MINERAL COMMODITIES LTD - Annual Report 2009

MINERAL COMMODITIES LIMITED

ABN 39 008 478 653

ANNUAL FINANCIAL REPORT

31 DECEMBER 2008

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Corporate Directory

Directors	Joseph Anthony Caruso - Non-Executive Chairman
	Mark Victor Caruso - Managing Director
	Gregory Hugh Steemson – Non-Executive Director
Company Secretary	Peter Torre
Registered Office	Unit 15, Level 1
	51-53 Kewdale Road
	Welshpool, Western Australia 6106
	Telephone: (61 8) 9353 4890
	Facsimile: (61 8) 9353 4894
	Email: [email protected]
	Website: www.mncom.com.au
Solicitors	Steinepreis Paganin
	Level 4, Next Building
	16 Milligan Street
	Perth WA 6000
Auditors	BDO Kendalls Audit and Assurance (WA) Pty Ltd
	128 Hay Street
	Subiaco, Western Australia 6008
Share Registry	Advanced Share Registry Ltd
	150 Stirling Highway
	Nedlands, Western Australia 6009
	Telephone: (61 8) 9389 8033
	Facsimile: (61 8) 9389 7871
Bankers	Australia & New Zealand Banking Group Ltd
	77 St George’s Terrace
	Perth WA 6000
Stock Exchange Listing	The Company is Listed on the Australian Stock
	Exchange Limited under ASX Code - MRC

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

DIRECTORS’ REPORT INCOME STATEMENTS 11 BALANCE SHEETS 12 CASH FLOW STATEMENTS 13 STATEMENTS OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS 16 DIRECTORS’ DECLARATION 53 AUDITORS INDEPENDENCE DECLARATION 54 INDEPENDENT AUDITOR’S REPORT 55

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report

The Directors present their report together with the financial report of Mineral Commodities Limited (“the Company”) and its controlled entities (the “Group”) for the year ended 31 December 2008.

DIRECTORS

The Directors of the Company in office during or since the end of the financial year are:

. Mr Joseph A Caruso – Non Executive Chairman

. Mr Mark V Caruso – Managing Director . Gregory Hugh Steemson - Non Executive Director

Directors have been in office since the start of the financial year to the date of this report.

DIRECTORS’ INFORMATION

Joseph Anthony Caruso (63 Years of Age)

Non-Executive Chairman

Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Construction Manager of Simto Australia Pty Ltd, both of which are involved in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has considerable experience in managing and administration of engineering, mining, raw materials production operations, earthmoving and related infrastructure utilities services resource contracts. Mr Caruso has been a director of Mineral Commodities Limited since September 2000.

Mark Victor Caruso (47 Years of Age)

Managing Director

Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Simto Australia Pty Ltd, both of which are involved in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has been a director of Mineral Commodities Limited since September 2000. He is also a Director of Allied Gold Limited. Former directorships of public listed companies in the last 3 years are CI Resources Limited from October 2003 to May 2007.

Gregory Hugh Steemson (56 Years of Age)

Non Executive Director

Mr Steemson is a qualified Geologist and Geophysicist with an extensive background in exploration, development and management of mining projects. Mr Steemson has been a Director of the Company since April 2001. Mr Steemson is also a Director of Allied Gold Limited. Former directorships of public listed companies in the last 3 years include Sandfire Resources Limited from June 2003 to August 2007.

Due to the size of the Company, all directors consider matters which would normally be dealt with by Audit and Remuneration Committees.

COMPANY SECRETARY

Peter Torre CA, ACIS, MAICD

Mr Torre was appointed Company Secretary of Mineral Commodities Limited in July 2006. He is a Chartered Accountant and a Chartered Secretary. He was previously a partner of an internationally affiliated firm of Chartered Accountants. Mr Torre is the Company Secretary of several ASX listed companies and is a Director of ORT Limited and Carbine Resources Ltd.

PRINCIPAL ACTIVITIES

The principal activity of the Group during the year was exploration for mineral sands and other mineral resources. This has mainly involved exploration and evaluation of the Xolobeni Mineral Sands Project in the Eastern Cape Province of South Africa and the Tormin Mineral Sands Project in the Western Cape Province of South Africa.

There were no significant changes in the nature of activities of the Group during the year.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

CONSOLIDATED RESULTS

The loss of the group after income tax and outside equity interests was $1,515,661 (2007: Loss of $7,010,080).

DIVIDENDS

No dividends have been paid, declared or recommended for payment, in respect of the current financial year.

REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

Highlights of the Company’s operations for the period under review are as follows:

South African Projects

Xolobeni Mineral Sands Project

In March 2007, Mineral Commodities Limited’s (MRC’s) majority owned South African subsidiary Transworld Energy and Minerals Resources SA Pty Ltd (TEM) lodged the Mining Right Application for the Xolobeni Heavy Mineral Sands Project with the Department of Minerals and Energy (DME) in Port Elizabeth.

TEM has since completed the Environmental Impact Assessment (EIA), which was submitted to the DME on 22 October 2007. After a series of government department and public meetings aimed at reviewing the scope and outcomes of the EIA and accompanying Environmental Management Programme (EMP), an updated report was resubmitted on 20 December 2007. This report addressed the various matters arising from the consultation process.

During the year, TEM attended meetings at the DME’s head offices in Pretoria and regional office in Port Elizabeth to clarify various aspects of the application. Briefing sessions with XolCo (MRC’s Black Economic Empowerment (BEE) partner) and the Tribal Authority also continued during the period to update the community on the Mining Right Application process and position.

On 4 August 2008, the Company announced that it has received notification from the DME that they will proceed to grant to TEM, the Mining Right for the Kwanyana block within the Xolobeni Mineral Sands tenement area. The remaining areas will be held under a Prospecting Right valid to 2010 which can be extended until applications are made to convert the remaining areas to Mining Rights on a block by block requirement.

Initial indications were that the Xolobeni Mining Right was to be signed on 31 October 2008. The Minister of Minerals and Energy (the Minister) and a high level delegation visited the Xolobeni Project in August 2008 and in an open meeting with the AmaDiba community members advised that the Xolobeni Mining Right would be granted. However in September 2008, the Company was advised that on behalf of the AmaDiba Crisis Committee (the ACC) and its members, the Grahamstown office of the Legal Resources Centre had filed a Notice of Appeal (the Appeal) with the Minister. The ACC requested the Minister to suspend and then appeal the decision to grant the mining right.

The issue date of the Mining Right has been deferred pending the outcome of the Appeal.

Tormin Mineral Sands Project

The Tormin deposit is covered by two tenements, one held by the Company and the other held in the name of Steenvas Pty Ltd but under option to the Company.

On 15 February 2008 the Company received notification from the DME that the Mining Right had been granted to its South African subsidiary Mineral Sands Resources (Pty) Ltd and as announced on 28 November 2008, the Mining Right and the Steenvas Mining Right Conversion were executed by the respective companies and the DME.

The execution of the mining right was underpinned by the entering into of a new Black Empowerment arrangement with Xolco, the Company’s BEE partner on the Xolobeni Mineral Sands Project

The Company has commenced proceedings to appoint an engineering contractor to complete the final plant design and engineering.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

The Company also announced subsequent to year end that the DME has granted to its South African subsidiary Mineral Sands Resources (Pty) Ltd, a Reconnaissance Permit (Permit) over the marine area adjacent to its Tormin Mineral Sands Project. The area is approximately12 km long and 1 km wide from the low water mark out to sea enclosing an area of 1280ha. The Permit allows for a prospecting of zircon, ilmenite, garnet, leucoxene and rutile.

Sierra Leone Operations

The Company’s wholly owned Sierra Leone subsidiary, Kariba Kono (SL) Ltd, owns the No. 11 Oversize Tailings Dump at Koidu. The operations were placed under care and maintenance pending an engineering and design review following the failure of the 80tph diamond pan plant supplied by ProMet Engineers Africa (Pty) Ltd.

The MRC Board has resolved to divest either Kariba Kono (SL) Ltd or its assets. On 4 June 2008 the Company announced that it had entered into a Heads of Agreement with ROK Diamonds Ltd to sell the No 11 diamondiferous gravel dump at Koidu, Sierra Leone.

Consideration for the sale was to be US$2M apportioned as follows:

(1) US$1.5M payable at settlement; and

(2) The balance of US$0.5M may be converted to ordinary seed shares in ROK Diamonds Limited at MRC’s election within 12 months or the float of ROK Diamonds Limited whichever occurs first.

The sale was not to include the Diamond Pan Plant.

On 25 August 2008, the Company announced that due to certain legal impediments currently in place in Sierra Leone which prevent the divestment of these assets, the current Agreement with ROK was terminated.

Legal Proceedings

On 12 October 2007 the Company commenced legal proceedings in the Federal Court of Australia against Promet Engineers Africa (Pty) Ltd (Promet), Promet Engineers Pty Ltd, James Dinsdale Cribbes, Robert John Bennett and Richard George Ford for breach of contract, misleading and deceptive conduct and breaches of the Trade Practices Act in relation to the diamond pan plant in Sierra Leone

On 10 December 2008, the Company attended a mediation conference in the Federal Court of Western Australia with ProMet Engineers and its insurer ACE Insurance Australia. On 27 January 2009, the Company announced that the parties agreed to settle for an amount of AUD$2 million to be paid to MRC without admission of liability.

All plant and machinery delivered under the construction contract remains in the possession and ownership of MRC.

Petro Ventures International Limited

During the year the Company continued as a seed capital investor in Petro Ventures International Limited (Petro Ventures) and holds a 9.13% stake. Petro Ventures has presently secured three project areas in the UK, offshore Romania and onshore Hungary. Petro Ventures working interest in the projects is 5%, 20% and 10% respectively. Updates in respect to the exploration activities of Petro Ventures can be reviewed in the Company’s quarterly reports lodged with the Australian Stock Exchange.

Investment in Allied Gold Limited

Allied Gold Limited (ALD) is a listed gold production and exploration company with the Tabar Islands Gold Project in Papua New Guinea as its principal asset. This comprises the Simberi Oxide Gold Project and exploration property on the Tabar Islands Group. ALD successfully commissioned its processing plant operation and poured its first gold in February 2008 and has continued to announce successful exploration results along with a recent Resource upgrade.

MRC remains as one of the largest shareholders in ALD and currently holds 15.5 million shares in ALD.

The market value of MRC’s shareholding at 31 December 2008 was $6.51 million.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

FINANCIAL POSITION

The net assets of the group has increased by $2,289,907 from 31 December 2007 to $21,339,716 at 31 December 2008. This is mainly as a result of the reclassification of the investment in Allied Gold Ltd from equity accounted to fair value.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The company will continue the process of development of both the Tormin and Xolobeni projects in South Africa. The Company will seek to divest its interest in the Sierra Leone Diamond Project at a value acceptable to the Board. The Board will continue to review other projects and opportunities in the interest of increasing shareholder value.

ENVIRONMENTAL REGULATIONS

In the course of its normal mining and exploration activities, the Company adheres to environmental regulations imposed upon it by the relevant regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna. The Company has complied with all material environmental requirements up to the date of this report.

SCHEDULE OF MINING TENEMENTS

Mining tenements currently held by the economic entity are:

Area	Entity holding the interest	% Held	Title	Status
Xolobeni – South Africa	Transworld Energy & Minerals Resources	100	New order Prospecting Right	Granted
Tormin – South Africa	Mineral Sands Resources	100	Mining Right	Granted
Koidu – Sierra Leone	Kariba Kono (SL) Ltd	100	Mining Lease 3/04	Granted

SIGNIFICANT CHANGES IN STATE OF AFFAIRS AND LIKELY DEVELOPMENTS

The following significant changes in the state of affairs of the Consolidated Entity occurred during the year:

In December 2008, 18,400,000 shares were issued under a placement at $0.02 per share to raise $368,000.

OPTIONS

The total number of unissued ordinary shares under option at the date of this report is 2,250,000, all of which are not listed. Options do not entitle the holder to receive a dividend paid to ordinary shareholders. New issues of options and options exercised in the period is as follows:

Date of Grant	No of Options	Exercise Price	Expiry date
Opening Balance 31 December 2007	3,600,000	Various	Various
- Options Exercised	-	-	-
- Options Lapsed	(1,350,000)	35 cents	11 May 2008
Balance at 31 December 2008	2,250,000	Various	30 September 2009

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

DIRECTORS’ SHAREHOLDING INTERESTS

The relevant interest of each director in the share capital of the Company, shown in the Register of Directors’ Shareholding at the date of the Directors’ Report is:

Director	Ordinary Shares	Ordinary Shares	Options over Ordinary Shares	Options over Ordinary Shares
	Direct	Indirect	Direct	Indirect
J A Caruso	-	18,450,988	-	-
M V Caruso	12,627	18,450,988	-	-
G H Steemson	1,510,000	-	-	-

J A Caruso and M V Caruso are both directors of and have a relevant interest in Zurich Bay Holdings Pty Ltd, which holds 18,450,988 shares in the Company.

MEETINGS OF DIRECTORS

The number of directors meetings and number of meetings attended by each of the directors of the Company during the financial year are:

	Meetings Held	Meetings Attended
J A Caruso	1	1
M V Caruso	1	1
G H Steemson	1	1

Other many matters of board business have been resolved by circular resolutions of directors, which are a record of decisions made at a number of informal meetings of the directors held to control, implement and monitor the Company’s activities throughout the year.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

REMUNERATION REPORT (Audited)

The remuneration report is set out under the following main headings:

A. Principles used to determine the nature and amount of remuneration.
B. Details of remuneration
C. Service Agreements
D. Share-based compensation
E. Additional Information

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration

In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company’s operations, the board reviews the remuneration packages of all directors and executive officers on an annual basis and makes recommendations. Remuneration packages are reviewed with due regard to performance and other relevant factors.

Remuneration packages may contain the following key elements:

(a) Directors Fees;
(b) Salary & Consultancy;
(c) Benefits – including provision of motor vehicle, superannuation.

Fees payable to non-executive directors reflect the demands which are made on, and the responsibilities of the directors. The Board reviews non-Executive directors’ fees and payments annually.

Executives are offered a competitive base pay that consists of fixed components. Base pay for senior executives is reviewed annually to ensure the executives pay is competitive with the market. Total Base Pay can be structured as a total employment package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion.

There were no short or medium term cash incentives provided to any executives of the company during the financial year. Short or medium term cash incentives are not incorporated into any executives salary packages at the time of this report.

The directors are not required to hold any shares in the company under the constitution of the company; however, to align directors’ interests with shareholders interests the directors are encouraged to hold shares in the company.

Remuneration is not directly related to company performance or key performance indicators.

The board has no separate remuneration committee due to the size of the company. The directors perform the role of a remuneration committee as disclosed in the Corporate Governance statement.

B. Details of Remuneration

The key management personnel of Mineral Commodities Ltd Group are the directors of Mineral Commodities Ltd and the Company Secretary Mr Peter Torre who reported directly to the Managing Director. The amounts disclosed are therefore applicable for both Mineral Commodities Limited and the Mineral Commodities Limited Group.

Details of the remuneration of directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Mineral Commodities Limited and the Mineral Commodities Limited Group are set out in the following tables.

There are no long term benefits amounts due to Directors and key management personnel.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

			Post	Share- based payments		Percentage performance based
		Short-term bfit	employment
		enes	benefits
		Cash Salary and fees $	Superannuation $	Shares/ Options $	Totals $
Non Executive Directors
Joe Caruso	2008 44,037 2007 44,037		3,963 3,963	- -	48,000 48,000	- -
Greg Steemson	2008 68,200		-	-	68,200	-
	2007 69,800		-	-	69,800	-
Sub-total non executive directors	2008 2007 112,237 112,837		3,963 3,963	-	116,200 116,800	- -
Executive Directors
Mark Caruso	2008 48,000 2007 48,000		- -	- -	48,000 48,000	- -
Other Key Management Personnel
Peter Torre	2008 72,000 2007 75,000		- -	- 9,800	72,000 84,800	- -
Total Key management personnel compensation	2008 2007 232,237 236,836		3,963 3,963	- 9,800	236,200 250,600	- -

		Options as a % of total	Number of ordinary shares issued on exercise of options	Date of exercise of options	Price per option when exercised
Non Executive Directors
Joe Caruso	2008 - 2007	-	-	- -	- -
Greg Steemson	2008 -	-	-	-	-
	2007 -	-	-	-	-
Sub-total non executive directors	2008 2007 - -	- -	- -	- -	- -
Executive Directors
Mark Caruso	2008 - 2007 -	- -	- -	- -	- -
Other Key Management Personnel
Peter Torre	2008 -	-	-	-	- $0.30
	2007 250,000	13%	-

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

C. Service Agreements

There were no formal service agreements with any directors or key management personnel.

D. Share Based Compensation

Options

Options were granted by the Company to Mr Peter Torre in November 2007 for no consideration. In addition, options were granted under the Mineral Commodities Limited Employee Option Plan which was approved by shareholders at a general meeting held in November 2007. All full time employees, part time employees, consultants and Directors of the Company are eligible to participate in the plan at the absolute discretion of the board.

Options are granted under the plan for no consideration and are at terms stipulated at the discretion of the Board.

For further details of the options issued please, refer to note 22(c) and 26.

E. Additional Information

There is no additional information to be provided in respect to the remuneration of the directors.

End of the Audited Remuneration Report

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Mineral Commodities Limited adhere to strict principles of corporate governance. The Company’s Corporate Governance statement will be included before the Additional ASX Information section of the Annual Financial Report.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company or the Consolidated Entity, the results of those operations or the state of affairs of the Company or the Consolidated Entity in future financial years unless otherwise disclosed in this Directors Report.

PROCEEDINGS ON BEHALF OF THE COMPANY

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

INSURANCE OF OFFICERS

During the financial year the Company has paid an insurance premium to insure the directors and secretaries of the company and its controlled entities. The premium paid was $44,120 representing $14,707 per director. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company.

AUDITORS’ INDEPENDENCE DECLARATION

The Auditors’ Independence Declaration as required by Section 307(c) of the Corporations Act 2001 is set out on page 54 and forms part of this report.

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors Report (continued)

NON-AUDIT SERVICES

The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important.

There were no non–audit services provided by BDO Kendalls in the year.

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non related firms:

Audit Services:	$
BDO Kendalls (WA) Pty Ltd
Audit and review of financial reports	70,421
Non BDO Kendalls audit firm (Tuffias Sandberg)	5,832
Total remuneration for audit services	76,253

BDO Kendalls Audit & Assurance (WA) Pty Ltd continues in office.

This report has been made in accordance with a resolution of the Directors.

==> picture [102 x 86] intentionally omitted <==

Mark V Caruso

Managing Director Perth, Western Australia 31March 2009

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Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Income Statements

For the year ended 31 December 2008

Note Revenue from continuing operations 2 Exploration written off 10 Share based payments General & Administration expenses Depreciation and Amortisation Employee benefits 15 Finance costs Share of net result of associates using the equity method 11(a) (Loss)/Profit before income tax Income tax expense 4 (Loss)/Profit from continuing operations Loss from discontinued operations 28 Loss for the year Loss for the year attributable to the members of the parent entity Minority interest	Consolidated Company 2008 2007 2008 2007 $ $ Restated $ $ Restated 609,221 765,304 1,104,875 1,176,126 (157,663) (186,867) (157,663) (186,867) - (78,500) - (78,500) (985,273) (795,892) (1,069,086) (783,433) (17,942) (17,685) (16,399) (15,947) 60,336 (48,563) 60,336 (48,563) (3,157) - (3,157) - - (286,097) - -
	(494,478) (648,300) (81,094) 62,816 - - - -
	(494,478) (648,300) (81,094) 62,816 (1,021,183) (6,361,780) (655,597) (6,921,206)
	(1,515,661) (7,010,080) (736,691) (6,858,390)

	(1,515,661) (7,010,080) (736,691) (6,858,390) - - - -
	(1,515,661) (7,010,080) (736,691) (6,858,390)

Loss per share attributable to the ordinary equity holders of the company.

Basic and diluted (loss) per share (cents) 19 (1.2) (6.1)

The income statements are to be read in conjunction with the notes to the financial statements.

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Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Balance Sheets

as at 31 December 2008

	Note	Consolidated	Consolidated		Company
		2008	2007	2008	2007
		$	$	$	$
CURRENT ASSETS
Cash and cash equivalents	5	797,328	2,177,864	256,698	2,150,627
Trade and other receivables	6	2,242,278	499,921	2,088,241	285,995
Financial assets	7	6,957,094	436,398	6,957,094	436,398
Other current assets	8	13,145	16,723	13,145	16,723
Total Current Assets		10,009,845	3,130,906	9,315,178	2,889,743
NON-CURRENT ASSETS
Property, plant and equipment	9	373,060	1,575,105	367,316	1,426,744
Exploration & development expenditure	10	12,026,008	11,394,491	-	-
Investments accounted for using the equity method	11(a)	-	3,298,437	-	4,562,213
Other financial assets	11(b)	7	-	1,451,001	1,551,001
Trade and other receivables	13	-	-	11,841,568	9,917,134
Total Non-Current Assets		12,399,074	16,268,033	13,659,885	17,457,092
Total Assets		22,408,919	19,398,939	22,975,063	20,346,835
CURRENT LIABILITIES
Trade and other payables	14	1,041,056	260,647	402,374	91,969
Provisions	15	28,147	88,483	28,147	88,483
Total Current Liabilities		1,069,203	349,130	430,521	180,452
Total Liabilities		1,069,203	349,130	430,521	180,452
NET ASSETS		21,339,716	19,049,809	22,544,542	20,166,383
EQUITY
Contributed equity	16	39,804,350	39,436,350	39,804,350	39,436,350
Reserves	17	4,917,465	1,479,897	2,738,300	(8,550)
Accumulated losses	18	(23,516,439)	(22,000,778)	(19,998,108)	(19,261,417)
Parent entity interest		21,205,376	18,915,469	22,544,542	20,166,383
Minority interest	12	134,340	134,340	-	-
TOTAL EQUITY		21,339,716	19,049,809	22,544,542	20,166,383

The balance sheets are to be read in conjunction with the notes to the financial statements.

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Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Cash Flow Statements

For the year ended 31 December 2008

Note CASH FLOWS FROM OPERATING ACTIVITIES Exploration and development expenditure Interest Received Payments to suppliers & employees Interest Paid Sundry Income Net cash outflows from operating activities 24(a) CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment 9 Purchase of equity investments Purchase of further investment in associate 11(a) Proceeds from sales of investments Investment in controlled entities 11(b) Loans advanced to controlled entities Loans repaid by other entities Loans to other entities Net cash inflow/(outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares 16 Net cash inflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of financial year 5	Consolidated Company 2008 2007 2008 2007 $ $ $ $ (1,882,412) (2,812,802) (157,663) (144,611) 89,995 133,000 74,739 127,830 (1,320,262) (1,857,890) (573,188) (923,491) (3,157) - (3,157) - 2,664 - 2,664 -
	(3,113,172) (4,537,692) (656,605) (940,272)
	(7,946) (354,890) (5,445) (330,137) (14,826) (494,601) (14,826) (494,601) - (632,043) - (632,043) 1,387,407 1,344,513 1,387,407 1,344,513 - - - - - - (2,972,460) (3,586,856) 1,070,000 450,000 1,070,000 450,000 (1,070,000) (450,000) (1,070,000) (450,000)
	1,364,635 (137,021) (1,605,324) (3,699,124)
	368,000 4,349,306 368,000 4,349,306
	368,000 4,349,306 368,000 4,349,306
	(1,380,537) (325,407) (1,893,929) (290,090) 2,177,864 2,561,364 2,150,627 2,440,717 - (58,093) - -
	797,328 2,177,864 256,698 2,150,627

The cash flow statements are to be read in conjunction with the notes to the financial statements.

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Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Statements of Changes in Equity

Consolidated Entity For the year ended 31 December 2008 Balance at the beginning of the year Movement for the year Net Income recognised directly in equity Loss for the year Total recognised income and expense during the year Contributions of equity Issue of equity Transaction costs on share issues Employee share scheme Balance at the end of the year	Contributed Equity Accum- ulated Losses General Reserve Foreign Currency Translation Reserve Share Based Payments Reserve Financial Asset Revaluation Reserve Minority Interests Total Equity $ $ $ $ $ $ $ $ 39,436,350 (22,000,777) 2,551,100 (1,162,270) 78,500 12,567 134,340 19,049,810 - - - 578,059 - 2,859,509 - 3,437,568
	- - - 578,059 - 2,859,509 - 3,437,568 - (1,515,661) - - - - - (1,515,661)
	- (1,515,661) - 578,059 - 2,859,509 - 1,921,907 - - 368,000 - - - - - - 368,000 - - - - - - - - - - - - - - - -
	39,804,350 (23,516,438) 2,551,100 (584,211) 78,500 2,872,076 134,340 21,339,717

Parent Entity For the year ended 31 December 2008 Balance at the beginning of the year Movement for the year Net Income recognised directly in equity Loss for the year Total recognised income and expense during the year Contributions of equity Issue of equity Transaction costs on share issues Employee share scheme Balance at the end of the year	Contributed Equity Accum- ulated Losses Share Based payments Reserve Foreign Currency Transaction Reserve Financial Asset Revaluation Reserve Total Equity $ $ $ $ $ $ 39,436,350 (19,261,417) 78,500 (99,617) 12,567 20,166,383 - - - (112,659) 2,859,509 2,746,850
	- - - (112,659) 2,859,509 2,746,850 - (736,691) - - - (736,691)
	- (736,691) - - - (736,691) 368,000 - - - - 368,000 - - - - - - - - - - - -
	39,804,350 (19,998,108) 78,500 (212,276) 2,872,076 22,544,542

14 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Statement of Changes in Equity (continued)

					Foreign	Share	Financial
Consolidated Entity	Contributed	Accum- ulated	General		Currency Translation	Based payments	Asset Revaluation	Minority	Total
	Equity	Losses	Reserve		Reserve	Reserve	Reserve	Interests	Equity
For the year ended
31 December 2007	$	$	$		$	$	$	$	$
Balance at the beginning of the year	35,087,042	(14,990,697)	2,551,100		(588,456)	-	514,028	134,340	22,707,357
Movement for the year	-	-	-		(573,814)	-	(501,461)	-	(1,075,275)
Net Income recognised directly in equity	-	-	-		(573,814)	-	(501,461)	-	(1,075,275)
Loss for the year	-	(7,010,080)	-		-	-	-	-	(7,010,080)
Total recognised income and expense during the year	-	(7,010,080)			(573,814)	-	(501,461)	-	(8,085,355)
Contributions of equity
Issue of equity	4,505,308	-	-		-	-	-	-	4,505,308
Transaction costs on share issues	(156,000)	-		-	-	-	-	-	(156,000)
Employee share scheme	-	-		-	-	78,500	-	-	78,500
Balance at the end of the year	39,436,350	(22,000,777)	2,551,100		(1,162,270)	78,500	12,567	134,340	19,049,810

Parent Entity For the year ended 31 December 2007 Balance at the beginning of the year Movement for the year Net Income recognised directly in equity Loss for the year Total recognised income and expense during the year Contributions of equity Issue of equity Transaction costs on share issues Employee share scheme Balance at the end of the year	Contributed Equity Accum- ulated Losses Share Based payments Reserve Foreign Currency Translation Reserve Financial Asset Revaluation Reserve Total Equity $ $ $ $ $ $ 35,087,042 (12,403,027) - - 514,028 23,198,043 - - - (99,617) (501,461) (601,078)
	- - - (99,617) (501,461) (601,078) - (6,858,390) - - - (6,858,390)
	(6,858,390) (6,858,390) 4,505,308 - - - - 4,505,308 (156,000) - - - - (156,000) - - 78,500 - - 78,500
	39,436,350 (19,261,417) 78,500 (99,617) 12,567 20,166,383

15 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

This financial report is for Mineral Commodities Limited as the parent entity and Mineral Commodities Limited and controlled entities, as the consolidated entity. Mineral Commodities Limited is an Australian domiciled public listed company.

This general purpose financial report for the year ended 31 December 2008 has been prepared in accordance with Australian Accounting Standards and Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report of Mineral Commodities Limited as the Parent entity and Mineral Commodities Limited and controlled entities comply with International Financial Reporting Standards (IFRS).

Historical Cost Convention

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of available for sale financial assets for which the fair value basis of accounting has been applied.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report and have been consistently applied to all the years presented, unless otherwise stated.

(b) Principles of Consolidation

The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Mineral Commodities Ltd (“Company” or “parent entity”) as at 31 December 2008 and the results of its subsidiaries for the year then ended. Mineral Commodities Ltd and its subsidiaries together are referred to in this financial report as the consolidated entity.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.

Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group – refer to note (f).

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

16 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation (continued)

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Mineral Commodities Limited.

On 23 June 2006, Mineral Commodities Limited completed a takeover of Erebus Plc and effectively took control from this date. Immediately following the handing over of control to Mineral Commodities Limited, the accounting and financial records of Erebus Plc were requisitioned so that Mineral Commodities Limited could also control this function. Upon receipt of the accounting records subsequent to the reporting date, it became apparent that the records were incomplete and the Company began the process of reconstructing the records with the limited information that was available.

As at 31 December 2006, the records were not sufficiently reliable to be able to represent a true and fair view of the financial position of Erebus Plc and its subsidiary for the full year ended 31 December 2006 due to the incomplete information received up to the date of acquisition.

The value of the consideration paid for Erebus Plc was $2,297,935 comprising 9,406,878 shares and 3,135,626 unlisted options.

For these reasons, the Directors of Mineral Commodities decided not to consolidate Erebus Plc from 23 June 2006 and to report its investment in Erebus Ltd at cost in the Economic Entity for the year ended 31 December 2006.

The majority of the expenditure within the Erebus Group relates to the mining activities and is capitalised accordingly in the balance sheet. The acquisition and consolidation of the Erebus Group would have resulted in assigning a fair value to the mining right. The Directors believe that this value essentially represents the value of the consideration that was paid to takeover the company and reflecting the investment at cost at 31 December 2006 was a more appropriate way of reporting to shareholders given the situation.

As the Company did not consolidate Erebus at 31 December 2006, the Investment in Erebus and loan receivable from Erebus were not eliminated.

The Mineral Commodities Group that was reported as at 31 December 2006 therefore consisted of the Parent Entity, Mineral Commodities Limited and the subsidiary companies listed in Note 11(b) with the exception of Erebus Ltd and its subsidiary: Erebus Ltd and its subsidiary were consolidated into the Group for the 2007 financial year. This had the effect of overstating exploration and evaluation expenditure and understating the accumulated loss at initial date of consolidation (1 January 2007).

In 2007 Erebus Ltd transferred its interest in Kariba Kono (SL) Ltd to MRC Africa Pty Ltd. On completion of this transfer there was no requirement to maintain Erebus Ltd a UK Company, therefore application was made to Companies House in the UK to have the Company dissolved, this was confirmed with effect from 19 August 2008.

(c) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

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

Interest Income

Interest and other income is recognised as it accrues on a time proportion basis using the effective interest method.

17 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Taxes

Income taxes

The charge for current income tax expense or revenue is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Income tax expense is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where this has no effect on accounting or taxable profit or loss.

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

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

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

The income tax expense for the year is calculated using the 30% tax rate (2007: 30%).

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods & 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 where 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 in the Balance Sheet.

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

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

(e) Foreign Currency Transactions and Balances

Functional and presentation currency

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

18 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Foreign Currency Transactions and Balances (continued)

Transaction and balances

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

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying net investment hedge.

Group Companies

The financial results and position of group entities whose functional currency is different from the group’s presentation currency are translated into the presentation currency as follows;

Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date.

Income and expenses are translated at average exchange rates for the period.

Exchange differences arising on translation of foreign operations are recognised directly in the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.

(f) Property, Plant and Equipment

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

Acquisition

Items of plant and equipment are initially recorded at cost and includes any expenditure that is directly attributable to acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Depreciation of Plant and Equipment

Plant and equipment are depreciated at rates based upon the expected useful lives of these assets. The expected useful lives of these assets are 3-10 years.

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.

Disposal of Assets

The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal and is included in the income statement in the year of disposal.

19 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Exploration and Development Expenditure

Costs incurred during the exploration and development stages of specific areas of interest are accumulated. Such costs are only carried forward if they are expected to be fully recouped through the successful development of the area, or where activities to date have not yet reached a stage to allow reasonable assessment regarding the existence of economically recoverable reserves, otherwise this expenditure is recognised in the income statement. Costs are written off as soon as an area has been abandoned or considered to be non-commercial or provided against where an area is considered noncommercial at the period end.

Once production commences, expenditure accumulated in respect of areas of interest is amortised on a unit of production basis over the life of the total proven economically recoverable reserves. Restoration costs recognised in respect of areas of interest in the exploration and evaluation stage are carried forward as exploration and evaluation expenditure. Costs recognised after the commencement of production in areas of interest will be charged to the profit and loss statement.

(h) Investments

Interests in - Subsidiaries

Investments in subsidiaries are carried in the Company’s financial report at cost less any impairment losses. Dividends and distributions are brought to account in the Company’s income statement when they are declared by the subsidiaries.

Investments in associates

Associates are all entities over which the Consolidated entity has significant influence but not control, generally accompanying a shareholding of between 20%-50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Consolidated entity’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Consolidated entity’s share of its associates post acquisition profits or losses is recognised in the income statement, and its share of post acquisition movements in reserves is recognised directly in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

(i) Impairment of Assets

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

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

(j) Financial Instruments

The Group classifies its financial instruments in the following categories. The classification depends on the purpose for which the financial instrument was acquired. Management determines the classification of its financial instruments at initial recognition.

Recognition and de recognition

Regular purchases and sales of financial assets are recognised on trade date; the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or been transferred and the Group has transferred substantially all the risks and rewards of ownership.

20 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Financial Instruments (continued)

Fair value

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

Loans and receivables

Loans and receivables are recognised at amortised cost using the effective interest rate method. They are included within current assets, except for those with maturities greater than 12 months after the reporting date which are classified as noncurrent assets.

Available-for-sale financial assets

Available-for-sale financial assets are recognised at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity until the instrument is sold at which time any balance in equity relating to the instrument is recycled to the income statement as part of the profit or loss on sale.

Financial Liabilities

Financial liabilities are recognised at amortised cost, comprising original debt less principle payments and amortisation of transaction costs.

Impairment

At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. Impairment losses recognised on equity instruments classified as available for sale are not reversed through the income statement.

(l) Contributed Equity

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

(m) Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

(n) Earnings /(Loss) per Share

Basic Earnings /(Loss) per Share

Basic earnings per share is determined by dividing the profit after income tax attributable to members of Mineral Commodities Ltd by the weighted average number of ordinary shares outstanding during the financial year.

Diluted Earnings /(Loss) per Share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share would arise from the exercise of options outstanding at the end of the financial year.

21 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(o) Employee Benefits

Wages and Salaries, Annual Leave and Sick Leave

Provision is made for the consolidated entity’s liability for employee entitlements arising from services rendered by employees to balance date. These benefits include annual leave. Sick leave is non-vesting and has not been provided for. Employee entitlements expected to be settled within one year have been measured at the amounts expected to be paid when the liabilities are settled and are recognised in other payables.

The contributions made to defined contribution superannuation funds by entities within the consolidated entity are charged against profits when due.

Share-Based Payments

Share-based compensation benefits are provided to employees via the Mineral Commodities Employee Incentive Option Scheme. Information relating to this scheme is set out in Note 26.

The fair value of options granted under the Mineral Commodities Employee Incentive Option Scheme is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employee becomes unconditionally entitled to the options.

The fair value at grant date is independently determined using a Binomial option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

(p) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised on a straight line basis.

(q) Segment reporting

A business segment is identified for a group of assets and operations engaged in providing services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

(r) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

(s) Comparatives

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

(t) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale or transaction rather than continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, investment property and non-current biological assets that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement..

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de recognition.

22 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

A discontinued operation is a component of the entity that has been disposed of or has been abandoned, or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement.

(u) Critical accounting estimates and judgements

The Group makes significant estimates and judgements concerning the future. The resulting accounting estimates may not equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Critical Accounting Estimates

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

Significant judgements in applying the entity’s accounting policies

Impairment

During the year, the consolidated entity impaired its property, plant and equipment (Note 9), and exploration and development expenditure (note 10) in relation to the Sierra Leone assets, as the directors have assessed that these amounts are no longer recoverable. In the parent entity, intercompany loans totalling $1,446,278 (2007: $3,438,935) (Note 13) have been impaired as they have been assessed as non recoverable. Although the net assets of the group are less than the parent, the intercompany loans are considered to be recoverable through the future development of the tenements held by the subsidiaries.

Available for sale financial assets

During the year, the company sold 4milllion shares in Allied Gold Limited, and that company restructured their Board such that it is considered that MRC has lost significant influence (Note 11(a)). The Directors have reclassified the remaining investment in Allied Gold as “available for sale” financial assets because (they intend to hold the investments to earn benefits in the medium to long term increases in the value of these investments) or (they do not meet the criteria to be held as financial assets through profit and loss as they are not monitored and evaluated on a fair value basis).

Exploration and development expenditure

Recoupment of the capitalised exploration and evaluation expenditure is dependant on the successful development and commercial exploitation of the Xolobeni Mineral Sands and the Tormin Mineral Sands areas of interest in South Africa. The capitalised expenditure in relation to the Xolobeni project is expected to be fully recoverable once the grant of the mining right has been affirmed by the Minister of Minerals and Energy in South Africa.

23 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v) Accounting Standards not yet effective

Australian Accounting Standards that have recently been issued or amended but are not yet effective for the parent and consolidated entity have not been adopted for the annual reporting period ended 31 December 2008.

AASB Amendment AASB 3 (reissued March 2008) AASB 2007–8 Amendments to Australian Accounting Standards AASB 2007–6 Amendments to Australian Accounting Standards Revised AASB 123 and AASB 2007-6 Revised AASB 101 AASB 8 and AASB 2007-3	Affected Standard(s) Business Combinations AASB 101 Presentation of Financial Statements AASB 1 First time adoption of AIFRS AASB 101 Presentation of Financial Statements AASB 107 Cash Flow Statements AASB 111 Construction Contracts AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123, Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101. AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8.	Nature of Change to Accounting Policy Released as part of long term international convergence project between IASB and FASB. The revised standard introduces more detailed guidance on accounting for step acquisitions, adjustments to contingent consideration, assets acquired that the purchaser does not intend to use, reacquired rights and share-based payments as part of purchase consideration. Also, all acquisition costs will have to be expensed instead of being recognised as part of goodwill. The revised AASB 101: Presentation of Financial Statements issued in September 2007 requires the presentation of a statement of comprehensive income. The revised AASB 123: Borrowing Costs issued in June 2007 has removed the option to expense all borrowing costs. This amendment will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. However, there will be no direct impact to the amounts included in the financial group as they already capitalize borrowing costs related to qualifying assets. Removal of option to expense all borrowing costs and when adopted will require the capitalisation of all borrowing costs directly attributable to the acquisition of a qualifying asset. There is expected to be no impact on the financial report of the Group. Requires changes to presentation and disclosure but will not affect any of the amounts recognised in the financial statements. Significant change in the approach to segment reporting and disclosure, however it is not expected to affect any of the amounts recognised in the financial statements.	Application Date of Standard* Business combination s where the acquisition date is on or after the beginning of the first reporting period that commences 1 July 2009 or later 1.1.2009 1.1.2009 1 Jan 09 1 Jan 09 1 Jan 09	Application Date for Group 1 July 2009 1.7.2009 1.7.2009 1 Jan 09 1 Jan 09 1 Jan 09

24 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v) Accounting Standards not yet effective

The following amendments are not applicable to the Group and therefore have no impact

AASB Amendment 2007-9 2008-2 AASB-I 14	Affected Standard(s) Amendments to Australian Accounting Standards arising from the review of AASs 27, 29 and 31. Amendments to Accounting Standards – Puttable Financial Instruments and Obligations Arising on Liquidation AASB-I 14 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction	Nature of Change to Accounting Policy No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact. No change to accounting policy required. Therefore no impact.	Application Date of Standard* 1 Jul 08 1 Jan 09 1 Jan 08	Application Date for Group 1 Jan 09 1 Jan 09 1 Jan 08

Application date is for the annual reporting periods beginning on or after the date shown in the above table.

25 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

2. OTHER REVENUE FROM CONTINUING OPERATIONS

Interest Interest revenue from unrelated entities Interest revenue from controlled entity Other Income Gain from sales of investments in listed companies Management fees Miscellaneous and other income Total Revenue from continuing operations	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 89,995 133,000 74,739 127,830 - 415,225 304,809
	89,995 133,000 489,964 432,639 471,562 539,419 471,562 539,419 45,000 90,000 140,685 201,183 2,664 2,885 2,664 2,885
	609,221 765,304 1,104,875 1,176,126

3. LOSS FOR THE YEAR

	Consolidated	Consolidated
	2008	2007	2008	2007
	$	$	$	$
Loss before income tax has been arrived at after
charging the following:
Exploration expenditure written off	157,663	186,867	157,663	186,867
Operating Lease rentals	70,133	69,741	70,133	69,741
Depreciation - Plant and Equipment	62,442	102,511	60,899	60,477
Superannuation contributions	26,350	25,585	19,876	17,984
Movement in provision for employee entitlements	(60,336)	48,563	(60,336)	48,563

26 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

4. INCOME TAX

The components of current income tax expense comprise: Current taxation Income tax (benefit) reported in the income statement The prima facie tax on loss before income tax is reconciled to the income tax expense as follows: Loss before income tax Prima facie tax payable / (benefit) on loss @ 30% (2007:30%) Non allowable items Non-assessable income Net deferred tax assets not brought to account Benefit of losses not previously brought to account Income tax expense / (benefit) Future income tax benefit arising from un-recouped deductions at balance date, for Australian tax resident entities. Revenue losses Capital losses	Consolidated Company 2008 2007 2008 2007 $ $ $ $ - - - -
	- - - -
	(1,515,661) (7,010,080) (736,691) (6,858,390)
	(454,698) (2,103,024) (221,007) (2,057,517) 427,222 (429,596) 917,548 70,113 (43,110) (43,110) (43,110) (43,110) 70,586 2,575,730 (653,430) 2,030,514 - - - -
	- - - -
	3,644,600 2,923,764 1,726,016 1,467,402 4,689,637 4,643,254 4,689,637 4,643,254

In addition the economic entity has unconfirmed tax losses and accumulated exploration expenditure that gives rise to potential carry forward tax benefits in South Africa amounting to approximately Rand 16.2 million (approximately A$2.7 million). The benefit of these potential future tax benefits has not been brought to account, and will only be realised if circumstances similar to those described above, also apply to the economic entity’s future operations in South Africa.

There are no franking credits available.

27 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

5. CASH AND CASH EQUIVALENTS

Cash at Bank	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 797,328 2,177,864 256,698 2,150,627
	797,328 2,177,864 256,698 2,150,627

The effective interest rate on cash at bank in 2008 was 6.38% (2007:6.0%)

(a)

Interest rate risk exposure

The consolidated and parent entity’s exposure to interest rate risk is discussed in Note 25.

(b) Reconciliation to cash at the end of the year

The above figures represent the cash at the end of the financial year as shown in the Cash Flow Statement.

6. TRADE AND OTHER RECEIVABLES – CURRENT

Trade receivables Term deposits Other receivables Loans receivable from other entities	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 54,026 35,634 54,026 35,639 12,934 36,950 - - 2,094,068 361,897 2,034,216 250,356 81,250 65,440 - -
	2,242,278 499,921 2,088,241 285,995

(a) Fair Values and credit risk

Due to the short term nature of these receivables the carrying values represent their respective fair values as at 31 December 2008 and 2007.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to Note 25 for more information on the risk management policy of the Group and the credit quality of the entity’s receivables.

(b) Foreign Exchange and Interest Rate Risk

Information about the Group’s and the parent entity’s exposure to foreign exchange and interest rate Risk in relation to trade and other receivables is provided in Note 25.

(c) Other Receivables

An amount of $2,000,000 (2007: Nil) relates to the settlement reached with Promet et al, which was received in January 2009. These amounts generally arise from transactions outside the usual operating activities of the Group and collateral is not normally obtained.

28 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

7. FINANCIAL ASSETS - CURRENT

Available for sale Investments Investments in companies listed on a recognised stock exchange - shares at fair value At the beginning of the year Investments re classified from unlisted investments Adjustment to fair value Reclassify investment in Allied Gold Ltd from equity accounted investments Total available for sale investments in companies listed on a recognised stock exchange Available for sale investment in companies not listed on a recognised stock exchanges At the beginning of the year Investment this year Transfer to Investments listed on a recognised stock exchange Total available for sale investments in companies not listed on a recognised stock exchange¹ Total Financial Assets - Current	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 75,000 10,000 75,000 10,000 65,000 65,000 (18,569) - (18,569) -
	56,431 75,000 56,431 75,000 6,524,439 - 6,524,439 -
	6,580,870 75,000 6,580,870 75,000
	361,398 50,000 361,398 50,000 14,826 376,398 14,826 376,398 - (65,000) - (65,000)
	376,224 361,398 376,224 361,398

	6,957,094 436,398 6,957,094 436,398

Available for sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed returns or fixed maturity date attached to these investments.

Fair Value of Investment in Allied Gold Limited

The market value of this investment in Allied Gold at balance date was $6,524,439 based on a price per share of 42 cents. The investment by Mineral Commodities Ltd in Allied Gold Ltd has been reclassified from equity accounted to fair value refer note 11(a).

¹ Non listed investments have been valued as an approximate to their fair value.

29 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

7. FINANCIAL ASSETS – CURRENT (continued)

(a) Risk Exposure

Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 25.

8 OTHER – CURRENT

	Consolidated	Consolidated
	2008	2007	2008	2007
	$	$	$	$
Prepayments	13,145	16,723	13,145	16,723

9. PROPERTY, PLANT AND EQUIPMENT

Plant and office equipment - at cost Accumulated depreciation Total property, plant and equipment Reconciliation of the carrying amount of plant & equipment at the beginning and end of the current and previous financial year Plant and office equipment Carrying amount at beginning of year Additions Impairment Depreciation Carrying amount at end of year	663,628 1,794,056 530,425 1,562,562 (290,568) (218,951) (163,109) (135,818)
	373,060 1,575,105 367,316 1,426,744
	1,575,105 2,544,443 1,426,744 2,542,171 7,946 518,260 5,445 330,137 (1,104,766) (1,385,087) (1,003,974) (1,385,087) (105,225) (102,511) (60,899) (60,477)
	373,060 1,575,105 367,316 1,426,744

(a) During 2008 an impairment loss of $1,003,974 (2007 $1,385,087) was brought to account in respect of the Diamond pan plant situated in Sierra Leone. The impairment value has been calculated to write off the full carrying value.

30 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

10. EXPLORATION AND DEVELOPMENT EXPENDITURE

Exploration expenditure - costs carried forward in respect of areas of interest in: Exploration and evaluation phases Total exploration and evaluation expenditure Reconciliation of the carrying amount of mining tenements at the beginning and end of the current and the previous financial year. Carrying amount at beginning of year Exploration expenditure on consolidation of Erebus/ Kariba Kono Expenditure during the year Expenditure outlaid other than in cash Impairment of exploration expenditure Foreign exchange translation reserve Write off discontinued projects Carrying amount at end of year	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 12,026,008 11,394,491 - -
	12,026,008 11,394,491 - -
	11,394,491 8,863,985 - 42,256 - 4,606,608 - - 2,505,464 2,233,094 157,663 144,611 - - - - (983,069) (3,606,608) - - (733,215) (515,721) - - (157,663) (186,867) (157,663) (186,867)
	12,026,008 11,394,491 - -

Recoupment of carried forward exploration and evaluation expenditure is dependent upon the granting of mining rights and successful development and commercial exploitation of each area of interest, or otherwise by their sale at an amount not less than the carrying value.

The impairment loss of $983,069 (2007:3,606,608) was brought to account in respect of the exploration assets contained within the Company’s Sierra Leone project. The impairment value has been calculated to write off all carrying value.

11(a) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investment in companies accounted for using the equity method At the beginning of the year Equity accounting adjustments Reclassify to fair value investment	Consolidated 2008 2007 $ $ 3,298,437 4,562,213 - (1,263,776) (3,298,437) -
	- 3,298,437

31 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

11(a) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) Interests are held in the following associated companies:

Name Principal Activity Ownership Interest 2008 2007 % % Listed Allied Gold Ltd (Incorporated in Australia) Mineral exploration Ord 3.78 5.71 Movements during the year in Equity Accounted investments in Associated Companies Carrying amount at beginning of financial year Disposal of Leonaust Mining Company Ltd Investments in associates acquired during the year, at cost Cost of shares in associates sold during the year Share of associate's net loss Net gain on deemed disposal Reclassify to Fair Value Carrying amount at end of financial year Summarised Presentation of Aggregate Assets, Liabilities and Performance of Associates The Consolidated entity’s share of the results of its associate and its aggregated assets (including goodwill) and liabilities are as follows: Current Assets Non current assets Total assets Current liabilities Non current liabilities Total liabilities Net assets as reported by associates Share of net (loss) profit after income tax as reported by the associate	Carrying Amount of Investment 2008 2007 - 3,298,437
	- 3,298,437
	3,298,437 3,623,988 - (74,174) - 632,043 - (686,890) - (286,097) - 89,567 (3,298,437) -
	- 3,298,437
	2008 2007 $ $ - 528,021 - 7,541,951
	- 8,069,972
	- 3,096,004 - 411,755
	- 3,507,759
	- 4,562,213
	- (286,097)

During 2008 Mineral Commodities Limited sold 4 million shares in Allied Gold Limited reducing it’s ownership to 3.78%, as a consequence of this and also Board restructure the holding has been reclassified as an available for sale investment with a fair value of $6,524,439 refer note 7

Prior to this, although Mineral Commodities Limited owned less than 20% of Allied Gold Limited, it was in a position of significant influence because it is one of the largest shareholders of Allied Gold Limited, and two of the Mineral Commodities Limited directors are also directors of Allied Gold, amounting to 40% Board representation throughout the relevant period.

32 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

11(b) SUBSIDIARIES

Unquoted investments - at cost Shares in controlled entities Subsidiaries Class of Share Parent Entity Mineral Commodities Limited Controlled Entities Rexelle Pty Ltd Ord Queensland Minex NL Ord Q Smelt Pty Ltd Ord Mincom Waste Pty Ltd Ord MRC Resources (Pty) Ltd Ord MRC Africa Pty Ltd Ord Erebus Plc (refer note 1b) Ord Kariba Kono (S.L.) Ltd (refer note 1b) Ord Blackhawk Oil & Gas Ltd Ord Less Impairment Subsidiaries of MRC Resources (Pty) Ltd Class of Share Transworld Energy & Minerals Resources (SA) (Pty) Limited ¹ Ord Mineral Sands Resources (Pty) Ltd ² Ord Nyati Titanium Eastern Cape (Pty) Ltd Ord MRC Metals (Pty) Ltd Ord Skeleton Coast Resources (Pty) Ltd Ord	Consolidated 2008 2007 $ $ - -	Company 2008 2007 $ $ 1,451,001 1,551,001
	- -	1,451,001 1,551,001
	Place of Incorporation Equity Holding 2008 2007 % % Australia - Australia 100 100 Australia 100 100 Australia 90 90 Australia 100 100 South Africa 100 100 Australia 100 100 United Kingdom - 100 Sierra Leone 100 100 Australia 100 100 Place of Incorporation Equity Holding 2008 2007 % % South Africa 56 75 South Africa 50 100 South Africa 100 100 South Africa 100 100 Namibia 100 100	Cost to Company 2008 2007 $ $ - 1,450,001 1,450,001 4,718,302 4,718,302 - - - - - - 1,000 1,000 - - - - 100,000 100,000
		6,269,303 6,269,303 (4,818,302) (4,718,302)
		1,451,001 1,551,001
		Cost to Company 2008 2007 $ $ 2,500,000 2,500,000 - - - - - - - -

Please refer to Note 1 (b) in respect to Erebus Ltd and Kariba Kono Pty Ltd.

¹ MRC Resources (Pty) Ltd shareholding reduced by 19% following the transfer to the Black Economic Enterprise partner.

² MRC Resources (Pty) Ltd shareholding reduced by 50% following the transfer to the Black Economic Enterprise partner

33 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

12. MINORITY INTERESTS

Minority interests in subsidiaries comprise: Interest in retained profits at the beginning of the financial year after adjusting for outside equity interests in the entities acquired during the financial year Operating loss Share capital Reserves Total minority interests	Consolidated Entity 2008 2007 $ $ - - - - 54,710 54,710 79,630 79,630
	134,340 134,340

During the year, two subsidiaries’ ownership interests were restructured to comply with South African legislation. Ordinary shares were issued to the Black Empowerment Parties to effect these changes.

13. TRADE AND OTHER RECEIVABLES – NON-CURRENT

Opening Balance Investment in subsidiary Adjustment arising from consolidation Loans and advances - controlled entities Less impairment Total Trade and other receivables	2,261,727- 9,917,134 9,100,328 - - - - (2,261,727) - - - - 3,370,712 4,255,741 - - (1,446,278) (3,438,935)
	- - 11,841,568 9,917,134

Recovery of the loans to controlled entities is dependent upon the commercial exploitation of mining tenements held by the controlled entities.

(a) Impaired receivables and receivables past due

As at 31 December 2008 non current loans and advances with a nominal value of $1,446,278 (2007 $3,438,935) were impaired.

This related to the following loans:

(i) $1,415,246 advanced to Kariba Kono (SL) Ltd. It is expected that the sale of the assets of this entity will not generate sufficient funds in order for this receivable to be repaid. Please refer to Note 1 (b) in respect to loans to Erebus Ltd and Kariba Kono (S.L.) Ltd.

(ii) $31,033 (2007: Nil) advanced to Blackhawk Oil & Gas Ltd and Queensland Minex NL were also considered to be impaired.

34 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

13. TRADE AND OTHER RECEIVABLES – NON-CURRENT (CONTINUED)

(b) Risk Exposure

Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 25.

14. TRADE AND OTHER PAYABLES - CURRENT

Trade payables - unsecured Other payables and accruals - unsecured	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 704,742 156,517 129,170 25,616 336,314 104,130 273,204 66,353
	1,041,056 260,647 402,374 91,969

Refer to Note 25 for details of interest rates incurred on payables.

Risk Exposure

Information about the Groups and the parent entity’s exposure to foreign exchange risk is provided in Note 25.

15. PROVISIONS – NON-CURRENT

	Consolidated	Consolidated	Company
	2008	2007	2008	2007
	$	$	$	$
Provision for employee entitlements
Opening balance	88,483	39,920	88,483	39,920
Movement for the period	(60,336)	48,563	(60,336)	48,563
Provision for employee entitlements	28,147	88,483	28,147	88,483

Employee entitlements represent unused annual and long service leave.

35 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

16. CONTRIBUTED EQUITY

Balance at beginning of financial year Placement of shares, July 2007 Conversion of listed 30 cent options Conversion of 40 cent options Placement of shares, December 2008 Costs of capital raising Balance at end of financial year	2008 Number of shares 2007 Number of shares 2008 $ 2007 $ 122,993,385 106,436,002 39,436,350 35,087,042 - 12,000,000 - 3,120,000 - 4,373,883 - 1,311,908 - 183,500 - 73,400 18,400,000 - 368,000 - - - - (156,000)
	141,393,385 122,993,385 39,804,350 39,436,350

In December 2008 the Company placed 18.4 million shares to various Investors at 2 cents per share to raise $368,000.

(a)

Ordinary Shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(b) Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets in order to maintain sufficient funds necessary to continue its operations.

As a junior mineral explorer debt financing is not an option until such time at the Company’s projects have reached a stage at which debt financing can be obtained, therefore the company considers its contributed equity as it’s capital during this period.

36 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

17. RESERVES

	Consolidated	Consolidated	Company
	2008	2007	2008	2007
	$	$	$	$
General Reserve	2,551,100	2,551,100	-	-
Financial asset revaluation reserve	2,872,076	12,567	2,872,076	12,567
Share based payments reserve	78,500	78,500	78,500	78,500
Foreign currency translation reserve	(584,211)	(1,162,270)	(212,276)	(99,617)
	4,917,465	1,479,897	2,738,300	(8,550)

Nature and purpose of reserves

General Reserve

The General Reserve arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economic entity.

Financial asset revaluation reserve

The financial asset revaluation reserve arises from the revaluation at balance sheet date of available for sale financial assets.

Foreign Currency Translation reserve

The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of operations into the presentational currency of the group. Refer to accounting policy Note 1 (e).

Share Based Payments Reserve

The share based payments reserve is used to recognise the fair value of options issued to employees but not exercised and the fair value of shares issued to employees.

18. ACCUMULATED LOSSES

	Consolidated	Consolidated	Company	Company
	2008	2007	2008	2007
	$	$	$	$
Accumulated losses at beginning of the year	(22,000,778)	(14,990,698)	(19,261,417)	(12,403,027)
Net profit (loss) attributable to members	(1,515,661)	(7,010,080)	(736,691)	(6,858,390)
Accumulated losses at end of the year	(23,516,439)	(22,000,778)	(19,998,108)	(19,261,417)

37 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

19 LOSS PER SHARE

	Consolidated	Consolidated
	2008	2007
	$	$
Basic loss per share (cents per share)	(1.2)	(6.1)
Weighted average number of ordinary shares outstanding during	124,098,53	114,795,28
the year used in calculation of basic loss per share	3	9
Loss used in the calculation of basic loss per share	(1,515,661)	(7,010,080)

The dilutive effect of the options has not been disclosed as the options were anti-dilutive.

38 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

20. SEGMENT INFORMATION

Geographical Segments

The consolidated entity has two geographical segments, Australia and South Africa.

(a) Geographical

Revenue External segment revenue Total segment revenue Total Revenue Result Segment result Eliminations Income Tax expense Net Loss for the year Segment Assets and Liabilities Segment assets Eliminations Segment liabilities Net segment assets Net entity assets	Australia Africa Discontinued Operations 2008 2007 2008 2007 2008 2007 $ $ $ $ $ $ 594,589 761,556 14,632 3,748 2,006,859 -	Totals 2008 2007 $ $ 2,616,080 765,304
	594,589 761,556 14,632 3,748 2,006,859 -	2,616,080 765,304
	(736,073) (6,870,688) (926,733) (700,438) (1,487,274) (1,482,472) - - 9,682,494 8,908,272 11,112,290 9,017,969 3,043,220 3,740,968 430,539 180,470 575,554 132,298 63,110 36,362 9,251,955 8,727,802 10,536,736 8,885,671 2,980,110 3,704,606	2,616,080 765,304
		(3,150,080) (9,053,598) 1,634,419 2,043,518
		(1,515,661) (7,010,080) - -
		(1,515,661) (7,010,080)
		23,838,004 21,667,209 (1,429,084) (2,268,270)
		22,408,920 19,398,939 1,069,203 349,130
		21,339,717 19,049,809
		21,339,717 19,049,809

39 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Geographical (continued)	Australia	Australia	Africa		Discontinued	Operations	Totals
	2008	2007	2008	2007	2008	2007	2008	2007
	$	$	$	$	$	$	$	$
Investment in equity method
associates included in segment	-	3,298,437	-	-	-	-	-	3,298,437
assets
Share of net loss of associate	-	286,097	-	-	-	-	-	286,097
Acquisition of property plant & equipment	5,445	330,137	2,501	4,251	-	183,872	7,946	518,260
Depreciation	60,899	60,477	1,543	1,738	42,783	40,296	105,225	102,511

Secondary Reporting

Business Segments

The consolidated entity operates in only one business segment being the field of exploration for mineral resources.

40 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

21. AUDITORS’ REMUNERATION

During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and nonrelated audit firms:

Amounts received or due and receivable by auditors for: Auditors of the parent entity Audit and review Non-related practice of the auditors Audit of subsidiaries	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 70,421 45,893 70,421 45,893 5,832 12,713 - - 76,253 58,606 70,421 45,893

22. KEY MANAGEMENT PERSONNEL DISCLOSURES

Key Management Personnel Compensation

Key Management Personnel Short-term employee benefits Post-employment benefits Share-based payments	Economic Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ 232,237 236,837 232,237 236,837 3,963 3,963 3,963 3,963 - 9,800 - 9,800
	236,200 250,600 236,200 250,600

41 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

22. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)

(c) Option holdings of key management personnel

The numbers of options over ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the Consolidated entity are set out below:

2008
Key Management Personnel	Balance at 1 January '08	Granted as Remuneration	Options Exercised	Options Lapsed	Balance at 31 Dec '08	Vested and exercisable	Unvested
Mark Caruso	-	-	-	-	-	-	-
Joseph Caruso	-	-	-	-	-	-	-
Greg Steemson	-	-	-	-	-	-	-
Peter Torre	250,000	-	-	-	250,000	250,000	-
2007
Key Management Personnel	Balance at 1 January '07	Granted as Remuneration	Options Exercised	Options Lapsed	Balance at 31 Dec '07	Vested and Exercisable	Unvested
Mark Caruso	3,089,547	-	-	3,089,547	-	-	-
Joseph Caruso	3,085,338	-	-	3,085,338	-	-	-
Greg Steemson	53,333	-	-	53,333	-	-	-
Peter Torre	-	250,000	-		250,000	250,000	-

(d) Shareholdings of key management personnel

The numbers of ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the Consolidated entity are set out below:

2008
	Balance at	Received as	Options	Net change	Balance
Director	1 January ‘08	Remuneration	Exercised	other	31 Dec ‘08
Mark Caruso	11,569,353	-	-	6,894,262	18,463,615
Joseph Caruso	11,556,726	-	-	6,894,262	18,450,988
Greg Steemson	210,000	-	-	1,300,00	1,510,000
Peter Torre	-	-	-	-	-
2007
	Balance at	Received as	Options	Net change	Balance
Director	1 January ‘07	Remuneration	Exercised	other	31 Dec ‘07
Mark Caruso	9,268,642	-	-	2,300,711	11,569,353
Joseph Caruso	9,256,015	-	-	2,300,711	11,556,726
Greg Steemson	210,000	-	-	-	210,000
Peter Torre	-	-	-	-	-

Joseph and Mark Caruso are both directors of Zurich Bay Holdings Pty Ltd which has a relevant interest in 18,450,988 shares

42 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

22. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)

All equity transactions with key management personnel, other than those arising from the exercise of remuneration options, have been entered into under terms and conditions no more favourable that those the Group would have adopted if dealing at arm’s length.

(e) Loans to key management personnel

There were no loans to key management personnel during the period.

(f) Other transactions and balances with key management personnel

There were no transactions or balances with key personnel except as disclosed in this note and Note 23.

23. RELATED PARTY TRANSACTIONS

There were no transactions with directors or director related entities during the financial period other than the payment of directors’ remuneration as is disclosed on note 22 and the payment of $8,454 for secretarial services provided by Minesite Constructions Ltd an entity in which Mr Joseph Caruso and Mr Mark Caruso are Directors and have a relevant interest in the Company.

Mineral Commodities Ltd is a shareholder in Allied Gold Ltd owning 15,534,379 shares or 3.78% of the issued share capital at balance date. Mark Caruso and Greg Steemson are also directors of Allied Gold Limited.

Wholly owned group

The group consists of Mineral Commodities Limited and its subsidiaries. Details of entities in the group are set out in Note 11.

Transactions between Mineral Commodities Limited and other entities in the group during the years ended 31 December 2008 and 31 December 2007 consisted of loans advanced and payments received and made on inter company accounts. These transactions were made on normal commercial terms and conditions and at market rates.

During the financial year, the Company provided management, accounting and administration services to other entities in the wholly-owned group.

An impairment loss was booked on the receivable from Kariba Kono and Blackhawk Oil & Gas Ltd; refer to Note 13 (a) for more information. All other inter company receivables are expected to be receivable in full.

Key management personnel

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

43 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

24(a) RECONCILIATION OF LOSS FOR THE YEAR TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Profit/(loss) after income tax and outside equity interest Depreciation Unrealised foreign exchange loss/(gain) Non bank interest income not in cash Impairment losses Management fees not received in cash Share Based Payments (Profit)/loss on sale of investment in listed companies Provision – employee entitlements Equity accounting adjustments Exploration expenditure written off Exploration expenditure capitalised Other non-cash items Changes in assets and liabilities during the year: Increase (decrease) in trade payables and other liabilities (Increase) decrease in trade and other receivables (Increase) decrease in prepayments Net cash inflow / (outflow) from operating activities	Consolidated Company 2008 2007 2008 2007 $ $ $ $ (1,515,661) (7,010,080) (736,691) (6,858,389) 105,225 102,511 60,899 60,477 - - - 3,085 - - (430,049) (304,809) 2,087,836 4,991,695 2,550,252 6,817,068 (45,000) (75,000) (140,685) (111,183) - 78,500 - 78,500 (471,562) (539,419) (471,562) (539,419) (60,336) 48,563 (60,336) 48,563 - 286,097 - - 157,663 186,867 157,663 186,867 (2,505,464) (2,233,094) (157,663) (144,611) 93,520 (49,696) 60,852 33,919 778,017 (72,461) 308,013 (55,471) (1,740,988) (255,192) (1,800,877) (157,886) 3,578 3,017 3,578 3,017
	(3,113,172) (4,537,692) (656,606) (940,272)

Profit/(loss) after income tax and outside equity
interest
Depreciation
Unrealised foreign exchange loss/(gain)
Non bank interest income not in cash
Impairment losses
Management fees not received in cash
Share Based Payments
(Profit)/loss on sale of investment in listed
companies
Provision – employee entitlements
Equity accounting adjustments
Exploration expenditure written off
Exploration expenditure capitalised
Other non-cash items
Changes in assets and liabilities during the year:
Increase (decrease) in trade payables and other
liabilities
(Increase) decrease in trade and other
receivables
(Increase) decrease in prepayments
Net cash inflow / (outflow) from operating
activities

Consolidated
Company
2008
2007
2008
2007
$
$
$
$
(1,515,661)
(7,010,080)
(736,691)
(6,858,389)
105,225
102,511
60,899
60,477
-
-
-
3,085
-
-
(430,049)
(304,809)
2,087,836
4,991,695
2,550,252
6,817,068
(45,000)
(75,000)
(140,685)
(111,183)
-
78,500
-
78,500
(471,562)
(539,419)
(471,562)
(539,419)
(60,336)
48,563
(60,336)
48,563
-
286,097
-
-
157,663
186,867
157,663
186,867
(2,505,464)
(2,233,094)
(157,663)
(144,611)
93,520
(49,696)
60,852
33,919
778,017
(72,461)
308,013
(55,471)
(1,740,988)
(255,192)
(1,800,877)
(157,886)
3,578
3,017
3,578
3,017

(3,113,172)
(4,537,692)
(656,606)
(940,272)

24(b) Non-cash Investing and Financing Activities

The group has no available finance facilities as at balance date.

44 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

25. FINANCIAL RISK MANAGEMENT

The Consolidated entity’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated entity.

The Consolidated entity does not hold any derivative financial instruments.

The Consolidated entity uses sensitivity analysis in the case of interest rate and foreign exchange risks and aging analysis for credit risk, to measure different types of risk to which it is exposed.

Risk management is carried out by the Board of Directors.

The Consolidated entity and the parent entity hold the following financial instruments:

Financial Assets Cash and cash equivalents Trade and other receivables Available for sale investments Financial Liabilities Trade and other payables	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 797,328 2,177,864 256,698 2,150,627 2,242,279 499,921 13,929,809 10,203,129 6,957,094 3,734,835 6,957,094 4,998,611
	9,996,701 6,412,620 21,143,601 17,352,367
	1,041,056 349,130 402,374 180,452
	8,955,645 6,063,490 20,741,227 17,171,915

Market Risk

Foreign exchange risk

The Group and the parent entity operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the South African Rand, Great British Pound, and US Dollar.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Consolidated entity’s functional currency and net investments in foreign operations. The risk is measured using sensitivity analysis and cash flow forecasting.

The Consolidated entity and the parent entity currently hold no derivatives or foreign exchange contracts to hedge their foreign exchange risk exposure.

45 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

25. FINANCIAL RISK MANAGEMENT (CONTINUED)

The Groups exposure to foreign currency risk at the reporting date was as follows:

Cash and cash equivalents Trade and other receivables Available for sale investments Trade and other payables	31-Dec-08 31-Dec-07 Canadian $ United States $ South African Rand GB £ Sierra Leone Leones Canadian $ United States $ South African Rand Sierra Leone Leones - 388 3,425,678 - 1,118,957 - 2,452 93,247 11,712,580 - - 465,448 - 1,240,280 - - 1,095,385 1,250,000 5,882 - - - - 11,628 - - -
	5,882 388 3,891,926 - 2,359,237 11,628 2,452 1,188,632 12,962,580
	- (4,704) (3,764,126) (16,360) (5,489,600) - - (793,782) -
	5,882 (4,316) 127,800 (16,360) (3,130,363) 11,628 2,452 394,850 12,962,580

The carrying amounts of the parent entity’s financial assets and liabilities are denominated in Australian dollars except as set out below:

Trade and other receivables Available for sale investments	31-Dec-08 31-Dec-07 CAN $ United States $ South African Rand GB £ Sierra Leone Leones Canadian $ United States $ South African Rand Sierra Leone Leones - - 11,930,674 - - - - 10,322,259 - 5,882 - - - - 11,628 - - -
	5,882 - 11,930,674 - - 11,628 - 10,322,259 -

46 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

25. FINANCIAL RISK MANAGEMENT (CONTINUED)

Group and Parent entity sensitivity Price risk

The consolidated entity has an exposure to equity securities price risk. This arises from investments held by the consolidated entity and classified on the balance sheet as available for sale financial assets. Neither the Group nor the parent entity are exposed to commodity price risk.

2008 Available for sale investments Listed Shares & Options Unlisted shares 2007 Available for sale investments Listed shares Unlisted shares	Price Risk -20% +20% Carrying amount $ Profit $ Equity $ Profit $ Equity $ 6,580,870 - (1,316,174) - 1,316,174 376,224 - (75,245) - 75,245
	6,957,094 - (1,391,419) - 1,391,419
	Price Risk -20% +20% Carrying amount $ Profit $ Equity $ Profit $ Equity $ 75,000 - (15,000) - 15,000 361,398 - (72,280) - 72,280
	436,398 - (87,280) - 87,280

Cash flow and fair value interest rate risk

The Group’s only interest rate risk arises from cash and cash equivalents held. Deposits and current accounts held with variable rates expose the Group to cash flow interest rate risk. The Group does not consider this to be material to the group and have therefore not undertaken any further analysis of risk exposure.

Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as credit exposures including outstanding receivables.

All cash balances held at banks are held at internationally recognised institutions. The majority of receivables held are with related parties and within the Group. Given this, the credit quality of financial assets that are neither past due or impaired can be assessed by reference to historical information about default rates.

47 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

25. FINANCIAL RISK MANAGEMENT (CONTINUED)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The Board monitors rolling cash flow forecasts to manage liquidity risk. The only financial liabilities of the Group at balance date are trade and other payables, these amounts are unsecured.

As at reporting date the Group had sufficient cash reserves to meet its requirements. The Group therefore had no credit standby facilities or arrangements for further funding in place.

The only financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. These were non interest bearing and were due within the normal 30 day terms of creditor payments.

Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets, such as available for sale securities, is based on quoted market prices as at reporting date. The quoted market price used for financial assets held by the Group is the current bid price.

The fair value of financial instruments that are not traded in an active market such as unlisted investments is determined using valuation techniques where applicable. Where this is unable to be done they are held at cost.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature.

48 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

26. SHARE BASED PAYMENTS

(a) Employee Option Plan

The establishment of the Mineral Commodities Employee Incentive Option Scheme was approved by shareholders at the 2006 annual general meeting. The incentive scheme is designed to provide long term incentives for senior staff to deliver long term shareholder returns. Under the plan, participants are granted options which vest immediately but are not exercisable until 30 September 2009. Participation in the plan is at the Boards discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.

Options granted under the plan carry no dividend or voting rights.

When exercisable, each option is convertible into one ordinary share within 10 business days.

Set out below are summaries of options granted under the plan:

Consolidated and parent entity – 2008

Grant date Expiry date Exercise price 16-Nov-07 30-Sep-09 $0.30 23-Nov-07 30-Sep-09 $0.30 23-Nov-07 30-Sep-09 $0.40 Weighted average exercise price	Balance at start of the year Granted during the year Exercised during the year Forfeited during the year Balance at end of the year Vested and exercisable at end of the year 1,250,000 - - - 1,250,000 1,250,000 500,000 - - - 500,000 500,000 500,000 - - - 500,000 500,000
	2,250,000 - - - 2,250,000 2,250,000
	$0.322

No options expired during the periods covered by the above table.

The weighted average remaining contractual life of share options outstanding at the end of the period was 0.75 years. (2007: 1.75 years)

Consolidated and parent entity – 2007

Grant date Expiry date Exercise price 16-Nov-07 30-Sep-09 $0.30 23-Nov-07 30-Sep-09 $0.30 23-Nov-07 30-Sep-09 $0.40	Balance at start of the year Granted during the year Exercised during the year Forfeited during the year Balance at end of the year Vested and exercisable at end of the year 1,250,000 - - - 1,250,000 1,250,000 500,000 - - - 500,000 500,000 500,000 - - - 500,000 500,000
	2,250,000 - - - 2,250,000 2,250,000

Weighted average exercise price $0.32

No options expired during the periods covered by the above table.

49 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

26. SHARE BASED PAYMENTS (CONTINUED)

Fair value of options granted

The assessed fair value at grant date of options granted during the year ended 31 December 2007 was between $0.02 and $0.039.

The fair value at grant date is independently determined using a Binomial option valuation model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The model inputs for options granted during the year ended 31 December 2007 included:

(a) Options are granted for no consideration and vest immediately with no performance criteria required to be met; however there are rules if an employee terminates employment before exercising the options. Vested options expire 30 September 2009.
(b) Exercise price: $0.30 for 1,750,000 options and $0.40 for 500,000 options
(c) Grant date: 23 November 2007 for 500,000 options at $0.30 and 500,000 options at $0.40 and 16 November 2007 for 1,250,000 options at $0.30
(d) Expiry date: 30 September 2009
(e) Share Price at grant date $0.225
(f) Expected price volatility of company ‘s shares:50%
(g) Expected dividend yield: Nil
(h) Risk free Interest rate: 6.35%

The expected price volatility is based on historic volatility (based on the remaining life of the options) adjusted for any expected changes to future volatility due to publicly available information.

Expenses arising from share-based payment transactions

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

Options issued under employee incentive option scheme	Consolidated Company 2008 2007 2008 2007 $ $ $ $ - 78,500 - 78,500
	- 78,500 - 78,500

50 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

27. COMMITMENTS

(a) Non- Cancellable Operating Leases

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year Later than one year but not later than five years Total	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 78,297 69,720 78,297 69,720 79,000 147,000 79,000 147,000
	157,297 216,720 157,297 216,720

The operating lease is a rental agreement for the Company’s office premises in Welshpool. The lease is for a 3 year term expiring on 15 February 2011. The lease provides for annual rent reviews to the higher of CPI or market.

(b) Exploration Tenement Leases – Commitments for Expenditure.

In order to maintain current rights of tenure to exploration tenements, the Company and consolidated entity is required to outlay lease rentals and to meet the minimum expenditure requirements which are not considered to be material.

28 DISCONTINUED OPERATIONS

(a) Description

Kariba Kono (SL) Ltd

Due to the uncertainty regarding the outcome of the legal impediments in Sierra Leone provisions for impairment have been made against the value of exploration expenditure including the Number 11 Dump, fixed assets and loans owing to Mineral Commodities Ltd.

Blackhawk Oil & Gas Ltd

The Company is dormant and has no assets, accordingly a provision for impairment has been made against the value of Mineral Commodities investment in and loans receivable from Blackhawk Oil & Gas Ltd.

51 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Notes to the Financial Statements (continued)

(b) Financial performance and cash flow information

Revenue Promet settlement Other income Total revenue Expenses Site Operating expenses General & administration expenses Impairment of loans to subsidiaries Impairment of fixed assets Impairment of exploration asset Impairment of investment in subsidiary Total expenses Loss before income tax Income tax expense Loss from discontinued operations	Consolidated Company 2008 2007 2008 2007 $ $ $ $ 2,000,000 - 2,000,000 - 6,859 - - -
	2,006,859 - 2,000,000 - (685,556) (1,274,802) (44,500) (44,530) (254,650) (95,283) (60,845) (59,608) - (3,606,608) (1,446,278) (3,277,369) (1,104,766) (1,385,087) (1,003,974) (1,385,087) (983,070) - - - - - (100,000) (2,154,612)
	(3,028,042) (6,361,780) (2,655,597) (6,921,206)
	(1,021,183) (6,361,780) (655,597) (6,921,206) - - - - (1,021,183) (6,361,780) (655,597) (6,921,206)

29 CONTINGENT LIABILITIES

There are no Contingent Liabilities.

30. SUBSEQUENT EVENTS

No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature that is likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company or the Consolidated Entity, the results of those operations or the state of affairs of the Company or the Consolidated Entity in future financial years.

52 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2008

Directors’ Declaration

The Directors of the Company declare that:

The financial statements, comprising the income statement, balance sheet, cash flow statement, statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001 including;
(a) complying with Australian Accounting Standards, Corporations Regulations 2001; and other mandatory professional reporting requirements, and
(b) give a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2008 and of the performance for the year ended on that date.
In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The remuneration disclosures set out on pages 7 to 9 of the Directors Report comply with S300A of the Corporations Act 2001.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors:

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Mark V Caruso Managing Director Dated at Perth, Western Australia this 31[st] day of March 2009

53 -

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BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au

ABN 79 112 284 787

31 March 2009

The Directors Mineral Commodities Ltd Unit 15, Level 1 51-53 Kewdale Rd Welshpool WA 6106

Dear Sirs

DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MINERAL COMMODITIES LIMITED

As lead auditor of Mineral Commodities Limited for the year ended 31 December 2008, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Mineral Commodities and the entities it controlled during the period.

Peter Toll Director

==> picture [109 x 25] intentionally omitted <==

BDO Kendalls Audit & Assurance (WA) Pty Ltd Perth, Western Australia.

54 -

BDO Kendalls is a national association of separate partnerships and entities

==> picture [149 x 31] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT

To the members of Mineral Commodities Limited

Report on the Financial Report

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au

ABN 79 112 284 787

We have audited the accompanying financial report of Mineral Commodities Limited, which comprises the balance sheet as at 31 December 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes 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 and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with 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. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

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

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

Independence

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

Qualification

As disclosed in the audit report to the financial statements for the year ended 31 December 2007, the Company had not consolidated two subsidiaries being Erebus Plc and Kariba Kono Ltd into the income statement, balance sheet, cash flow statement, statement of changes in equity or notes to

BDO Kendalls is a national association of separate partnerships and entities

55 -

==> picture [148 x 31] intentionally omitted <==

the financial report as at 31 December 2006 due to the fact that the financial information was not considered reliable by the Board of Directors and ourselves.

As Erebus Plc and Kariba Kono Ltd are controlled by Mineral Commodities Ltd at 31 December 2006, all assets and liabilities of these subsidiaries should have been recorded within the consolidated balance sheet of Mineral Commodities Ltd. These assets and liabilities should have been recorded at their fair value at the date of acquisition, with any excess of consideration over the net assets acquired being recorded as goodwill. In addition the results of these subsidiaries from the date of acquisition (23 June 2006) should have been included in the consolidated income statement and the cash flows since acquisition to 31 December 2006.

As at 1 January 2007 the company consolidated Erebus Plc and Kariba Kono Ltd. As Erebus Plc and Kariba Kono Ltd incurred losses from the date of acquisition being 23 June 2006 until 31 December 2006 which were not recorded in the consolidated entity, this has had the effect of overstating the acquired assets and understating accumulated losses as at the date of consolidation (1 January 2007). The Company and ourselves were unable to quantify this amount.

Auditor’s Opinion

(a) In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to quantify the amounts as explained above, the financial report of Mineral Commodities Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2008 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) The financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the Remuneration Report of Mineral Commodities Limited for the year ended 31 December 2008, complies with section 300A of the Corporations Act 2001.

BDO Kendalls Audit & Assurance (WA) Pty Ltd

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==> picture [110 x 6] intentionally omitted <==

==> picture [110 x 5] intentionally omitted <==

==> picture [110 x 6] intentionally omitted <==

==> picture [110 x 5] intentionally omitted <==

Peter Toll Director

Perth, 31[st] March 2009

56 -

AI assistant

MINERAL COMMODITIES LTD — Annual Report 2009

65371_rns_2009-03-31_dabc5cc5-26e1-40a5-ac0b-f8379d7cb0a6.pdf

MINERAL COMMODITIES LIMITED

ABN 39 008 478 653

ANNUAL FINANCIAL REPORT

Corporate Directory

Contents

Directors Report

The Directors present their report together with the financial report of Mineral Commodities Limited (“the Company”) and its controlled entities (the “Group”) for the year ended 31 December 2008.

DIRECTORS

DIRECTORS’ INFORMATION

Joseph Anthony Caruso (63 Years of Age)

Non-Executive Chairman

Mark Victor Caruso (47 Years of Age)

Managing Director

Gregory Hugh Steemson (56 Years of Age)

COMPANY SECRETARY

Peter Torre CA, ACIS, MAICD

PRINCIPAL ACTIVITIES

Directors Report (continued)

CONSOLIDATED RESULTS

DIVIDENDS

REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

South African Projects

Xolobeni Mineral Sands Project

Tormin Mineral Sands Project

Directors Report (continued)

Sierra Leone Operations

Legal Proceedings

Petro Ventures International Limited

Investment in Allied Gold Limited

Directors Report (continued)

FINANCIAL POSITION

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

ENVIRONMENTAL REGULATIONS

SCHEDULE OF MINING TENEMENTS

SIGNIFICANT CHANGES IN STATE OF AFFAIRS AND LIKELY DEVELOPMENTS

OPTIONS

Directors Report (continued)

DIRECTORS’ SHAREHOLDING INTERESTS

MEETINGS OF DIRECTORS

Directors Report (continued)

REMUNERATION REPORT (Audited)

A. Principles used to determine the nature and amount of remuneration

B. Details of Remuneration

Directors Report (continued)

Directors Report (continued)

C. Service Agreements

D. Share Based Compensation

Options

E. Additional Information

End of the Audited Remuneration Report

CORPORATE GOVERNANCE

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

PROCEEDINGS ON BEHALF OF THE COMPANY

INSURANCE OF OFFICERS

AUDITORS’ INDEPENDENCE DECLARATION

Directors Report (continued)

NON-AUDIT SERVICES

Mark V Caruso

Income Statements

For the year ended 31 December 2008

Balance Sheets

as at 31 December 2008

Cash Flow Statements

Statements of Changes in Equity

Statement of Changes in Equity (continued)

Notes to the Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

Compliance with IFRS

Historical Cost Convention

(b) Principles of Consolidation

Notes to the Financial Statements (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation (continued)

(c) Revenue Recognition

Interest Income

Notes to the Financial Statements (continued)

MINERAL COMMODITIES LTD Annual Report 2009