five year term.

24. Contingent Liabilities

No contingent liability exists for termination benefits under service agreements with directors or persons who take part in the management of the company. There were no contingent liabilities as at 30 June 2012.

25. Parent Entity Information

The following details information related to the parent entity, Metals Australia Ltd, at 30 June 2012. The information presented here has been prepared using consistent accounting policies as shown in Note 2.

Notes to the Financial Statements Page No . 45

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES EQUITY Issued capital Accumulated losses TOTAL EQUITY RESERVES Share option reserve TOTAL RESERVES FINANCIAL PERFORMANCE (Loss) for the year Other comprehensive income TOTAL COMPREHENSIVE (LOSS)	Parent 2012 $ 2,258,754 1,751,100 4,009,854 (123,557) - (123,577) 24,613,601 (23,078,510) 1,535,091 2,351,206 2,351,206 (1,743,689) - (1,743,689)	Entity 2011 $ 1,681,039 1,502,653
		3,183,692
		(111,996) -
		(111,996)
		22,126,676 (21,335,385)
		791,291
		2,280,405
		2,280,405
		(113,255) -
		(113,255)

No guarantees have been entered into by the parent entity on behalf of its subsidiary.

No contingent liabilities exist.

No contractual commitments by the parent company exist, other than those for exploration commitments as set out below.

Year Ending 30 June 2013 2014 2015 2016 2017	Amount $ 261,400 298,100 208,000 158,000 158,000
	1,083,500

Notes to the Financial Statements Page No . 46

METALS AUSTRALIA LTD

DIRECTORS’ DECLARATION

In t he opinion o f the Direct o rs of Metal s Australia L t d (the “Company”):
( a) the financial sta t ements an d notes s e t out on p ages 17 t o 46, and the Remuneration di s closures t h at are c o ntained in pages 13 to 14 of the Remuneration R e port in th e Directors’ Report, a r e in acco rd ance with the Corp o rations Act 2 001 , includi n g:
(i) givi n g a true an d fair view o f the Grou p ’s financial p osition as a t 30 June 2 012 and of its perfor m ance, for t h e financial year ended on that date; a nd
(ii) complying with Australian Accountin g Standard s (including the Austr a lian Acc o unting Inter p retations) a nd the Corp o rations Re g ulations 20 0 1; and
(iii) complying with I n ternational F inancial R e porting Sta n dards as di s closed in N o te 2.
( b) the r e muneration disclosure s that are contained in page 1 3 to 14 of the Remu n eration Re p ort in the D irectors’ R e port compl y with Austr a lian Accou n ting Stand a rd AASB 124 Related P a rty Disclos u res and
( c) there a re reasona b le grounds to believe that the Co m pany will b e able to p a y its debts a s and when they beco m e due and p ayable.
The Direc t ors have b een given t he declara t ions requir e d by Secti o n 295A o f the Corporatio n s Act 2001 from the C h ief Executi v e Officer a n d Chief Fin a ncial Offic e r for the financi a l year ende d 30 June 2 0 12.

Sign e d in accord a nce with a r esolution of the Director s :

==> picture [31 x 54] intentionally omitted <==

==> picture [55 x 54] intentionally omitted <==

==> picture [16 x 54] intentionally omitted <==

D Zu k erman DIR E CTOR

Date d this twent y sixth day o f September 2012 Pert h , Western A ustralia

Directors Declaration

Page No . 47

==> picture [206 x 39] intentionally omitted <==

Grant Thornton (WA) Partnership ABN 17 735 344 518

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

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Independent Auditor’s Report

To the Directors of Metals Australia Limited

Report on the financial report

We have audited the accompanying financial report of Metals Australia Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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.

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 of the financial report in accordance with Australian Accounting Standards and the Corporations Act 2001. This responsibility includes such internal controls as the Directors determine are necessary to enable the preparation of the financial report to be free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

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

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

Liability limited by a scheme approved under Professional Standards Legislation

Page No. 48

==> picture [139 x 27] intentionally omitted <==

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 Company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Auditor’s opinion

In our opinion:

a the financial report of Metals Australia 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 2012 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 financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements.

Report on the remuneration report

We have audited the remuneration report included in pages 13 to 14 of the directors’ report for the year ended 30 June 2012. 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.

Page No. 49

==> picture [139 x 27] intentionally omitted <==

Auditor’s opinion on the remuneration report

In our opinion, the remuneration report of Metals Australia Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001.

==> picture [114 x 31] intentionally omitted <==

GRANT THORNTON (WA) PARTNERSHIP Chartered Accountants

==> picture [114 x 50] intentionally omitted <==

P W Warr Partner

Perth, 26 September 2012

Page No. 50

==> picture [206 x 39] intentionally omitted <==

Grant Thornton (WA) Partnership ABN 17 735 344 518

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

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Auditor’s Independence Declaration To the Directors of Metals Australia Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Metals Australia Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [114 x 31] intentionally omitted <==

GRANT THORNTON (WA) PARTNERSHIP Chartered Accountants

==> picture [114 x 50] intentionally omitted <==

P W Warr Partner

Perth, 26 September 2012

Liability limited by a scheme approved under Professional Standards Legislation

Page No. 51

METALS AUSTRALIA LTD CORPORATE GOVERNANCE

CORPORATE GOVERNANCE STATEMENT

Metals Australia Ltd ACN 008 982 474 ("the Company") has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised below.

The following additional information about the Company's corporate governance practices is set out on the Company's website at www.metalsaustralia.com.au :

– Principle 1 Lay solid foundations for management and oversight

Responsibilities of the Board

The Board is responsible for the following matters:

ensuring the Company’s conduct and activities are ethical and carried out for the benefit of all its stakeholders;
development of corporate strategy, implementation of business plans and performance objectives;
reviewing, ratifying and monitoring systems of risk management, codes of conduct, internal control system and legal and regulatory compliance;
the appointment of the Company’s Corporate Manager, Chief Executive Officer (or equivalent), Chief Financial Officer, Company Secretary and other senior executives;
monitoring senior executives’ performance and implementation of strategy;
determining appropriate remuneration policies;
allocating resources and ensuring appropriate resources are available to management;
approving and monitoring the annual budget, progress of major capital expenditure, capital management, and acquisitions and divestitures; and
approving and monitoring financial and other reporting.

Diversity

The Company recognises and respects the value of diversity at all levels of the organisation.

Currently, however, due to the size and scale of the Company’s activities, all managerial and geological services are provided by the Corporate Manager and the Company has no direct employees.

When the level of activity permits, the Directors will ensure that women are fairly considered and the Company’s aim will be to promote a culture which embraces diversity through ongoing education, succession planning, director and employee selection and recognising that skills are not gender specific.

Corporate Governance

Page No . 52

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

As at the date of this report, the Company has no women appointed to the Board, to senior management, or to the organisation as a whole.

Chairman

The Chairman is responsible for leadership of the Board and for the efficient organisation and conduct of the Board’s business. The Chairman should facilitate the effective contribution of all directors and promote constructive and respectful relations between directors and between the Board and management of the Company. The Chairman is responsible for briefing directors on issues arising at Board meetings and is ultimately responsible for communications with shareholders and arranging Board performance evaluation.

Corporate Manager

The Corporate Manager is responsible for running the affairs of the Company under authority delegated from the Board. In carrying out its responsibilities the Corporate Manager must report to the Board in a timely manner and ensure all reports to the Board present a true and fair view of the Company’s financial condition and operational results.

Company Secretary

The Company Secretary is responsible for monitoring the extent that Board policy and procedures are followed, and coordinating the timely completion and despatch of Board agendas and briefing material. All directors are to have access to the Company Secretary.

Performance Evaluation

The Chairman and/or the Corporate Manager are responsible for reviewing the performance of each executive at least once every calendar year with reference to the terms of their employment contract.

Principle 2 - Structure the Board to add value

Composition of the Board

The Company will ensure that the Board will be of a size and composition that is conducive to making appropriate decisions and be large enough to incorporate a variety of perspectives and skills, and to represent the best interests of the Company as a whole rather than of individual shareholders or interest groups. It will not, however, be so large that effective decision-making is hindered.

Independent Directors

The Company will regularly review whether each non-executive director is independent and each non-executive director should provide to the Board all information that may be relevant to this assessment. If a director’s independence status changes this should be disclosed and explained to the market in a timely fashion.

The Company will endeavour to ensure that it has a majority of independent directors at all times, subject to the right of shareholders in general meeting to elect and remove directors .

Corporate Governance

Page No . 53

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Chairman

The Chairman should be a non-executive director who is independent. The Chairman should not be the Chief Executive Officer of the Company. The Chairman’s other positions should not be such that they are likely to hinder the effective performance of his role of Chairman of the Company.

Independent decision- making

All directors - whether independent or not - should bring an independent judgment to bear on Board decisions. Non-executive directors are encouraged to confer regularly without management present. Their discussions are to be facilitated by the Chairman, if he is independent, or, if he is not independent, the deputy Chairman. Non-executive directors should inform the Chairman before accepting any new appointments as directors.

Independent advice

To facilitate independent decision making, the Board and any committees it convenes from time to time may seek advice from independent experts whenever it is considered appropriate. With the consent of the Chairman, individual directors may seek independent professional advice, at the expense of the Company, on any matter connected with the discharge of their responsibilities.

Procedure for selection of new directors

The Company believes it is not of a size to justify having a Nomination Committee. If any vacancies arise on the Board, all directors will be involved in the search and recruitment of a replacement. The Board believes corporate performance is enhanced when it has an appropriate mix of skills and experienced.

In support of their candidature for directorship or re-election, non-executive directors should provide the Board with details of other commitments and an indication of time available for the Company. Prior to appointment or being submitted for re-election nonexecutive directors should specifically acknowledge to the Company that they will have sufficient time to meet what is expected of them. Re-appointment of directors is not automatic.

Induction and education

The Board will implement an induction programme to enable new directors to gain an understanding of:

the Company’s financial, strategic, operational and risk management position;
the rights, duties and responsibilities of the directors;
the roles and responsibilities of senior executives; and
the role of any Board committees in operation.

Corporate Governance

Page No . 54

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Directors will have reasonable access to continuing education to update and enhance their skills and knowledge, including education concerning key developments in the Company and in the industries in which the Company’s business is involved.

Access to information

The Board has the right to obtain all information from within the Company which it needs to effectively discharge its responsibilities.

Senior executives are required on request from the Board to supply the Board with information in a form and timeframe, and of a quality that enables the Board to discharge its duties effectively. Directors are entitled to request additional information where they consider such information necessary to make informed decisions.

- Principle 3: Promote ethical and responsible decision making

Code of conduct

The Board has adopted the Code of Conduct set out at Appendix A to promote ethical and responsible decision making by directors, management and employees. The Code embraces the values of honesty, integrity, enterprise, excellence, accountability, justice, independence and equality of stakeholder opportunity.

The Board is responsible for ensuring that training on the Code of Conduct is provided to staff and officers of the Company.

The Board is responsible for making advisers, consultants and contractors aware of the Company’s expectations set out in the Code of Conduct.

Policy for trading in Company securities

The Board has adopted a policy on trading in the Company’s securities by directors, senior executives and employees set out in Appendix B.

The Board is responsible for ensuring that the policy is brought to the attention of all affected persons and for monitoring compliance with the policy.

Principle 4: Safeguard integrity in financial reporting

Audit and Risk Management

The Company believes it is not of a size to justify having a separate Audit and Risk Management Committee. Ultimate responsibility for the integrity of the Company’s financial reporting rests with the full Board. Given the small size of the Board, the directors believe an Audit Committee structure to be inefficient. All directors share responsibility for ensuring the integrity of the Company’s financial reporting and appropriate Board processes must be implemented to perform the following audit and risk management functions:

Corporate Governance

Page No . 55

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

external audit function:
review the overall conduct of the external audit process including the independence of all parties to the process;
review the performance of the external auditors;
consider the reappointment and proposed fees of the external auditor; and
where appropriate seek tenders for the audit and where a change of external auditor is recommended arrange submission to shareholders for shareholder approval;
reviewing the quality and accuracy of published financial reports;
reviewing the accounting function and ongoing application of appropriate accounting and business policies and procedures;
reviewing and imposing variations to the risk management and internal control policies designed and implemented by Company management; and
any other matters relevant to audit and risk management processes.

Principle 5: Make timely and balanced disclosure

Disclosure Policy

The Board has adopted a Disclosure Policy for ensuring timely and accurate disclosure of price-sensitive information to shareholders through the ASX set out in Appendix D.

The Disclosure Policy ensures that:

all investors have equal and timely access to material information concerning the Company including its financial position, performance, ownership and governance; and
Company announcements are subjected to a vetting and authorisation process designed to ensure they:
are released in a timely manner;
are factual;
do not omit material information; and
are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.

Principle 6: Respect the rights of shareholders

Communication with Shareholders

The Board is committed to open and accessible communication with holders of the Company’s shares and other securities. Disclosure of information and other communication will be made as appropriate by telephone, mail or email.

Corporate Governance

Page No . 56

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

The Company’s website will also be used to provide additional relevant information to security holders. The Board considers the following to be appropriate features for the Company’s website:

placing the full text of notices of meeting and explanatory material on the website;
providing information about the last three years’ press releases or announcements plus at least three years of financial data on the website; and
providing information updates to security holders on request by email.

General Meetings

The Company is committed to improving shareholder participation in general meetings. In order to achieve that objective, the Company has adopted guidelines of the ASX Corporate Governance Council for improving shareholder participation through the design and content of notices and through the conduct of the meeting itself.

Principle 7: Recognise and manage risk

Creation and implementation of Company risk management policies

It is the responsibility of the Corporate Manager to create, maintain and implement risk management and internal control policies for the Company, subject to review by the Board.

The Corporate Manager must report to the Board on an annual basis regarding the design, implementation and progress of the risk management policies and internal control systems.

Audit and Risk Management

As referenced with respect to Principle 4, the Board has not established an Audit and Risk Management Committee for the reasons given above.

Review by the Board

The Board will review the effectiveness of implementation of the risk management system and internal control system at least annually.

When reviewing risk management policies and internal control system the Board should take into account the Company’s legal obligations and should also consider the reasonable expectations of the Company’s stakeholders, including security holders, employees, customers, suppliers, creditors, consumers and the community.

Corporate Manager

The Corporate Manager is required annually to state in writing to the Board that the Company has a sound system of risk management, that internal compliance and control systems are in place to ensure the implementation of Board policies, and that those systems are operating efficiently and effectively in all material respects.

Corporate Governance

Page No . 57

METALS AUSTRALIA LTD CORPORATE GOVERNANCE

Verification of financial reports

The Corporate Manager and Chief Financial Officer are required by the Company to state the following in writing prior to the Board making a solvency declaration pursuant to section 295(4) of the Corporations Act:

that the Company’s financial reports contain a true and fair view, in all material respects, of the financial condition and operating performance of the Company and comply with relevant accounting standards; and
that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and that the system is operating effectively in all material respects in relation to financial reporting risks.

Principle 8: Remunerate fairly and responsibly

Director and senior executive remuneration policies

The Company’s remuneration policy is structured for the purpose of:

motivating senior executives to pursue the long-term growth and success of the Company; and
demonstrating a clear relationship between senior executives’ performance and remuneration.

The Board’s responsibility is to set the level and structure of remuneration for officers (including but not limited to directors and secretaries) and executives, for the purpose of balancing the Company’s competing interests of:

attracting and retaining senior executives and directors; and
not paying excessive remuneration.

Executive directors’ remuneration should be structured to reflect short and long-term performance objectives appropriate to the Company’s circumstances and goals.

Executive directors’ and senior executives’ remuneration packages should involve a balance between fixed and incentive-based pay, reflecting short and long-term performance objectives appropriate to the Company’s circumstances and goals.

Non-executive directors’ remuneration should be formulated with regard to the following guidelines:

non-executive directors should normally be remunerated by way of fees, in the form of cash, non-cash benefits, superannuation contributions or equity, usually without participating in schemes designed for the remuneration of executives;
non-executive directors should not be provided with retirement benefits other than superannuation.

No director may be involved in setting their own remuneration or terms and conditions and in such a case relevant directors are required to be absent from the full Board discussion.

Corporate Governance

Page No . 58

METALS AUSTRALIA LTD CORPORATE GOVERNANCE

Remuneration Committee

The Company believes it is not of a size to justify having a Remuneration Committee and that it has Board processes in place which raise the issues which would otherwise be considered by a committee.

Corporate Governance

Page No . 59

METALS AUSTRALIA LTD CORPORATE GOVERNANCE

Appendix A – Code of Conduct

Introduction

This Code of Conduct sets out the standards with which the Board, management and employees of the Company are encouraged to comply when dealing with each other, the Company’s shareholders and the broader community.

Responsibility to shareholders

The Company aims:

to increase shareholder value within an appropriate framework which safeguards the rights and interests of shareholders; and
to comply, with openness and integrity, the systems of control and accountability which the Company has in place as part of its corporate governance.

Responsibility to clients, employees, suppliers, creditors, customers and

consumers

The Company will comply with all legislative and common law requirements which affect its business.

Employment practices

The Company will employ the best available staff with the skills required to carry out the role for which they are employed. The Company will ensure a safe workplace and maintain proper occupational health and safety practices.

Responsibility to the community

The Company recognises, considers and respects environmental, native title and cultural heritage issues which may arise in relation to the Company’s activities and will comply with all applicable legal requirements.

Responsibility to the individual

The Company recognises and respects the rights of individuals and will comply with applicable laws regarding privacy and confidential information.

Obligations relative to fair trading and dealing

The Company will deal with others in a way that is fair and will not engage in deceptive practices.

Business courtesies, bribes, facilitation payments, inducements and commissions

Corrupt practices are unacceptable to the Company. It is prohibited for the Company or its directors, managers or employees to directly or indirectly offer, pay, solicit or accept bribes or any other corrupt arrangements.

Conflicts of interest

The Board, management and employees must report any situations where there is a real or apparent conflict of interest between them as individuals and the interests of the Company.

Corporate Governance

Page No . 60

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Where a real or apparent conflict of interest arises, the matter must be brought to the attention of the Chairman in the case of a Board member, the Corporate Manager in the case of a member of management and a supervisor in the case of an employee, so that it may be considered and dealt with in an appropriate manner.

Compliance with the Code of Conduct

Any breach of compliance with this Code of Conduct is to be reported directly to the Chairman.

Periodic review of Code

The Company will monitor compliance with this Code of Conduct periodically by liaising with the Board, management and staff. Suggestions for improvements or amendments to this Code of Conduct can be made at any time to the Chairman.

Corporate Governance

Page No . 61

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Appendix B – Policy for trading in Company securities

Introduction

The Company recognises and enforces legal and ethical restrictions on trading in its securities by relevant persons within and external to the Company. The terms of this securities dealing policy apply to the Company’s directors, Corporate Manager, senior executives, employees and consultants ( Relevant Persons ).

Communication

This policy will be communicated to all Relevant Persons and will be placed on the Company website.

Trading restrictions

Trading by Relevant Persons in the Company’s securities is subject to the following limitations:

No trading in Company securities shall take place during the two weeks preceding release of each quarterly report, half-yearly financial report, and annual financial report of the Company.
No trading in the Company’s securities shall take place, directly or indirectly, where it is known, or ought reasonably to have been known by the person intending to trade, that information exists which has not been released to the ASX and where that information is of a type that could reasonably be expected to encourage buying or selling were that information known by others.
No trading shall take place in Company securities unless prior notice is given to the Chairman [and approval is obtained from the Chairman].

Hardship

During a period specified in paragraph o, Relevant Persons may, after obtaining the Chairman’s consent, trade the Company’s securities to the extent reasonably necessary to avoid or ameliorate documented hardship and suffering or as required by other extenuating circumstances.

Directors’ trading and disclosures

Within twenty four hours of a director being appointed to the Board, resigning or being removed from the Board, or trading in the Company’s securities, full details of the director’s notifiable interests in the Company’s securities and changes in such interest must be advised to the Company Secretary so that a record is kept within the Company and so that necessary ASX notifications will occur.

All directors must notify the Company Secretary of any margin loan or similar funding arrangement entered into in relation to the Company’s securities and any variations to such arrangements, including the number of securities involved, the circumstances in which the lender can make margin calls, and the right of the lender to dispose of securities.

Corporate Governance

Page No . 62

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Appendix C - Disclosure Policy

Disclosure requirements

The Company recognises its obligations pursuant to the continuous disclosure rules of the ASX Listing Rules and the Corporations Act to keep the market fully informed of information which may have a material effect on the price or value of the Company’s securities.

Subject to certain exceptions (in ASX Listing Rule 3.1A), the Company is required to immediately release to the market information that a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

Responsibilities of directors officers and employees

The Board as a whole is primarily responsible for ensuring that the Company complies with its disclosure obligations and for deciding what information will be disclosed. Subject to delegation, the Board is also responsible for authorising all ASX announcements and responses of the Company to ASX queries.

Every director, officer and employee of the Company is to be informed of the requirements of this policy and must advise the Corporate Manager, Chairman or Company Secretary as soon as possible (and prior to disclosure to anyone else) of matters which they believe may be required to be disclosed.

Authorised Disclosure Officer

The Board has delegated its primary responsibilities to communicate with ASX to the following Authorised Disclosure Officer:

the Company Secretary or
in the absence of the Company Secretary, the Corporate Manager is authorised to act in that capacity by the Board.

Responsibilities of Authorised Disclosure Officer

Subject to Board intervention on a particular matter, the Authorised Disclosure Officer is responsible for the following:

monitoring information required to be disclosed to ASX and coordinating the Company’s compliance with its disclosure obligations;
ASX communication on behalf of the Company, authorising Company announcements and lodging documents with ASX;
requesting a trading halt in order to prevent or correct a false market;
providing education on these disclosure policies to the Company’s directors, officers and employees; and
ensuring there are vetting and authorisation processes designed to ensure that Company announcements:
are made in a timely manner;
are factual;
do not omit material information;
are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.

Corporate Governance

Page No . 63

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

An Authorised Disclosure Officer, who is responsible for providing contact details and other information to ASX to ensure such availability, must be available to communicate with the ASX at all reasonable times.

Measures to avoid a false market

In the event that ASX requests information from the Company in order to correct or prevent a false market in the Company’s securities, the Company will comply with that request. The extent of information to be provided by the Company will depend on the circumstances of the ASX request.

If the Company is unable to give sufficient information to the ASX to correct or prevent a false market, the Company will request a trading halt.

If the full Board is available to consider the decision of whether to call a trading halt, only they may authorise it, but otherwise, the Authorised Disclosure Officer may do so.

ASX announcements

Company announcements of price sensitive information are subjected to the following vetting and authorisation process to ensure their clarity, timely release, factual accuracy and inclusion of all material information:

The Authorised Disclosure Officer must prepare ASX announcements when required to fulfil the Company’s disclosure obligations.
Proposed announcements must be approved by the Corporate Manager or in his absence, urgent announcements may be approved by any other person expressly authorised by the Board.
Announcements must first be released to the ASX Announcements Platform before being disclosed to any other private or public party (such as the media). After release of the announcement, it must be displayed on the Company’s website, following which the Company can then release such information to media and other information outlets.
Wherever practical, all announcements must be provided to the directors, Corporate Manager and Company Secretary prior to release to the market for approval and comment.

Confidentiality and unauthorised disclosure

The Company must safeguard the confidentiality of information which a reasonable person would expect to have a material effect on the price or value of the Company’s securities. If such information is inadvertently disclosed, the Authorised Disclosure Officer must be informed of the same and must refer it to the Chairman and Corporate Manager as soon as possible.

External communications and media relations

The Chairman, Corporate Manager and Company Secretary are authorised to communicate on behalf of the Company with the media, government and regulatory authorities, stock brokers, analysts and other interested parties or the public at large. No other person may do so unless specifically authorised by the Chairman or the Corporate Manager.

All requests for information from the Company must be referred to the Authorised Disclosure Officer for provision to the Chairman and the Corporate Manager.

Corporate Governance

Page No . 64

METALS AUSTRALIA LTD

CORPORATE GOVERNANCE

Breach of Disclosure Policy

Serious breaches of the Company’s Disclosure Policy may be treated with disciplinary action, including dismissal, at the discretion of the Board.

Where the breach is alleged against a member of the Board, that director will be excluded from the Board’s consideration of the breach.

Corporate Governance

Page No . 65

METALS AUSTRALIA LTD

SHAREHOLDER INFORMATION

Additional information included in accordance with listing requirements of the Australian Securities Exchange Limited.

1. SHAREHOLDERS

(a) As at 17 September 2012 the distribution of members and their shareholdings were:-

Range of Holding 1 1,000 1,001 5,000 5,001 10,000 10,001 100,000 100,001 and over	Holders 99 283 391 1,517 777 3,067	Shares Held 59,406 969,497 3,363,241 67,787,441 695,497,937 767,677,522	Percent 0.01 0.12 0.44 8.83 90.60
			100.00

(b) There exist 1,349 shareholders with unmarketable parcels of shares.

(c) The twenty largest shareholders as at 17 September 2012 which represents 42.82% of the paid up capital were as follows:

Name of Holder	Number	%
JP Morgan Nominees Australia Ltd	101,776,408	13.25
Pan Pacific Mining Pty Ltd	35,000,000	4.56
Citicorp Nominees Pty Ltd	30,272,228	3.94
Temmedo Pty Ltd	25,820,000	3.36
Doyle Family Superannuation Fund	22,036,406	2.87
I-CAN Limited	17,000,000	2.21
Pio Services Limited	15,057,000	1.96
L C Asia Limited	12,720,000	1.66
Philip Hamlyn	10,000,000	1.30
Bassam Haddad	8,000,000	1.04
HSBC Custody Nominees (Australia) Pty Ltd	6,984,683	0.91
W D & M N Christman	6,900,000	0.90
Paul Arsenis	6,750,000	0.88
Evangelos Kalafatas	5,184,186	0.68
Zuvela Super Fund	5,000,000	0.65
Salvatore Danze	5,000,000	0.65
Barry Sirgunas	4,100,000	0.53
Simon Jones	4,054,054	0.53
Alban R Hasslinger	3,645,000	0.48
Trayburn Pty Ltd	3,500,000	0.46
	328,799,965	42.82

(d) Substantial Shareholders

The names of the substantial shareholders who have notified the Company in accordance with Section 671B of the Corporation Act 2001 are:

Number of Percentage Name Ordinary Shares of Issued Capital Pan Pacific Mining Pty Ltd together with group member Caconda Pty Ltd 36,500,000 4.75%

_________________

Shareholder Information Page No. 66

METALS AUSTRALIA LTD

SHAREHOLDER INFORMATION

2. OPTIONHOLDERS

The twenty largest holders of listed options as at 17 September 2012 were as follows:

Name of Holder	Number	%
Colbern Fiduciary Nominees Pty Ltd	148,350,000	90.64
Bluebase Pty Ltd	4,957,500	3.03
Kalgoorlie Mine Management <Kalgoorlie Mime
Management Superannuation Fund>	4,297,500	2.63
Brendon Deshon	2,000,000	1.22
Bruce Stewart	890,000	0.54
Bennett & Bennett Pty Ltd	850,000	0.52
JP Morgan Nominees Australia Ltd	500,000	0.31
Matthew Painter & Julie Jones	350,000	0.21
Sharin Grafton	225,000	0.14
Gillian Arkwright	200,000	0.12
Jadel Pty Ltd	100,000	0.06
Coniston Pty Ltd	100,000	0.06
Dagana Pty Ltd	80,000	0.05
Caconda Pty Ltd	75,000	0.05
Kalgoorlie Mine Management Pty Ltd	75,000	0.05
James del Piano	60,000	0.04
HSBC Custody Nominees Pty Ltd	50,000	0.03
Pan Pacific Mining Pty Ltd	35,000	0.02
Silverglade Nominees Pty Ltd	30,000	0.02
Cambrian Investments Pty Ltd	30,000	0.02
	163,255,000	99.76

_________________ Shareholder Information Page No. 67

AI assistant

METALS AUSTRALIA LTD — Annual Report 2012

65344_rns_2012-09-26_7e2b6ef2-f434-4a6c-bb3e-bca7aabb15f6.pdf

MLS

METALS AUSTRALIA LTD

ANNUAL REPORT

CONTENTS

DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

SOLICITORS

AUDITORS

BANKERS

SHARE REGISTRY

SECURITIES EXCHANGE LISTING

A N NU A L AC T IVIT I ES R E POR T

URANI U M PROJECTS, N A MIBIA

THE MILE 7 2 URANIUM PROJEC T

Surface tr e nching

Radon cup and EM su r veys

A new pha s e of exploration at Mile 7 2

THE ENGO VALLEY URANIUM PROJECT

ANGRA FRIA PORT PROPOSAL

MANINDI ZINC PROJECT

1.354 million tonnes @ 6.04% Zinc, 0.25% Copper, 3.4 g/t Silver & 0.25 g/t Gold

SHERLOCK BAY EXTENDED BASE METAL PROJECT

GOLD PROJECT S , VICTORIA

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS

DIVIDENDS

FINANCIAL POSITION

SIGNIFICANT CHANGES

LIKELY DEVELOPMENTS

INFORMATION ON DIRECTORS AND COMPANY SECRETARY

(iii) David Zukerman

Norman Grafton FCIS

REMUNERATION REPORT (AUDITED) 2012

DIRECTORS’ REPORT

2011

ANALYSIS OF MOVEMENT IN OPTIONS

MEETINGS OF DIRECTORS

RETIREMENT, ELECTION AND CONTINUATION IN OFFICE OF DIRECTORS

ENVIRONMENTAL ISSUES

EVENTS SUBSEQUENT TO BALANCE DATE

INDEMNIFYING OFFICER OR AUDITORS

OPTIONS

PROCEEDINGS ON BEHALF OF THE COMPANY

AUDITOR’S INDEPENDENCE DECLARATION

DIRECTORS' BENEFITS

AUDIT COMMITTEE

NON AUDIT SERVICES

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

METALS AUSTRALIA LTD

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

(b) Statement of compliance

(c) Changes in accounting policies on initial application of Accounting Standards

(d) New Accounting standards and interpretation

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

METALS AUSTRALIA LTD

NOTES TO THE FINANCIAL STATEMENTS

(e) Basis of consolidation

NOTES TO THE FINANCIAL STATEMENTS

(f) Interest in joint venture operation

(g) Foreign currency translation

NOTES TO THE FINANCIAL STATEMENTS

(h) Property, plant and equipment

Impairment

METALS AUSTRALIA LTD Annual Report 2012