SWAN GOLD MINING LIMITED (previously named Monarch Gold Mining Company Limited) ABN 69 100 038 266

FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2010

SWAN GOLD MINING LIMITED

ABN 69 100 038 266

CORPORATE DIRECTORY

BOARD OF DIRECTORS

Martin Depisch Non-Executive Chairman Damian Delaney Non Executive Director Peter Farris Non Executive Director Michael Fotios Non Executive Director Gerhard Kornfeld Non Executive Director Thomas Styblo Non Executive Director

COMPANY SECRETARY

Ildiko Wowesny

REGISTERED OFFICE

First Floor 143 Hay Street SUBIACO WA 6008

Telephone: (61-8) 6389 7500 Facsimile: (61-8) 6389 7510 [email protected] Web-site: www.swangoldmining.com.au

Directors’ report .................................................. 2 Auditor’s independence declaration .................. 19 Consolidated statement of comprehensive income ............................................................... 20 Consolidated statement of financial position ..... 21 Consolidated statement of changes in equity ..... 22 Consolidated statement of cash flows ................ 23 Notes to the financial statements ....................... 24 Directors’ declaration ........................................ 75 Independent auditor’s report .............................. 76

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St. George’s Terrace Perth WA 6000

Telephone: (61-8) 9323 2000 Facsimile: (61-8) 9323 2033 E-mail: [email protected] Web-site: www.computershare.com.au

AUDITORS

Ernst & Young

SOLICITORS

Steinepreis Paganin

BANKERS

National Australia Bank Limited

STOCK EXCHANGE LISTING

Shares in Swan Gold Mining Limited are listed on the Australian Stock Exchange under the trading code SWA.

This financial report covers the consolidated financial statements for the consolidated entity, consisting of Swan Gold Mining Limited and its subsidiaries.

The annual financial report is presented in Australian dollars.

Swan Gold Mining Limited is a company limited by shares, incorporated and domiciled in Australia.

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

The directors of Swan Gold Mining Limited (previously named Monarch Gold Mining Company Limited) (“Swan Gold” or “the Company”) present their report on the results and state of affairs of the consolidated entity, being the Company and its controlled entities for the financial year ended 30 June 2010.

DIRECTORS

The names of the directors of Swan Gold in office during the course of the financial year and up to the date of this report are as follows:

Martin Depisch	(appointed 25 July 2012)
Damian Paul Delaney	(appointed 25 July 2012)
Gerhard Kornfeld	(appointed 25 July 2012)
Michael Fotios	(appointed 14 September 2012)
Peter Farris	(appointed 14 September 2012)
Thomas Styblo	(appointed 14 September 2012)
Keith John Vuleta	(resigned 25 July 2012)
Allan Richard Brown	(appointed 26 February 2010, resigned 25 July 2012)
Ian Leslie Price	(appointed 26 February 2010, resigned 25 July 2012)
Bruce Dennis Maluish	(appointed 26 February 2010, resigned 17 June 2010)
John Leslie Baxter	(appointed 26 February 2010, resigned 17 June 2010)
Michael Laurence Kiernan	(resigned 28 June 2010)
Marty Adams	(appointed 23 July 2010, resigned 11 September 2010)

Unless otherwise indicated, all directors held their position as a director throughout the entire financial year and up to the date of this report.

PRINCIPAL ACTIVITIES

The principal activity of Swan Gold and the consolidated entity (which includes the controlled entities of Swan Gold) during the financial year was mineral exploration and evaluation, notwithstanding the appointment by the directors of a Voluntary Administrator on 10 July 2008 and subsequent recapitalisation on 26 February 2010. There was no significant change in the nature of this activity during the year.

RESULTS OF OPERATIONS

The net loss of the consolidated entity after impairments and income tax was $9,065,000 (2009: loss $11,811,000).

OPERATING AND FINANCIAL REVIEW

During the course of the financial year, the consolidated entity remained in administration up to 26 February 2010, at which time the company was recapitalised under the Recapitalisation Deed with Stirling Resources Ltd. From that date the administrator retired and the new board of directors took control of the company. Swan Gold commenced preparations for operations at the Carnegie and Mt Ida gold projects and undertook detailed modelling and optimisation of its project assets towards a production focus. In June 2010 the recommencement of mining was delayed until sufficient funding could be secured. Refer to Significant Changes below and immediately thereafter for details of significant events after the balance date.

The basic and diluted loss per share for the consolidated entity for the year was 1.38 cents per share (2009: loss of 5.94 cents per share). Since the Company’s incorporation in 2002 and since its listing in October 2002, the Company’s financial performance and result has been, and will continue to be, attributable to its ongoing exploration, evaluation and development activities on its tenement holdings.

At the date of this report the Company has 741,487,661 ordinary shares on issue and 115,000,000 unlisted options outstanding over 115,000,000 ordinary shares.

DIVIDENDS

No amounts were paid by way of dividend since the end of the previous financial year. The directors do not recommend the payment of a dividend.

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

LIKELY DEVELOPMENTS

During the course of the financial year ended 30 June 2011, the consolidated entity held the Carnegie and Mt Ida gold projects in care and maintenance with funds provided mainly by Stirling Resources Ltd.

On 18 August 2011, Swan Gold (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan’s subsidiaries that own the Carnegie and Mt Ida gold projects.

The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000;
DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the agreement and $9,000,000 payable within 6 months;
Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000;
All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be extinguished at settlement;
Amount to be paid to Swan of $5,000,000 at settlement;
All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement;
DCM fund the ongoing operations of Swan until the transaction is completed; and
Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement is not binding until the following conditions are met:

(a) the Financial Investment Review Board (FIRB) Condition has been satisfied;
(b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser with a copy of such consents;
(c) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules in relation to the Transaction;
(d) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary under the Territory Trust pursuant to which the Territory Resources Limited will assign to the Purchaser and the Purchaser will take an assignment of all Territory Resources Limited’s rights and interests as beneficiary under the Territory Trust;
(g) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and
(h) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring.

On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet, and subsequently a Restructure Deed, had been entered into by the Company, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012 (“the Investmet transaction”).

Investmet has advised it intends to recapitalize Swan and provide sufficient funding to complete a review into recommencement of operations at the Carnegie and Mt Ida gold projects, including amongst other items thorough geological and economic reviews of resources, project data, exploration activities as required, and mine planning.

Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of SWA (SWA shares) on the ASX (subject to ASX approval) as soon as possible after completion.

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

LIKELY DEVELOPMENTS (ontinued)

The main terms and conditions of the Restructure Deed are as follows:

Swan will conduct a share placement to sophisticated investors to raise working capital of a minimum of $7,500,000 by the issue of new ordinary shares at $0.02 effective on completion of the transaction (Completion). The issue will be fully underwritten by Investmet on terms reasonably satisfactory to Investmet and the Company;
DCM will transfer 39,849,657 Swan shares to Investmet in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;
The Group Trustee will transfer 134,483,578 Swan shares to Investmet as consideration for the payment by Investmet to the Group Trust of $10,000,000; the payment will also extinguish all claims by the Group Trust under the recapitalization deed;
Investmet will pay $144,240 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to repay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.
Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security to be granted by Swan as required to Investmet;
DCM to fund ongoing operations of Swan until Completion; and
The Conditions of the Restructure Deed are to be satisfied or waived on or before 31 October 2012, with the exception of shareholder and regulatory approvals, and Loan Syndicate Arrangements which are to be finalised by 31 December 2012. Beyond these dates an alternative restructure or extension period are to be negotiated in good faith, but should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring any liability.

The Conditions for Completion to occur includes amongst other items:

Agreement on documentation relating to Investmet’s funding arrangements;
The share sale agreement between Swan and DCM dated 18 August 2011 (as varied) being terminated on Completion with no further liability for either party;
The Recapitalisation Deed between Swan, Stirling Resources Ltd and others dated 21 June 2009 (as amended) being terminated on Completion with no further liability for Swan;
Any plaint proceedings relating to the tenements of Swan and its subsidiaries are to be discontinued or withdrawn on terms satisfactory to Investmet by 31 October 2012. Investmet may immediately terminate if it considers that the plaint condition will, or may, not be satisfied by 31 October 2012; and
All necessary shareholder, third party or regulatory approvals.

This transaction is also conditional on the completion of inter-related transactions between Investmet, DCM and each of Stirling Resources Limited and Redbank Copper Limited, the terms of which have been finalised but not released.

Investmet and DCM intend to establish syndicated loan arrangements with Swan, to include the new security charges to regulate secured debt over Swan incorporating a two year moratorium on principal repayments and at the end of the two year moratorium Swan may elect to repay the debt or require conversion at a price to be agreed between the parties.

Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of Swan on the Australian Stock Exchange (ASX) (subject to ASX approval) as soon as possible after completion.

In the opinion of the directors there is no additional information available as at the date of this report on any likely developments which may materially affect the operations of the consolidated entity and the expected results of those operations in subsequent years.

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

OPTIONS GRANTED OVER UNISSUED SHARES

At the date of this report, 115,000,000 ordinary fully paid shares which are subject to options were unissued. The terms of these options are as follows:

Number

Options granted over fully paid shares exercisable:

ptions granted over fully paid shares exercisable:
- exercisable at $0.05 each on or before 26 February 2013	115,000,000
	115,000,000

Details of options issued and exercised during the financial year are contained in Note 15 and Note 16 to the financial report.

No person entitled to exercise the options has any right by virtue of the option to participate in any share issue of any other corporation.

During the financial year, employees and executives did not exercise any options to acquire fully paid ordinary shares.

SIGNIFICANT CHANGES

Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:

A meeting of the creditors of the Group was held on 30 June 2009 to vote on the Recapitalisation proposal. On this date, the Recapitalisation Deed was executed between the Group, the Deed Administrator, Stirling Resources Limited and Stirling Gold Pty Ltd.

A meeting of the shareholders of the Company was held on 10 September 2009 to vote on the issue of shares and charges and change of Company name contemplated in the Recapitalisation Deed. Shareholders approved all resolutions.

On 26 February 2010, the Recapitalisation Deed was formally completed, thereby effecting the retirement of Mr Bryan Hughes as Deed Administrator and transferring control of the Group to the new Board of Directors.

Effective on this date Monarch Group Mining Company Ltd was re-named “Swan Gold Mining Limited” and Davyhurst Gold Pty Ltd was re-named “Carnegie Gold Pty Ltd”.

At this time, the Receivers and Managers representing Territory Resources Limited retired and Territory’s charge was accordingly released.

Also at this time, charges were granted in favour of the Trusts governing the Group assets in order to secure the instalments due, pursuant to the Recapitalisation Deed.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 18 August 2011, Swan Gold (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company and DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan’s subsidiaries that own the Carnegie and Mt Ida gold projects (“the DCM transaction”).

The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000;
DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the agreement and $9,000,000 payable within 6 months;
Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000;
All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be extinguished by DCM at settlement;
Amounts to be paid to Swan of $5,000,000 at settlement;
All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement;
DCM fund the ongoing operations of Swan until the transaction is completed; and
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SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement does not become binding until the following conditions precedent are met:

(a) the Financial Investment Review Board (FIRB) Condition has been satisfied;
(b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser with a copy of such consents;
(c) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules in relation to the Transaction;
(d) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary under the Territory Trust pursuant to which the Territory Resources Limited will assign to the Purchaser and the Purchaser will take an assignment of all Territory Resources Limited’s rights and interests as beneficiary under the Territory Trust;
(g) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and
(h) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring.

On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet, and subsequently a Restructure Deed, had been entered into by the Company, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (Investmet), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012 (“the Investmet transaction”).

Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of Swan (Swan shares) on the Australian Stock Exchange (ASX) (subject to ASX approval) as soon as possible after completion.

The main terms and conditions of the Restructure Deed are as follows:

Swan will conduct a share placement to sophisticated investors to raise working capital of a minimum of $7,500,000 by the issue of new ordinary shares at $0.02 effective on completion of the transaction (Completion). The issue will be fully underwritten by Investmet on terms reasonably satisfactory to Investmet and the Company;
DCM will transfer 39,849,657 Swan shares to Investment in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;
The Group Trustee will transfer 134,483,578 Swan shares to Investmet as consideration for the payment by Investmet to the Group Trust of $10,000,000; the payment will also extinguish all claims by the Group Trust under the recapitalization deed;
Investmet will pay $144,240 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to repay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.
Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security is to be granted by Swan as required to Investmet;
DCM to fund ongoing operations of Swan until Completion; and
The Conditions of the Restructure Deed are to be satisfied or waived on or before 30 June 2012, or an alternative restructure or extension period are to be negotiated in good faith. Should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring liability.
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SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

The Conditions for Completion to occur includes amongst other items:

Agreement on documentation relating to Investmet’s funding arrangements;
The share sale agreement between Swan and DCM dated 18 August 2011 (as varied) being terminated on Completion with no further liability for either party;
The Recapitalisation Deed between Swan, Stirling Resources Ltd and others dated 21 June 2009 (as amended) being terminated on Completion with no further liability for Swan;
Any plaint proceedings relating to the tenements of Swan and its subsidiaries are to be discontinued or withdrawn on terms satisfactory to Investmet by 31 October 2012. Investmet may immediately terminate if it considers that the plaint condition will, or may, not be satisfied by 31 October 2012; and
All necessary shareholder, third party or regulatory approvals;

During the year ended 30 June 2011, a number of plaint proceedings were made by various third parties on tenements held by Swan. Investmet are seeking to have all of the plaint proceedings discontinued or withdrawn on terms satisfactory to it to retain the maximum value of Swan’s assets.

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

INFORMATION ON DIRECTORS

Director Qualifications, experience and special responsibilities Martin Depisch Masters Degree in Economics and Social Sciences (Mag.rer.soc.oec) Non-Executive A director since July 2012, Mr Depisch is an Austrian national who completed his Master in Business Chairman Administration with emphasis on Finance at Karl-Franzens University in Graz Austria. Mr Depisch has over 15 years experience in financing and project management in the mining sector. Other current directorships: Redbank Copper Limited (from November 2011) and Stirling Resources Limited (from November 2011).

Mr Depisch has not held directorships in any other listed companies in the last three years.

Damian Delaney CA Non-Executive A director since July 2012, Mr Delaney is a chartered accountant with many years’ experience Director working with international listed companies. He has been involved in numerous capital raisings for the junior resource sector and brings significant experience in capital markets for the SME sector. Other current directorships: Redbank Copper Limited (from July 2012) and Stirling Resources Limited (from July 2012).

Former directorships in the last three years: Nimrodel Resources Ltd.

Peter Farris Diploma Business Tech, Diploma Business RMIT, MAICD Non-Executive A director since September 2012, Mr Farris is a well respected and highly credentialed businessman Director in the Perth real estate industry and corporate advisory services. He has managed and developed major real estate companies with turnovers in excess of $200 million and has extensive experience in company management.

Other current directorships: Northern Star Resources Limited (April 2009), Redbank Copper Limited (from September 2012) and Stirling Resources Limited (from September 2012).

Mr Farris has not held directorships in any other listed companies in the last three years.

Michael Fotios BSc (Hons) MAusIMM Non-Executive A director since September 2012, Mr Fotios is a Geologist specialising in Economic Geology with 27 Director years extensive experience in exploration throughout Australia for gold, base metals, tantalum, tin and nickel and taking projects from exploration to feasibility. He previously held positions with Homestake Australia Limited and Sons of Gwalia Limited. He was Managing Director and a Director with Tantalum Australia NL (now ABM Resources Ltd) from September 1999 to October 2005. His last position was as Managing Director of Galaxy Resources Limited. Michael Fotios is founder and current Executive Chairman of Investmet and regarded as having control of Investmet for the purposes of the Corporations Act.

Other current directorships: Northern Star Resources Limited (from September 2009), Pegasus Metals Limited (from December 2009), Horseshoe Metals Limited (from May 2012), General Mining Corporation Limited (from June 2012), Redbank Copper Limited (from September 2012) and Stirling Resources Limited (from September 2012).

Former directorships in the last three years: Galaxy Resources Limited.

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

Gerhard Kornfeld PhD in Economic and Social Sciences (Dr. rer. soc. oec) Non-Executive A director since July 2012, Dr Kornfeld is an Austrian national who completed his PhD at the Director University of Economics in Vienna and has been involved in various executive positions throughout Europe. Before joining DCM as CEO in May 2012, he had been acting as CEO of VA TECH EZ, based in Prague and CEO of Mondi Russia, based in Syktyvkar. Other current directorships: Australian Zircon NL, Stirling Resources Limited (from September 2012) and Redbank Copper Limited (from September 2012).

Mr Kornfeld has not held directorships in any other listed companies in the last three years.

Thomas Styblo L.L.M. Mag.rer.soc.oec Non-Executive Mr Styblo is Director of Finance with DCM DECOmetal GmbH. He is an Executive Master of Director Laws (L.L.M) and holds a Masters Degree in Economics and Social Science (Mag.rer.soc.oec). Other current directorships: Australian Zircon NL (from February 2012), Redbank Copper Limited (from April 2012) and Stirling Resources Limited (from April 2012).

Mr Styblo has not held directorships in any other listed companies in the last three years.

Allan Brown B Sc (Hons) Met NSW, FAusIMM Non-Executive A director since February 2010 and Chairman since June 2010. Mr Brown is a metallurgist with Chairman more than 40 years industry experience, specialising in the design, testing, commissioning and operation of base metal processing projects. He has worked as an industry consultant on metal processing projects in Australia and overseas for a range of local and global organisations including AngloGold, Newcrest and CBH Resources. Prior to his consulting career, he worked as Project and Mine Manager for a number of gold and base metal developers including Wiluna Gold, Sally Malay Nickel and Murchison Zinc.

Other current directorships: Mutiny Gold Limited.

Former directorships in the last three years: Redbank Copper Limited.

Keith Vuleta B.Bus (Acc & Com Law) , C.A., MAICD Non-Executive A Chartered Accountant for more than 20 years, having trained with Ernst & Young. He has held Director positions as Finance Director, Chief Financial Officer and Company Secretary for public companies in the mining, engineering and financial services industries.

Other current directorships: Matilda Zircon Limited.

Former directorships in the last three years: Redbank Copper Limited.

Ian Price B. Eng., FAusIMM

Non-Executive A director since February 2010. Mr Price is a mining engineer with more than 30 years experience Director in mine operations, public company management and consulting. He has been involved in all aspects of mining from exploration, feasibility studies, permitting, project development and construction through to operations, corporate management and project financing. He also has experience in base metals, gold and coal mining and processing and has a strong background in underground mining working throughout Australasia and Asia.

Other current directorships: Anchor Resources Limited.

Former directorships in the last three years: Redbank Copper Limited.

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

Bruce Maluish B.AppSc. (Surv), Dip Met. Mining Managing Director Mr Maluish was appointed Managing Director in February 2010 and resigned in June 2010. Mr Maluish has more than 30 years’ experience in the management and development of mining operations. He has previously been the Operations and General Manager with various public companies in Australia including formative years of the very successful companies, Hill 50 Ltd and Abelle Ltd. Previously held management roles at Mount Fisher Gold Mines, Darlot Gold Mine, Mount Burgess Gold Mining, Mount Monger Gold and Sundowner Minerals.

Other current directorships: Ventnor Resources Limited.

Former directorships in the last three years: Matilda Zircon Limited, Matilda Minerals Limited.

John Baxter B Sc, M Sc, MAIG, MSEG, MGSA Non-Executive A director since February 2010, resigning in June 2010. Mr Baxter has more than 40 years Director experience in mineral industry including 15 years with the Geological Survey of Western Australia and 20 years as a consulting geologist specializing in structural and depositional controls on ore deposits, including tectonic evolution of stratigraphically hosted mineralization and the implications for resource estimation.

Other current directorships: Nil

Former directorships in the last three years: Matilda Zircon Limited.

Michael Kiernan B.Bus., FAICD Non-Executive A director since March 2002 and Chairman since November 2005, Mr Kiernan resigned in June Chairman 2010. Mr Kiernan has more than 35 years experience in transport, mining, contracting and resources industries, including the development and operation of mining projects in iron ore, manganese, chromite, nickel, copper, coal, gold and mineral sands. He has a track record in management and leadership of resources based projects having held executive positions with Australia’s major mining and transport contractors. He was founding Managing Director of the diversified minerals producer Consolidated Minerals Limited.

Other current directorships: Nil

Former directorships in the last 3 years: Territory Resources Limited (February 2007 to June 2008), India Resources Limited (August 2006 to June 2008), Mineral Resources Limited (July 2006 to May 2008), Precious Metals Australia Limited (August 2006 to February 2008), Matilda Minerals Limited (December 2006 to June 2008), Peel Exploration Limited (March 2007 to February 2008), Uran Limited (May 2006 to June 2007), Croesus Mining NL (November 2005 to July 2007), Australian Zircon NL (May 2006 to April 2007 and February 2009 to March 2010), Redbank Mines Limited (December 2008 to June 2010), Matilda Zircon Limited (July 2009 to June 2010) and Stirling Resources Limited (October 2008 to June 2010).

Marty Adams B.Eng (Mining) Non-Executive Mr. Adams has 30 years’ experience in the Australian mining industry. He has held a range of Director operational and senior management positions in open pit and underground operations.

Other current directorships: Australian Zircon NL.

Former directorships in the last 3 years: Redbank Copper Limited (July to September 2010), Stirling Resources Limited (July to November 2010) and Matilda Zircon Limited (July to November 2010).

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SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

DIRECTORS' REPORT

Interests in the shares and options of Swan Gold

Details of directors’ interests in the securities of Swan Gold as at the date of this report are as follows:

Director	Fully paid shares	Unlisted options
M Depisch	-	-
D Delaney	-	-
P Farris	-	-
M Fotios	-	-
G Kornfeld	-	-
T Styblo	-	-

COMPANY SECRETARIES

Ildiko Wowesny B.Bus.

Company Secretary since 26 February 2010. Ms Wowesny is a qualified Accountant with experience in company secretarial roles together with corporate management, accounting and financial areas. She has served as Company Secretary for ASX listed resource companies for some considerable time together with 5 years at Deloitte Touche Tohmatsu and also a period in the United Kingdom with resource groups.

Keith J Vuleta B.Bus (Acc & Com Law), CA, MAICD

Mr Vuleta was appointed Company Secretary on 27 October 2006 and resigned on 25 January 2008. He was subsequently reappointed on 26 June 2008 and resigned on 26 February 2010. Mr Vuleta has been a Chartered Accountant for more than 20 years, having trained with Ernst & Young. He has held positions as Finance Director, Chief Financial Officer and Company Secretary for public companies in the mining, engineering and financial services industries.

MEETINGS OF DIRECTORS

There were no meetings of Directors of Swan Gold held during the year ended 30 June 2010 whilst in administration until 26 February 2010. The number of meetings attended by each director was as follows:

	Board
	No. held whilst	No.
	in office	attended
K Vuleta	4	3
A Brown	4	3
I Price	4	4
B Maluish	4	4
J Baxter	4	4
M Kiernan	4	3

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AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

REMUNERATION REPORT (audited)

This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the company and the group, directly or indirectly, including any director (whether executive or otherwise) of the parent company.

Details of key management personnel during the year:

*Executive Directors*
B Maluish	Managing Director (appointed 26 February 2010, resigned 17 June 2010)
*Non-executive directors*
K Vuleta
M Kiernan	Chairman (resigned 28 June 2010)
A Brown	(appointed director 26 February 2010, appointed Chairman 28 June 2010)
I Price	(appointed 26 February 2010)
J Baxter	(appointed 26 February, resigned 17 June 2010)
*External Administrators*
B Hughes	Appointed Administrator on 10 July 2008, appointed Deed Administrator on
	5 September 2008, retired on 26 February 2010.
*Company secretary*
I Wowesny	(appointed 26 February 2010)

Principles used to determine the nature and amount of remuneration

Directors and executives remuneration

Overall remuneration policies are determined by the Board of Directors and are adapted to reflect competitive market and business conditions. Within this framework, the board considers remuneration policies and practices generally, and determines specific remuneration packages and other terms of employment for executive directors and senior management. Executives may be provided with longer-term incentives through participation in option schemes, which serve to align the interests of the executives with those of shareholders. Executive remuneration and other terms of employment are reviewed annually by the remuneration committee having regard to performance, relevant comparative information and expert advice.

Swan Gold’s remuneration policy for executive directors and senior management is designed to promote superior performance and long term commitment to Swan Gold. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing Swan Gold’s operations. Executive directors receive a base remuneration which is market related, together with an element of performance based remuneration. During the year, the Company was in voluntary administration and did not operate in the normal course of business that could be measured as financial performance. The Company considers it inappropriate at this stage for performance considerations to be included within its remuneration policies and at such time as the company’s performance is able to be consistently measured, the board will review these policies.

Swan Gold’s remuneration policies will be designed to align executive’s remuneration with shareholders’ interests and to retain appropriately qualified executive talent for the benefit of Swan Gold. The main principles of the policy will be:

reward reflects the competitive market in which Swan Gold operates;
individual reward should be linked to performance criteria; and
executives should be rewarded for both financial and non-financial performance.
Notwithstanding the above remuneration policies, there were no proportions of any elements of remuneration that related to performance.

The structure of remuneration packages for executive directors and other senior executives will comprise of:

a fixed sum base salary payable monthly in cash;
short term incentives, where considered appropriate, through eligibility to participate in performance bonus plans;
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long term incentives through executive directors being eligible to participate in share option schemes and share purchase plan with the prior approval of shareholders. Senior executives may also participate in employee share option schemes, with any option issues generally being made in accordance with thresholds set in plans approved by shareholders; and
other benefits, including participation in superannuation schemes.

The proportion of fixed and variable remuneration is established for each executive by the Board of Directors. The objective of any short term incentives is to link achievement of Swan Gold’s operational targets with the remuneration received by executives charged with meeting those targets. The objective of long term incentives is to reward executives in a manner which aligns this element of their remuneration with the creation of shareholder wealth. Swan Gold’s activities comprise the exploration and evaluation of mineral tenements aimed at identifying economic mineral deposits capable of development. Swan Gold’s financial performance reflects the nature of these ongoing activities.

Non-executive directors’ remuneration

In accordance with current corporate governance practices, the structure for the remuneration of non-executive directors and senior executives is separate and distinct. Shareholders approve the maximum aggregate remuneration for nonexecutive directors, with the current approved limit being $500,000. The Board determines the actual payments to directors. The Board approves any consultancy arrangements for non-executive directors who provide services outside of and in addition to their duties as non-executive directors.

Non-executive directors are entitled to statutory superannuation benefits. At this stage of Swan Gold’s development, nonexecutive directors may be entitled to participate in equity based remuneration schemes. Shareholders must approve the framework for any equity based compensation schemes and if a recommendation is made for a director to participate in an equity scheme, that participation must be specifically approved by the shareholders. All directors are entitled to have their indemnity insurance paid by Swan Gold.

The Company does not have a policy preventing executives and directors from managing their risk exposure from ownership of employee share options.

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Details of remuneration

The following table discloses details of the nature and amount of each element of the emoluments of each director of Swan Gold and each of the officers receiving the highest emoluments for the year ended 30 June 2010.

30 June 2010 Name	Primary (short-term)	Primary (short-term)	Primary (short-term)	Post- employment	Equity (share- based payments)
	Salary and directors fees	Consulting fees	Non- monetary benefits	Super- annuation	Options	Total
*Key management personnel* Executive directors B Maluish (i) Non-executive directors M Kiernan (ii) A Brown (iii) K Vuleta I Price (iv) J Baxter (v) External administrators B Hughes (vi) Company secretary I Wowesny (vii) Total	$ 75,865 48,000 12,000 12,000 12,000 10,700 - -	$ - - - - 30,499 23,550 814,091 -	$ - - - - - - - -	$ 6,881 - 1,080 1,080 1,080 963 - -	$ - - - - - - - -	$ 82,746 48,000 13,080 13,080 43,579 35,213 814,091 -
	170,565	868,140	-	11,084	-	1,049,789

(i) Mr Maluish was appointed on 26 February 2010 and resigned on 17 June 2010.

(ii) Mr Kiernan resigned on 28 June 2010.

(iii) Mr Brown was appointed on 26 February 2010.

(iv) Mr Price was appointed on 26 February 2010.

(v) Mr Baxter was appointed on 26 February 2010 and resigned on 17 June 2010.

(vi) Mr Hughes retired on 26 February 2010.

(vii) Ms Wowesny was appointed on 26 February 2010. Company secretarial services are provided by Stirling Resources Ltd as part of the management fee detailed in Note 22 to the financial report.

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30 June 2009 Name	Primary (short-term)	Primary (short-term)	Primary (short-term)	Post- employment	Equity (share- based payments)
	Salary and directors fees	Consulting fees	Non- monetary benefits	Super- annuation	Options	Total
*Key management personnel* Executive directors I Huitson (i) (vi) J Davis (ii) Non-executive directors M Kiernan K Vuleta P Botsis (iii) D Humann (iv) External administrators C Munday & B Hughes (v) Total	$ 280,640 40,194 - 38,506 - - -	$ - - - - - - 1,816,453	$ - - - - - - -	$ 18,062 2,580 - 2,543 - - -	$ 21,267 - - - - - -	$ 319,969 42,774 - 41,049 - - 1,816,453
	359,340	1,816,453	-	23,185	21,267	2,220,245

(i) Mr Huitson resigned on 30 January 2009. (ii) Mr Davis resigned on 1 August 2008.

(iii) Mr Botsis resigned on 14 July 2008. (iv) Mr Humann resigned on 11 July 2008.
(v) Mr Munday retired on 30 January 2009 and Mr Hughes retired on 26 February 2010.

(vi) Remuneration as options represented 6.6% of Mr Huitson’s total remuneration.

There were no proportions of any elements of Key Management Personnel remuneration that related to performance. While the options are not specifically linked to performance criteria, the options are issued with an exercise price of an ordinary Swan Gold share at the time of issue, ensuring that executives only receive a benefit where shareholder wealth has increased. Other than directors of Swan Gold, there were no other executive officers of the consolidated entity during the year. For the period, the company secretary is included in the Remuneration Report as they are deemed to be an executive by virtue of being an officer of Swan Gold. The role performed by the company secretary does not meet the definition of ‘key management person’ under AASB 124, hence this officer has been excluded from the key management personnel disclosures in Note 18.

There were no options granted to key management personnel during the year (2009:$ nil).

No shares were issued during the year as a result of the exercise of options granted as part of remuneration. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. There were no forfeitures during the period.

Information on any benefits received by directors of Swan Gold by reason of a contract made by the consolidated entity with a director or a director-related entity is contained in Note 22 of the financial report.

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Service agreements

The terms of employment for executive directors and specified executives were formalised in service agreements. Major provisions of the agreements relating to duration and termination are set out below.

B Maluish – Managing Director Term of agreement: unspecified. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually.

Termination provisions: payment upon termination by the Company (other than for serious misconduct) three months of annual salary for inadequate performance or long term incapacity and three months of annual salary for redundancy or in lieu of notice.

Share-based compensation

Directors, employees and consultants may be eligible to participate in equity based compensation schemes. An employee share option scheme was approved by shareholders at a general meeting held on 5 July 2006. A Share Purchase Plan was approved by shareholders at a general meeting held on 14 August 2007. The primary purposes of the schemes are to increase motivation, promote retention, and align interests with those of Swan Gold and its shareholders and to reward contribution to the growth of Swan Gold.

Company performance

The table below shows the performance of the consolidated entity as measured by its earnings per share. Swan Gold shares have been suspended from trading since Voluntary Administrators were appointed on 10 July 2008. In the past five years the consolidated entity has incurred losses and no dividends have been paid. Any improvement to earnings is viewed as a long term position that is not yet fully determinable.

Earnings/(loss) per share	30 June 2010 30 June 2009 30 June 2008 30 June 2007 30 June 2006 Cents Cents Cents Cents Cents (1.38) (5.94) (53.48) (38.77) (54.60)

End of Remuneration Report (audited)

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ENVIRONMENTAL REGULATIONS

The consolidated entity is subject to significant environmental regulation in respect to its mineral exploration activities. These obligations are regulated under relevant government authorities within Australia. The consolidated entity is a party to exploration and mine development licences. Generally, these licences specify the environmental regulations applicable to exploration and mining operations in the respective jurisdictions. The consolidated entity aims to ensure that it complies with the identified regulatory requirements in each jurisdiction in which it operates.

Compliance with environmental obligations is monitored by the Board of Directors. No environmental breaches have been notified to the consolidated entity by any government agency during the year ended 30 June 2010.

NON-AUDIT SERVICES

Non-audit services provided by Ernst & Young during their period as external auditors was nil (2009: $51,317 for taxation consulting advice). Further details of remuneration of the auditors are set out at Note 19.

The board has considered the non-audit services provided during the year and is satisfied that the provision of those services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001, for the following reasons:

all non-audit services were subject to the corporate governance guidelines adopted by Swan Gold;
non-audit services have been reviewed by the audit committee to ensure that they do not impact the impartiality or objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out in Professional Statement F1, Professional Independence, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity, acting as an advocate for Swan Gold or jointly sharing economic risks and rewards.

AUDITOR INDEPENDENCE

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included immediately following the Directors’ Report and forms part of this Directors’ Report.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into indemnity agreements with each of the directors and officers of the Company. Under the agreements, the Company will indemnify those officers against certain claims or for any expenses or costs which may arise as a result of work performed in their respective capacities as officers of the Company or any related entities.

The Company has taken out an insurance policy insuring Directors and Officers of the Company against any liability arising from a claim bought by a third party against the Company or its Directors or Officers, and against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as a Director or Officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company.

During the year, the Company paid premiums in respect of the above insurance policy. The contract prohibits the disclosure of the nature of the liabilities and/or the amount of the premium.

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ROUNDING

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to Swan Gold under the ASIC Class Order 98/0100 . Swan Gold is an entity to which the Class Order applies.

Signed in accordance with a resolution of the directors.

==> picture [169 x 60] intentionally omitted <==

D Delaney Director

Perth, Western Australia 19 October 2012

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==> picture [102 x 62] intentionally omitted <==

Auditor's Independence Declaration to the Directors of Swan Gold Mining Limited

In relation to our audit of the financial report of Swan Gold Mining Limited for the financial year ended 30 June 2010, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [189 x 55] intentionally omitted <==

Ernst & Young

==> picture [171 x 49] intentionally omitted <==

G A Buckingham Partner Perth 19 October 2012

Liability limited by a scheme approved under Professional Standards Legislation

GB:KE:SWA:014

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

NOTE Revenue 5(a) Other income 5(b) Employee and directors – remuneration expense 5(c) Raw materials and consumables used 5(d) Tenement costs expensed Corporate and administration expenses 5(e) Administrators fees Other expenses Finance costs 5(f) Exploration expenditure Impairment of receivables 8 Net loss on release of net liabilities Impairment of available for sale financial assets Loss before income tax expense Income tax expense 6 Loss for the year Other comprehensive income for the year Total comprehensive loss for the year Attributable to: - Members of Swan Gold - Non-controlling interest Basic and diluted loss per share (cents per share) 28	CONSOLIDATED 2010 2009 $’000 $’000 1,351 4,997 17 554 (1,781) (3,964) (1,505) (5,204) (628) - (2,285) (2,886) (814) (1,816) (769) (1,383) (82) - (802) - (1,543) (1,307) (224) (765) - (37) (9,065) (11,811) - - (9,065) (11,811) - - (9,065) (11,811) (9,065) (11,811) - - (9,065) (11,811) 1.38 5.94	CONSOLIDATED 2010 2009 $’000 $’000 1,351 4,997 17 554 (1,781) (3,964) (1,505) (5,204) (628) - (2,285) (2,886) (814) (1,816) (769) (1,383) (82) - (802) - (1,543) (1,307) (224) (765) - (37) (9,065) (11,811) - - (9,065) (11,811) - - (9,065) (11,811) (9,065) (11,811) - - (9,065) (11,811) 1.38 5.94
		(11,811) -
		(11,811) -
		(11,811)
		(11,811) -
		(11,811)
		5.94

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

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

NOTE CURRENT ASSETS Cash and cash equivalents 27 Trade and other receivables 7 Receivable – sale of subsidiary 8 Prepayments TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables 8 Available for sale financial assets Property, plant and equipment 9 Deferred exploration expenditure 10 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 11 Interest bearing loans and borrowings 12 Provisions 13 Obligations to the Group Trust 14 Obligations to the Mt Ida Trust 14 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest bearing loans and borrowings 12 Provisions 13 Obligations to the Territory Trust 14 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS / (LIABILITIES) EQUITY Contributed equity 15 Accumulated losses Reserves 16 TOTAL PARENT ENTITY INTEREST Non-controlling interest 17 TOTAL EQUITY / (DEFICIT)	CONSOLIDATED 2010 2009 $’000 $’000 16 1,445 330 5,190 - 3,250 200 - 546 9,885 5,218 5,390 - 26 8,842 8,750 21,499 21,499 35,559 35,665 36,105 45,550 2,873 25,264 762 30,305 35 35 9,970 - 1,013 - 14,653 55,604 66 633 4,148 4,148 13,477 - 17,691 4,781 32,344 60,385 3,761 (14,835) 164,666 137,474 (166,239) (157,174) 5,292 4,823 3,719 (14,877) 42 42 3,761 (14,835)	CONSOLIDATED 2010 2009 $’000 $’000 16 1,445 330 5,190 - 3,250 200 - 546 9,885 5,218 5,390 - 26 8,842 8,750 21,499 21,499 35,559 35,665 36,105 45,550 2,873 25,264 762 30,305 35 35 9,970 - 1,013 - 14,653 55,604 66 633 4,148 4,148 13,477 - 17,691 4,781 32,344 60,385 3,761 (14,835) 164,666 137,474 (166,239) (157,174) 5,292 4,823 3,719 (14,877) 42 42 3,761 (14,835)
		9,885
		5,390 26 8,750 21,499
		35,665
		45,550
		25,264 30,305 35 - -
		55,604
		633 4,148 -
		4,781
		60,385
		(14,835)
		137,474 (157,174) 4,823
		(14,877) 42
		(14,835)

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

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

Attributable to equity holders of the parent entity

	Attributable to equity holders of the parent entity
Consolidated	Contributed equity Accumulated losses Reserves Total Non- controlling interests Total equity $’000 $’000 $’000 $’000 $’000 $’000
At 1 July 2008 Other comprehensive loss Loss for the year Total comprehensive loss for the year *Transactions with equity holders in* *their capacity as equity holders:* Issue of share capital Share issue expenses Exercise of options Share-based payments At 30 June 2009 Other comprehensive loss Loss for the year Total comprehensive loss for the year *Transactions with equity holders in* *their capacity as equity holders:* Issue of share capital Share issue expenses Exercise of options Share-based payments At 30 June 2010	137,474 (145,363) 4,823 (3,066) 42 (3,024)
	- - - - - - - (11,811) - (11,811) - (11,811)
	- (11,811) - (11,811) - (11,811)
	- - - - - - - - - - - - - - - - - - - - - - - -
	137,474 (157,174) 4,823 (14,877) 42 (14,835)
	- - - - - - - (9,065) - (9,065) - (9,065)
	- (9,065) - (9,065) - (9,065)
	27,192 - - 27,192 - 27,192 - - - - - - - - - - - - - - 469 469 - 469
	164,666 (166,239) 5,292 3,719 42 3,761

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

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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

NOTE Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Net cash outflow from operating activities 27 Cash flows from investing activities Payments for mineral exploration expenditure Proceeds from disposal of property, plant and equipment Payments for purchase of property, plant and equipment Proceeds from sale of tenements Proceeds from sale of financial assets Sale of subsidiary 24 Return of security deposit Refund of deposit Net cash inflow from investing activities Cash flows from financing activities Proceeds from issues of shares Share issue costs Repayment of loan 14 Loan proceeds from other parties Payment of finance lease liabilities Net cash inflow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 27	CONSOLIDATED 2010 2009 $’000 $’000 56 4,344 (20,783) (7,936) 78 172 (82) (6) (20,731) (3,426) (802) (3) - 108 (92) - 200 - 28 - 8,250 1,000 147 - - 2,500 7,731 3,605 15,000 - - - (2,961) - 220 1,750 (688) (484) 11,571 1,266 (1,429) 1,445 1,445 - 16 1,445	CONSOLIDATED 2010 2009 $’000 $’000 56 4,344 (20,783) (7,936) 78 172 (82) (6) (20,731) (3,426) (802) (3) - 108 (92) - 200 - 28 - 8,250 1,000 147 - - 2,500 7,731 3,605 15,000 - - - (2,961) - 220 1,750 (688) (484) 11,571 1,266 (1,429) 1,445 1,445 - 16 1,445
		(3,426)
		(3) 108 - - - 1,000 - 2,500
		3,605
		- - - 1,750 (484)
		1,266
		1,445 -
		1,445

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

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. CORPORATE INFORMATION

The financial report of Swan Gold Mining Limited for the year ended 30 June 2010 was authorised for issue in accordance with a resolution of the Directors on the date of signing of the Directors’ Report. Swan Gold Mining Limited is a company limited by shares that is incorporated and domiciled in Australia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general-purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and Interpretations. The financial report has been prepared on a historical cost basis. The financial report is presented in Australian dollars, and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(c) Adoption of New and Revised Standards

In the year ended 30 June 2010, the Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2009. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 8 and AASB 2007- 3	Operating Segments and consequential amendments to other Australian Accounting Standards	New Standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting.	1 January 2009	1 July 2009
AASB 123 (Revised) and AASB 2007-6	Borrowing Costs and consequential amendments to other Australian Accounting Standards	The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.	1 January 2009	1 July 2009
AASB 101 (Revised), AASB 2007- 8 and AASB 2007-10	Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards	Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to thetitles of thefinancialstatements.	1 January 2009	1 July 2009
AASB 2008- 1	Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations	The amendments clarify the definition of “vesting conditions”, introducing the term “non-vesting conditions” for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition isnot satisfied.	1 January 2009	1 July 2009
AASB 3 (Revised)	Business Combinations	The revised Standard introduces a number of changes to the accounting for business combinations, the most significant of which includes the requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.	1 July 2009	1 July 2009

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 127 (Revised)	Consolidated and Separate Financial Statements	There are a number of changes arising from the revision to AASB 127 relating to changes in ownership interest in a subsidiary without loss of control, allocation of losses of a subsidiary and accounting for the loss of control of a subsidiary. Specifically in relation to a change in the ownership interest of a subsidiary (that does not result in loss of control) – such a transaction will be accountedforas anequity transaction.	1 July 2009	1 July 2009
AASB 2008- 3	Amendments to Australian Accounting Standards arising from AASB3 andAASB 127	Amending Standard issued as a consequence of revisions to AASB 3 and AASB 127. Refer above.	1 July 2009	1 July 2009
AASB 2008- 5	Amendments to Australian Accounting Standards arising from the Annual Improvements Project	The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact. This was the first omnibus of amendments issued by the IASB arising from the Annual Improvements Project and it is expected that going forward, such improvements will be issued annually to remove inconsistencies and clarify wording in the standards. The AASB issued these amendments in two separate amending standards; one dealing with the accounting changes effective from 1 January 2009 and the other dealing with amendments to AASB 5, which will be applicable from 1 July 2009 [referbelowAASB 2008-6].	1 January 2009	1 July 2009
AASB 2008- 6	Further Amendments to Australian Accounting Standards arising from the Annual ImprovementsProject	This was the second omnibus of amendments issued by the IASB arising from the Annual Improvements Project. Refer to AASB 2008-5 above for more details.	1 July 2009	1 July 2009

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2008- 7	Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate	The main amendments of relevance to Australian entities are those made to AASB 127 deleting the “cost method” and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity's separate financial statements (i.e., parent company accounts). The distinction between pre- and post- acquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment.AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) ratherthan itsfairvalue.	1 January 2009	1 July 2009
AASB 2009- 2	Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038]	The main amendment to AASB 7 requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy: ► quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); ► inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and ► inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). These amendments arise from the issuance of Improving Disclosures about Financial Instruments (Amendments to IFRS 7) by the IASB in March 2009. The amendments to AASB 4, AASB 1023 and AASB 1038 comprise editorial changes resultingfrom the amendmentstoAASB7.	Annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009.	1 July 2009

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2009- 4	Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16]	The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting. The main amendment of relevance to Australian entities is that made to IFRIC 16 which allows qualifying hedge instruments to be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements in AASB 139 that relate to a net investment hedge are satisfied. More hedging relationships will be eligible for hedge accounting as a result of the amendment. These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The amendments pertaining to IFRS 5, 8, IAS 1,7, 17, 36 and 39 have been issued in Australia asAASB 2009-5 (referbelow).	1 July 2009	1 July 2009
AASB 2009- Y	Amendments to Australian Accounting Standards [AASB 5, 7, 107, 112, 136 & 139 and Interpretation 17]	These comprise editorial amendments and are expected to have no major impact on the requirements of the amended pronouncements.	1 July 2009	1 July 2009

The Group has not yet reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2010. These are outlined in the table below:

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2009-5	Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139]	The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting except for the following: The amendment to AASB 117 removes the specific guidance on classifying land as a lease so that only the general guidance remains. Assessing land leases based on the general criteria may result in morelandleases being classified as	1 January 2010	1 July 2010

28 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
		finance leases and if so, the type of asset which is to be recorded (intangible vs. property, plant and equipment) needs to be determined. The amendment to AASB 101 stipulates that the terms of a liability that could result, at anytime, in its settlement by the issuance of equity instruments at the option of the counterparty do not affect its classification. The amendment to AASB 107 explicitly states that only expenditure that results in a recognised asset can be classified as a cash flow from investing activities. The amendment to AASB 118 provides additional guidance to determine whether an entity is acting as a principal or as an agent. The features indicating an entity is acting as a principal are whether the entity: ► has primary responsibility for providing the goods or service; ► has inventory risk; ► has discretion in establishing prices; ► bears the credit risk. The amendment to AASB 136 clarifies that the largest unit permitted for allocating goodwill acquired in a business combination is the operating segment, as defined in IFRS 8 before aggregation for reporting purposes. The main change to AASB 139 clarifies that a prepayment option is considered closely related to the host contract when the exercise price of a prepayment option reimburses the lender up to the approximate present value of lost interest for the remaining term of the host contract. The other changes clarify the scope exemption for business combination contracts and provide clarification in relation to accounting for cash flow hedges.

29 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 9	Financial Instruments	AASB 9 includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below. (a) Financial assets are classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows. This replaces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria. (b) AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. (c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, ondifferentbases.	1 January 2013	1 July 2013

30 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2009-11	Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]	The revised Standard introduces a number of changes to the accounting for financial assets, the most significant of which includes: ► two categories for financial assets being amortised cost or fair value ► removal of the requirement to separate embedded derivatives in financial assets ► strict requirements to determine which financial assets can be classified as amortised cost or fair value. Financial assets can only be classified as amortised cost if (a) the contractual cash flows from the instrument represent principal and interest and (b) the entity’s purpose for holding the instrument is to collect the contractual cash flows ► an option for investments in equity instruments which are not held for trading to recognise fair value changes through other comprehensive income with no impairment testing and no recycling through profit or loss on derecognition ► reclassifications between amortised cost and fair value no longer permitted unless the entity’s business model for holding the asset changes ► changes to the accounting and additional disclosures for equity instruments classified as fair value throughothercomprehensiveincome	1 January 2013	1 July 2013

31 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 124 (Revised)	Related Party Disclosures (December 2009)	The revised AASB 124 simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition, including: (a) the definition now identifies a subsidiary and an associate with the same investor as related parties of each other; (b) entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and (c) the definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reducedrelated party disclosures.	1 January 2011	1 July 2011
AASB 2009-12	Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]	This amendment makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations. In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to thetextof IFRSs bytheIASB.	1 January 2011	1 July 2011

32 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 1054	Australian Additional Disclosures	This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB. This standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas: (a) Compliance with Australian Accounting Standards (b) The statutory basis or reporting framework for financial statements (c) Whether the financial statements are general purpose or special purpose (d) Audit fees (e)Imputationcredits	1 July 2011	1 July 2011
AASB 2010-3	Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]	Limits the scope of the measurement choices of non-controlling interest at proportionate share of net assets in the event of liquidation. Other components of NCI are measured at fair value. Requires an entity (in a business combination) to account for the replacement of the acquiree’s share-based payment transactions (whether obliged or voluntarily), i.e., split between consideration and post combination expenses. Clarifies that contingent consideration from a business combination that occurred before the effective date of AASB 3 Revised is not restated. Eliminates the requirement to restate financial statements for a reporting period when significant influence or joint control is lost and the reporting entity accounts for the remaining investment under AASB 139. This includes the effect on accumulated foreign exchange differences onsuch investments.	1 July 2010	1 July 2010

33 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY	OF SIGNIFICANT ACCOUNTING POLICIES (continued)	OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2010-4	Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]	Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments. Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions. Clarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme,isto betaken into account.	1 January 2011	1 July 2011
AASB 2010-5	Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]	This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB. These amendments have no major impact on the requirements of the amended pronouncements.	1 January 2011	1 July 2011
AASB 2010-6	Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7]	The amendments increase the disclosure requirements for transactions involving transfers of financial assets.Disclosures require enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognised and introduce new disclosures for assets that are derecognised but the entity continues to have a continuing exposure to the asset after the sale.	1 July 2011	1 July 2011

34 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY	OF SIGNIFICANT ACCOUNTING POLICIES (continued)	OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2010-7	Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127]	The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: ► The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ► The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presentedinprofit or loss.	1 January 2013	1 July 2013
AASB 2011-1	Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132, AASB 134, Interpretation 2, Interpretation 112, Interpretation 113]	This Standard amendments many Australian Accounting Standards, removing the disclosures which have been relocated to AASB 1054.	1 July 2011	1 July 2011
AABS 10	Consolidated Financial Statements	AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and Interpretation 112 Consolidation – Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidatedintothe group.	1 January 2013	1 July 2013

35 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY	OF SIGNIFICANT ACCOUNTING POLICIES (continued)	OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
AASB 11	Joint Arrangements	AASB 11 replaces AASB 131_Interests in_ Joint Ventures_and Interpretation 113 _Jointly- controlled Entities – Non- monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangementsheld by the group.	1 January 2013	1 July 2013
AASB 12	Disclosure of Interests in	AASB 12 includes all disclosures relating ’	1 January 2013	1 July 2013
	Other Entities	to an entitys interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non- controllinginterests.
AASB 2011-7	Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards	Consequential amendments to AASB 127 Separate Financial Statements_and AASB 128_Investments in Associates_as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11_Joint Arrangements_and AASB 12_Disclosure of Interests in Other Entities.	1 January 2013	1 July 2013

36 -

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY	OF SIGNIFICANT ACCOUNTING POLICIES (continued)	OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reference	Title	Summary	Application date of standard	Application date for Group
Interpretation 19	Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments	This interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability are “consideration paid” in accordance with paragraph 41 of IAS 39. As a result, the financial liability is derecognised and the equity instruments issued are treated as consideration paid to extinguish that financial liability. The interpretation states that equity instruments issued in a debt for equity swap should be measured at the fair value of the equity instruments issued, if this can be determined reliably. If the fair value of the equity instruments issued is not reliably determinable, the equity instruments should be measured by reference to the fair value of the financial liability extinguished as of the date of extinguishment.	1 July 2010	1 July 2010
IFRS 13	Fair Value Measurement	IFRS 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this definition may result in different fair values being determined for the relevant assets. IFRS 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on thefairvalue determined.	1 January 2013	1 July 2013

The Group has not yet assessed whether there will be any significant impact on 30 June 2010 results in light of the standards and interpretations issued but not yet effective.

37 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Going concern

As at 30 June 2010, the Group’s current liabilities exceeded its current assets by $14.107 million. The consolidated entity recorded a loss of $9,065,000 (2009: $11,811,000) for the year ended 30 June 2010.

The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000;
DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the agreement and $9,000,000 payable within 6 months;
Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000;
All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be extinguished at settlement;
Amount to be paid to Swan of $5,000,000 at settlement;
All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement;
DCM fund the ongoing operations of Swan until the transaction is completed; and
Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement is not binding until the following conditions are met:

(a) the Financial Investment Review Board (FIRB) Condition has been satisfied;
(b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser with a copy of such consents;
(c) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules in relation to the Transaction;
(d) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary under the Territory Trust pursuant to which the Territory Resources Limited will assign to the Purchaser and the Purchaser will take an assignment of all Territory Resources Limited’s rights and interests as beneficiary under the Territory Trust;
(g) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and
(h) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring.

38 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The main terms and conditions of the Restructure Deed are as follows:

Swan will conduct a share placement to sophisticated investors to raise working capital of a minimum of $7,500,000 by the issue of new ordinary shares at $0.02 effective on completion of the transaction (Completion). The issue will be fully underwritten by Investmet on terms reasonably satisfactory to Investmet and the Company;
DCM will transfer 39,849,657 Swan shares to Investmet in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;
The Group Trustee will transfer 134,483,578 Swan shares to Investmet as consideration for the payment by Investmet to the Group Trust of $10,000,000; the payment will also extinguish all claims by the Group Trust under the recapitalization deed;
Investmet will pay $144,240 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to repay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.
Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security to be granted by Swan as required to Investmet;
DCM to fund ongoing operations of Swan until Completion; and
The Conditions of the Restructure Deed are to be satisfied or waived on or before 31 October 2012, with the exception of shareholder and regulatory approvals, and Loan Syndicate Arrangements which are to be finalised by 31 December 2012. Beyond these dates an alternative restructure or extension period are to be negotiated in good faith, but should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring any liability.

The Conditions for Completion to occur includes amongst other items:

Agreement on documentation relating to Investmet’s funding arrangements;
The share sale agreement between Swan and DCM dated 18 August 2011 (as varied) being terminated on Completion with no further liability for either party;
The Recapitalisation Deed between Swan, Stirling Resources Ltd and others dated 21 June 2009 (as amended) being terminated on Completion with no further liability for Swan;
Any plaint proceedings relating to the tenements of Swan and its subsidiaries are to be discontinued or withdrawn on terms satisfactory to Investmet by 31 October 2012. Investmet may immediately terminate if it considers that the plaint condition will, or may, not be satisfied by 31 October 2012; and
All necessary shareholder, third party or regulatory approvals.

The ability of the Group to operate as a going concern and meet its debts as and when they fall due is primarily dependent upon the Directors meeting the terms and conditions under either the Investmet transaction or alternatively the DCM transaction. Failure to do so may result in the Group being unable to meet its debts as and when they fall due and realise its assets and liabilities in the ordinary course of business. The financial report has been prepared on the basis that the Company and the consolidated entity will continue to meet their commitments and can therefore continue normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

39 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The directors believe that at the date of signing the financial report there are reasonable grounds to believe that having regard to the matters set out above, the company and the consolidated entity will be able to raise sufficient funds to meet its obligations in the normal course of business as the conditions are met and the sale completed.

Should the company and the consolidated entity not achieve the matters set out above, there is significant uncertainty whether the company and the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements.

The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company and consolidated entity not be able to continue as going concerns.

(e) Principles of consolidation Subsequent to 1 July 2009

The consolidated financial statements comprise the financial statements of Swan Gold and its subsidiaries (as outlined in Note 24) (the Group) as at and for the period ended 30 June each year.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends have been eliminated in full.

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

Investments in subsidiaries held by Swan Gold are accounted for at cost in the separate financial statements of the parent entity less any impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parent will assess whether any indicators of impairment of the carrying value of the investment in the subsidiary exist. Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss is recognised.

The acquisition of subsidiaries which are businesses is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values.

The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

40 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.

Losses are attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it:

Derecognises the assets (including goodwill) and liabilities of the subsidiary
Derecognises the carrying amount of any non-controlling interest
Derecognises the cumulative translation differences, recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent's share of components previously recognised in other comprehensive income to profit or loss, or retained earnings, as appropriate

Prior to 1 July 2009

Certain of the above mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

Acquisitions of non-controlling interests, prior to 1 July 2009, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired was recognised in goodwill.
Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further excess losses were attributed to the parent, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 July 2009 were not reallocated between non-controlling interests and the parent shareholders.

Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments at 1 July 2009, have not been restated.

(f) Revenue recognition

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

Interest

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

Gold and silver sales

Amounts are recognised as sales revenue when there has been a transfer of risk to a customer, and:

the gold is in a form suitable for delivery and no further processing is required by, or on behalf of, the consolidated entity;
the quantity, quality and selling price of the gold or silver can be determined with reasonable accuracy; and
the gold or silver has been despatched to the metals refinery and is no longer under the physical control of the consolidated entity, or the metals refinery has formally acknowledged legal ownership of the product, including all inherent risks.
41 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(g) Property, plant and equipment

All assets acquired, including property, plant and equipment are initially recorded at their cost of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.

Property, plant and equipment located on a mine site is included at cost less provision for depreciation and any impairment in value. All such assets are depreciated over the estimated remaining economic life of the mine, using a unit of production basis. All other property, plant and equipment is included at cost less provision for depreciation and any impairment in value and depreciated on a straight-line basis commencing from the time the asset is held ready for use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(h) Other financial assets

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

All regular way purchases and sales of financial assets are recognised on the trade date (the date that the consolidated entity commits to purchase the asset). Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place.

Loans, receivables and security deposits

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

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets, principally equity securities, that are designated as available-for-sale or are not classified as financial assets at fair value through profit and loss, held to maturity investments nor loans and receivables. After initial recognition available-for sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

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

42 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Deferred exploration and evaluation expenditure

Once the legal right to explore has been acquired, exploration and evaluation costs are expensed to the Income Statement as incurred unless the Directors conclude that a future economic benefit is more likely than not to be realised. Costs incurred during this phase are expensed in the Income Statement as ‘exploration and evaluation expenditure’. In evaluating if expenditures meet the criteria to be capitalised, several different sources of information are utilised. The information that is used to determine the probability of future economic benefits depends on the extent of exploration and evaluation that has been performed.

Impairment

The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount.

The recoverable amount of capitalised exploration and evaluation expenditure is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cashgenerating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value.

An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss.

(j) Impairment of non-financial assets

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

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(k) Joint Venture Assets

The Group has an interest in a joint venture that has jointly controlled assets. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. The Group recognises its interest in the jointly controlled assets by recognising its interest in the assets and the liabilities of the joint venture. The Group also recognises the expenses that it incurs and its share of the income that it earns from the use and output of the jointly controlled assets.

43 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Income tax

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

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. A deferred income tax asset is not recognised where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss or when the deductible temporary difference is associated with

investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

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

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

(m) Trade and other receivables

Trade receivables, which generally have 30 to 90 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less an allowance for impairment. An allowance for doubtful debts is made when there is objective evidence that the consolidated entity will not be able to collect the debts. Bad debts are written off when identified.

Collectability of trade receivables is reviewed on an ongoing basis. Financial difficulties of the debtor, default payments or debts more than 180 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate.

(n) Trade and other payables

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

(o) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

(p) Contributed equity

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

44 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Goods and services tax

Revenues, expenses and assets are recognised net of goods and services tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authority is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from or payable to the tax authority are classified as operating cash flows.

(r) Employee benefits

Provision for employee benefits represents the amount which the consolidated entity has a present obligation to pay resulting from employees’ service provided up to the balance date.

Liabilities arising in respect of employee benefits expected to be settled within twelve months of the balance date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the balance date.

(s) Share based payments The consolidated entity may provide benefits to employees (including directors) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (“equity settled transactions”).

The cost of these equity settled transactions with employees is measured by reference to the fair value at the date they are granted. The value is determined using a binomial model. The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors, will ultimately vest.

No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

(t) Leases

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

Operating leases

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

Finance leases

Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the consolidated entity are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.

45 -

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) Rehabilitation costs

Full provision for rehabilitation costs is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance date. Increases due to additional environmental disturbances are capitalised and amortised over the remaining lives of the operations. These increases are accounted for on a net present value basis.

Rehabilitation provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances.

(v) Inventories

Ore and Gold stocks are valued at the lower of cost and net realisable value.

Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure relating to mining activities, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(w) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Swan Gold does not currently hold qualifying assets but, if it did, the borrowing costs directly associated with this asset would be capitalised (including any other associated costs directly attributable to the borrowing and temporary investment income earned on the borrowing).

(x) Earnings per share

Basic earnings per share is determined by dividing net operating results after income tax attributable to members of the parent entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

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

(y) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a day to day basis, net of outstanding bank overdrafts.

46 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The consolidated entity’s principal financial instruments are cash and short term deposits and loans. The main purpose of these financial instruments is to provide working capital and raise finance for the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. The main risks arising from the consolidated entity’s financial instruments are interest rate risk and credit risk. The Board reviews and agrees policies for managing each of these risks.

(i) Credit risk exposure

Credit risk relates to the risk that a counter party will default on its contractual obligations resulting in financial loss to the consolidated entity. The exposure of the consolidated entity to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of the assets as indicated in the balance sheet.

(ii) Interest rate risk exposure

The Group’s exposure to the risk of changes in market interest rates is minimal and relates primarily to finance leases with fixed rates of interest.

(iii) Commodity price exposure

The Group is exposed to Australian dollar gold price risk. This arises through sales of the Group’s main commodity, gold. The Group has not hedged gold production. Given the Group remained in administration until 26 February 2010 and that mining operations did not recommence during the year, the Group’s exposure was not material during the year ended 30 June 2010.

4. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY

(i) Significant accounting judgements In the process of applying the consolidated entity’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Capitalisation of exploration expenditure

The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in determining whether it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of Joint Ore Reserves Committee (JORC) resource is in itself an estimation process that requires varying degrees of uncertainty depending on sub-classification and these estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the Income Statement in the period when the new information becomes available.

(ii) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment

Assets, including property, plant and equipment, receivables and goodwill, are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of “value in use” (being the net present value of expected future cash flows of the relevant cash generating unit) and “fair value less costs to sell”.

Impairment of deferred exploration expenditure

The future recoverability of deferred exploration expenditure is dependent on a number of factors, including whether the Group decided to exploit the related tenement itself or, if not, whether it successfully recovers the related exploration asset through sale.

47 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

4. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

To the extent that deferred exploration expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made.

Provision for decommissioning and restoration costs

Decommissioning and restoration costs are a normal consequence of mining and the majority of this expenditure is incurred as the end of a mine’s life. In determining an appropriate level of provision, consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine) and the estimated future level of inflation.

The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates.

Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results.

Share-based payment transactions

The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the binomial model using the assumptions detailed in the financial statements.

48 -

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

5. REVENUE AND EXPENSES (a) Revenue - sales - interest (b) Other income - profit on sale of property, plant and equipment - profit on sale of investments - sundry income (c) Employee and directors’ benefits expenses - wages and salaries (d) Raw materials and consumables used - raw materials and consumables used - contractors and subcontractors (e) Corporate and administration expenses - audit and accounting fees - consulting fees - legal fees - travel and accommodation expenses - occupancy - regulatory - insurance - management fees (f) Finance costs - finance lease interest - interest expense	CONSOLIDATED 2010 2009 $’000 $’000 46 3,479 1,305 1,518 1,351 4,997 - 2 2 - 15 552 17 554 1,781 3,964 1,781 3,964 868 4,824 637 380 1,505 5,204 379 1,868 813 218 396 464 57 67 36 15 79 87 320 167 205 - 2,285 2,886 66 - 16 - 82 -	CONSOLIDATED 2010 2009 $’000 $’000 46 3,479 1,305 1,518 1,351 4,997 - 2 2 - 15 552 17 554 1,781 3,964 1,781 3,964 868 4,824 637 380 1,505 5,204 379 1,868 813 218 396 464 57 67 36 15 79 87 320 167 205 - 2,285 2,886 66 - 16 - 82 -
		2009
		$’000
		3,479 1,518
		4,997
		2 - 552
		554
		3,964
		3,964
		4,824 380
		5,204
		1,868 218 464 67 15 87 167 -
		2,886
		- -
		-

49 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

6. INCOME TAX The major components of income tax are: Income Statement Current income tax Current income tax charge / (benefit) Current income tax benefit / (charge) not recognised Deferred income tax Relating to origination and reversal of temporary differences Deferred income tax benefit not recognised A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the applicable income tax rate is as follows:	CONSOLIDATED 2010 2009 $’000 $’000 (2,568) (2,104) 2,568 2,104 693 (1,040) (693) 1,040	CONSOLIDATED 2010 2009 $’000 $’000 (2,568) (2,104) 2,568 2,104 693 (1,040) (693) 1,040
		2009
		$’000





		(2,104)
		2,104

		(1,040)
		1,040
	-	-




Accounting loss before income tax At the statutory income tax rate of 30% (2009: 30%) Expenditure not allowable for income tax purposes: Non-deductible expenses Tax losses not brought to account Income tax benefit reported in the income statement	(9,065)	(11,811)
	(2,720) - 2,720	(3,543)


		7
		3,536

	-	-

Accounting loss before income tax	(9,065)	(11,811)
At the statutory income tax rate of 30% (2009: 30%)	(2,720)	(3,543)
Expenditure not allowable for income tax purposes:
Non-deductible expenses	-	7
Tax losses not brought to account	2,720	3,536
Income tax benefit reported in the income statement	-	-

BALANCE SHEET 2010 2009 $’000 $’000 Deferred income tax Deferred income tax relates to the following: CONSOLIDATED Deferred tax liabilities - - - - Deferred tax assets Employee entitlements 11 11 Exploration tenements and rehabilitation 236 476 PPE 2,305 2,785 Rehabilitation reserve 1,244 1,244 Revenue tax losses 40,571 38,003 Tax losses and other deferred tax assets not recognised (44,367) (42,519) Gross deferred income tax assets - - Deferred tax (income)/expense	BALANCE SHEET 2010 2009 $’000 $’000 Deferred income tax Deferred income tax relates to the following: CONSOLIDATED Deferred tax liabilities - - - - Deferred tax assets Employee entitlements 11 11 Exploration tenements and rehabilitation 236 476 PPE 2,305 2,785 Rehabilitation reserve 1,244 1,244 Revenue tax losses 40,571 38,003 Tax losses and other deferred tax assets not recognised (44,367) (42,519) Gross deferred income tax assets - - Deferred tax (income)/expense	Income Statement Equity - (240) (480) - 2,568 (1,848)
	- -
	11 11 236 476 2,305 2,785 1,244 1,244 40,571 38,003 (44,367) (42,519)
	- -
		- -

50 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

7. TRADE AND OTHER RECEIVABLES CURRENT Trade debtors Receivable for sale of subsidiary – Note 24 Other	CONSOLIDATED 2010 2009 $’000 $’000 5 190 - 5,000 325 - 330 5,190	CONSOLIDATED 2010 2009 $’000 $’000 5 190 - 5,000 325 - 330 5,190
		5,190

At 30 June, the ageing analysis of trade and other receivables is as follows:

		Total	0-180	Days	+	181 Days PDNI *	+ 181 Days CI **
2010	Consolidated	330		330		-		-
2009	Consolidated	5,190		5,019		171		-

Past due not impaired (PDNI)

** Considered impaired (CI)

Receivables past due but not considered impaired are: nil (2009: $171,000). Payment terms on these amounts have not been renegotiated. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full. No collateral is being held in relation to PDNI or CI assets.

8. RECEIVABLES CURRENT Receivable for sale of subsidiary – Note 24 NON-CURRENT Security deposits (i) Sundry receivables – joint venture partner (ii) Allowance for non-recovery Reconciliation of allowance for non-recovery Opening balance Movement in allowance	CONSOLIDATED 2010 2009 $’000 $’000 - 3,250 - 3,250 5,218 5,390 6,534 4,991 (6,534) (4,991) 5,218 5,390 (4,991) (3,684) (1,543) (1,307) (6,534) (4,991)	CONSOLIDATED 2010 2009 $’000 $’000 - 3,250 - 3,250 5,218 5,390 6,534 4,991 (6,534) (4,991) 5,218 5,390 (4,991) (3,684) (1,543) (1,307) (6,534) (4,991)
		3,250
		5,390 4,991 (4,991)
		5,390
		(3,684) (1,307)
		(4,991)

(i) Security deposits are held in a 90 day term deposit that is rolled over at each maturity date. The deposit is not available for use until the consolidated entity has been released from any rehabilitation obligations in regard to tenements to which the security deposit relates.

(ii) Sundry receivables comprise of debts due from a joint venture partner - Refer to Note 25.

51 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

9. PROPERTY, PLANT AND EQUIPMENT Property. plant and equipment At cost Less accumulated depreciation Less impairment Plant and equipment – under finance lease At cost Less accumulated depreciation Total property, plant and equipment Reconciliation Property, plant and equipment Carrying amount at beginning of period Additions Disposals Disposals - subsidiaries - Note 24 Depreciation expense Plant and equipment – under finance lease Carrying amount at beginning of period Additions Disposals Depreciation expense	CONSOLIDATED 2010 2009 $’000 $’000 14,986 14,894 (2,299) (2,299) (4,139) (4,139) 8,548 8,456 614 614 (320) (320) 294 294 8,842 8,750 CONSOLIDATED 2010 2009 $’000 $’000 8,456 12,173 92 - - (106) - (3,611) - - 8,548 8,456 294 1,742 - - - (1,448) - - 294 294	CONSOLIDATED 2010 2009 $’000 $’000 14,986 14,894 (2,299) (2,299) (4,139) (4,139) 8,548 8,456 614 614 (320) (320) 294 294 8,842 8,750 CONSOLIDATED 2010 2009 $’000 $’000 8,456 12,173 92 - - (106) - (3,611) - - 8,548 8,456 294 1,742 - - - (1,448) - - 294 294
		8,456
		1,742 - (1,448) -
		294

Finance leases are secured over the related leased assets.

52 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

10. DEFERRED EXPLORATION EXPENDITURE Opening balance Exploration expenditure incurred in current year Disposal of exploration properties (Note 24)	CONSOLIDATED 2010 2009 $’000 $’000 21,499 27,135 - 3 - (5,639) 21,499 21,499	CONSOLIDATED 2010 2009 $’000 $’000 21,499 27,135 - 3 - (5,639) 21,499 21,499
		21,499

The ultimate recoupment of deferred exploration expenditure carried forward is dependent upon the successful development and exploitation, or alternatively sale, of the respective areas of interest at an amount greater than or equal to the carrying value.

11. TRADE AND OTHER PAYABLES CURRENT Trade payables and accruals	CONSOLIDATED 2010 2009 $’000 $’000 2,873 25,264 2,873 25,264	CONSOLIDATED 2010 2009 $’000 $’000 2,873 25,264 2,873 25,264
		25,264

Trade creditors and accruals are non-interest bearing and generally settled on 30 day terms. As a result of the appointment of a Voluntary Administrator on 10 July 2008 all creditors were suspended and formed part of the subsequent creditor trusts under the Recapitalisation Deed settled on 26 February 2010. The trade creditors and accruals balances at 30 June 2010 were incurred after 26 February 2010.

INTEREST BEARING LOANS AND BORROWINGS CURRENT Finance lease (i) Unsecured loans – interest bearing (ii) Unsecured loans – non-interest bearing (iii)	CONSOLIDATED 2010 2009 $’000 $’000 542 594 - 29,711 220 - 762 30,305	CONSOLIDATED 2010 2009 $’000 $’000 542 594 - 29,711 220 - 762 30,305
		30,305

12. INTEREST BEARING LOANS AND BORROWINGS CURRENT

(i) Finance leases are secured over the assets leased.

(ii) Unsecured loans are as agreed in the Recapitalisation Deed settled on 26 February 2010, to the extent $21,500,000 is due for repayment by 26 February 2012 and the balance formed part of the subsequent creditor trusts under the Recapitalisation Deed was repaid on 26 February 2011.

(iii) The unsecured loans balance at 30 June 2010 is a working capital loan from Stirling Resources Ltd which is noninterest bearing, received after 26 February 2010.

Also refer to Note 22 relating to unsecured loans by related parties.

53 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

		CONSOLIDATED	CONSOLIDATED
		2010	2009
		$’000	$’000
12.	INTEREST BEARING LOANS AND BORROWINGS (continued)
	NON-CURRENT
	Finance leases		66	633

Finance leases are secured over the assets leased.

13. PROVISIONS CURRENT Employee benefits NON-CURRENT Rehabilitation Opening balance Rehabilitation amount provided in current year Closing balance	CONSOLIDATED 2010 2009 $’000 $’000 35 35 4,148 4,148 - - 4,148 4,148	CONSOLIDATED 2010 2009 $’000 $’000 35 35 4,148 4,148 - - 4,148 4,148
		4,148 -
		4,148

The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis on the development of mines or installation of those facilities.

The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites. These provisions have been created based on Swan Gold’s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for necessary decommissioning works required which will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future gold prices, which are inherently uncertain.

54 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. OBLIGATIONS TO CREDITORS TRUSTS

In accordance with the Recapitalisation Deed which was completed on 26 February 2010 (refer Note 15), Swan Gold made the following payments to Creditor's trusts for the following creditors:

Creditors of the Group (other than Mt Ida Gold Pty Ltd and Mt Ida Gold Operations Pty Ltd (together Mt Ida)) were paid $6,630,392 at Completion, with 3 equal payments of $3,209,300 due within 4, 8 and 12 months from Completion, being 26 February 2010. These instalments plus further costs incurred by the trust until Completion have not yet been paid and are secured by a charge over the Swan Gold Group, other than Davyhurst Gold Pty Ltd and Siberia Mining Corporation Pty Ltd.
Creditors of Mt Ida were paid $1,201,838 at Completion, with 2 equal payments of $506,700 due within 4 and 8 months from Completion. These instalments have not yet been paid.
Territory Resources Ltd was paid $2,961,000 at Completion. Swan Gold also assigned its claims arising from the sale of Minjar Gold Pty Ltd to the Territory Trust, which were paid during the 2010 financial year, and within 24 months from Completion is to pay the Shortfall Payment. These payments are secured by a charge over Davyhurst Gold Pty Ltd and Siberia Mining Corporation Pty Ltd.

The obligations to the Creditor’s trusts at 30 June 2010 are as follows:

CURRENT Group Trust - Instalments pursuant to the Recapitalisation Deed - Additional costs incurred until Completion Mt Ida Trust - Instalments pursuant to the Recapitalisation Deed Territory Trust - Outstanding claim of trust at Completion - Proceeds from disposal of Minjar Gold assets (Note 24), after interest received and expenses incurred by the Minjar Gold Creditor’s Trust	CONSOLIDATED 2010 2009 $’000 $’000 9,628 - 342 - 9,970 - 1,013 - 22,572 - (9,095) - 13,477 -	CONSOLIDATED 2010 2009 $’000 $’000 9,628 - 342 - 9,970 - 1,013 - 22,572 - (9,095) - 13,477 -
		-
		-
		- -
		-

55 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NTRIBUTED EQUITY Share capital 742,820,993 (2009: 198,988,649) ordinary fully paid shares Movements in ordinary share capital Balance 1 July 2008 Issue of shares Exercise of options Share issue costs Balance 30 June 2009 Issue of shares pursuant to the Recapitalisation Deed: Stirling Gold Pty Ltd, at 5 cents per share Crawley Investments Pty Ltd, at 5 cents per share The Group Trust, at 5 cents per share The Mt Ida Trust, at 5 cents per share Balance 30 June 2010	CONSOLIDATED 2010 2009 $’000 $’000 164,666 137,474 Shares $’000 198,988,649 137,474 - - - - - - 198,988,649 137,474 300,000,000 15,000 35,000,000 1,750 178,206,960 8,910 30,625,384 1,532 742,820,993 164,666	CONSOLIDATED 2010 2009 $’000 $’000 164,666 137,474 Shares $’000 198,988,649 137,474 - - - - - - 198,988,649 137,474 300,000,000 15,000 35,000,000 1,750 178,206,960 8,910 30,625,384 1,532 742,820,993 164,666
		$’000 137,474 - - -
		137,474 15,000 1,750 8,910 1,532
		164,666

15. CONTRIBUTED EQUITY

(a) Share capital
(b) Movements in ordinary share capital

Ordinary shares entitle the holder to participate in dividends 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.

Effective 1 July 1998, the corporation’s legislation in place abolished the concepts of authorised capital and par value shares. Accordingly the parent entity does not have authorised capital or par value in respect of its issued shares.

Capital Management

When managing capital, management’s objective is to safeguard the entity’s ability to continue as a going concern as well as to maintain optimum returns to shareholders and benefits to other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. In order to sustain these objectives Management:

Appointed Voluntary Administrators in July 2008;
Negotiated the recapitalisation in February 2010; and subsequent to the Balance Date
Executed an agreement with global commodity company DCM DECOmetal GmbH (DCM) to acquire Swan Gold’s subsidiaries that own the Carnegie and Mt Ida gold projects.
Executed a Restructure Deed with Investmet Limited (Investmet) and DCM, where Investmet intends to replace the DCM agreement with a plan to recapitalise Swan Gold Mining to fund a review into the recommencement of operations at the Carnegie and Mt Ida gold projects.

Capital is comprised of shareholders’ equity as disclosed in the statement of financial position.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group is not subject to any externally imposed capital restrictions.

56 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

15. CONTRIBUTED EQUITY (continued)

A meeting of the creditors of the Company was held on 30 June 2009 to vote for varying the deed of company arrangement of each member of the Swan Gold Group (other than Mount Magnet Gold Pty Ltd (In Liquidation)) in accordance with the terms of the Recapitalisation Deed.

A meeting of the shareholders of the Company was held on 10 September 2009 to vote on the issue of shares and charges and change of Company name contemplated in the Recapitalisation Deed.

The Recapitalisation was completed on 26 February 2010 subsequent to the following conditions being satisfied:

i. The deed of company arrangement of each member of the Swan Gold Group (other than Mount Magnet Gold Pty Ltd (In Liquidation)) was varied on 30 June 2009 in accordance with the terms of the Recapitalisation Deed (note, Creditors had already approved the Recapitalisation Deed).

ii. On 10 September 2009, Swan Gold's Shareholders approved the issue of securities, payments and charges under the Recapitalisation.

iii.Territory Resources Ltd became bound by the varied deeds of company arrangement on 30 June 2009.

Stirling Resources Ltd guarantees the obligations of Stirling Gold Pty Ltd and (post completion), Swan Gold Mining Ltd.

The deed of company arrangement of each member of the Group (other than Mount Magnet Gold Pty Ltd (In Liquidation)) is varied so that upon completion of the Recapitalisation, the Group Companies are released from all Creditors' claims arising prior to administration (excluding inter-company loans); those claims being exchanged for claims against the respective Creditors' Trusts. Upon satisfaction of all of Swan Gold's obligations under the Recapitalisation, Swan Gold's Directors will also be released from all claims.

The Company made the following share issues on completion of the Recapitalisation Deed on 26 February 2010:

a. 300,000,000 Shares to Stirling Gold Pty Ltd at an issue price of $0.05 per share and 100,000,000 free attaching 3 year $0.05 Options for a total consideration of $15,000,000.

b. 35,000,000 Shares to Crawley Investments Pty Ltd in satisfaction of a $1,750,000 debt owed by Swan Gold to Crawley.

c. 208,832,344 Shares to the Creditors' Trusts at a deemed issue price of $0.05 per share. The Trustees of the Creditors’ Trusts was to sell their respective shares over a twelve month period and pay the net proceeds to Creditors other than Territory Resources Ltd.

As at 31 December 2009, the Administrator on behalf of the Company had received $7.977 million of the $15,000,000 owing from Stirling Gold Pty Ltd in relation to the recapitalisation. The remaining $7.023 million was received upon Completion on 26 February 2010.

On 27 November and 1 December 2009, Swan Gold made distributions totalling $829,910 in relation to priority employee entitlements pursuant to s556 of the Corporations Act 2001.

Swan Gold made the following payments to Creditor's trusts for the following creditors:

Creditors of the Group (other than Mt Ida Gold Pty Ltd and Mt Ida Gold Operations Pty Ltd (together Mt Ida)) were paid $6,630,392 at Completion, with 3 equal payments of $3,209,300 due within 4, 8 and 12 months from Completion, being 26 February 2010. These instalments have not yet been paid and are secured by a charge over the Swan Gold Group, other than Davyhurst Gold Pty Ltd and Siberia Mining Corporation Pty Ltd. Creditors will also receive the proceeds from the sale of Shares issued under paragraph (c) above.
Creditors of Mt Ida were paid $1,201,838 at Completion, with 2 equal payments of $506,700 due within 4 and 8 months from Completion. These instalments have not yet been paid. Creditors will also receive the proceeds from the sale of Shares issued under paragraph c) above.
Territory Resources Ltd was paid $2,961,000 at Completion. Swan Gold also assigned $9,095,000 of the funds raised from the sale of Minjar Gold Pty Ltd to the Territory Trust. The balance of $13,477,000 is payable within 24 months from Completion of the Recapitalisation Deed. These payments are secured by a first ranking charge over Davyhurst Gold Pty Ltd and Siberia Mining Corporation Pty Ltd (other than its Bellevue Assets).

The funds will be distributed to Creditors according to the principles applicable to liquidations with employees to be paid their full entitlements following Completion.

57 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. RESERVES Option premium and share-based payments reserve Movements in share options Weighted average exercise price $ Balance 1 July 2008 1.11 Expired 0.90 Expired 0.60 Expired 0.60 Balance 30 June 2009 0.82 Options issued pursuant to the Recapitalisation Deed 0.05 Share based payment 0.05 Balance 30 June 2010 0.16	CONSOLIDATED 2010 2009 $’000 $’000 5,292 4,823 Options $ ‘000 20,683,338 4,823 (500,000) - (933,334) (666,668) - 18,583,336 4,823 100,000,000 - 15,000,000 469 133,583,336 5,292	CONSOLIDATED 2010 2009 $’000 $’000 5,292 4,823 Options $ ‘000 20,683,338 4,823 (500,000) - (933,334) (666,668) - 18,583,336 4,823 100,000,000 - 15,000,000 469 133,583,336 5,292
		$ ‘000 4,823 - -
		4,823 - 469
		5,292

As at year end the following options over ordinary fully paid shares were outstanding:

- exercisable at $1.20 each on or before 6 August 2010 - exercisable at $0.60 each on or before 30 September 2010 - exercisable at $1.20 each on or before 30 September 2010 - exercisable at $1.20 each on or before 31 December 2010 - exercisable at $1.20 each on or before 23 February 2011 - exercisable at $1.20 each on or before 23 February 2012 - exercisable at $0.30 each on or before 30 June 2012 - exercisable at $0.05 each on or before 26 February 2013	Options 1,666,667 1,700,000 916,667 5,166,667 1,500,001 833,334 6,800,000 115,000,000
	133,583,336

- exercisable at $1.20 each on or before 6 August 2010
- exercisable at $0.60 each on or before 30 September 2010
- exercisable at $1.20 each on or before 30 September 2010
- exercisable at $1.20 each on or before 31 December 2010
- exercisable at $1.20 each on or before 23 February 2011
- exercisable at $1.20 each on or before 23 February 2012
- exercisable at $0.30 each on or before 30 June 2012
- exercisable at $0.05 each on or before 26 February 2013

Options
1,666,667
1,700,000
916,667
5,166,667
1,500,001
833,334
6,800,000
115,000,000

133,583,336

The weighted average remaining contractual life for the share options outstanding as at 30 June 2010 is 2.4 years (2009: 1.7 years).

Nature and purpose of reserve

The option premium and share-based payment reserve represents the premium paid to the parent entity by option holders, the value of equity benefits provided to directors, employees as part of their remuneration and the value of services provided to the Group paid for by the issue of equity.

17. NON-CONTROLLING INTERESTS Interest in: Share capital	CONSOLIDATED 2010 2009 $’000 $’000 42 42

58 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

18. KEY MANAGEMENT PERSONNEL

(a) Compensation of key management personnel

Remuneration by category


Remuneration by category Key management personnel Short-term Post-employment Share-based payments	CONSOLIDATED 2010 2009 $ $ 1,038,705 2,175,793 11,084 23,185 - 21,267
	1,049,789 2,220,245

(b) Option holdings of key management personnel (consolidated)

		Granted		Options				Balance vested and
	Balance at	as		exercised		Net change	Balance at	exercisable at
30 June 2010	1 July 2009	remuneration				other	30 June 2010	30 June 2010
*Directors*
K Vuleta	833,334		-		-	-	833,334	833,334
A Brown	-		-		-	-	-	-
I Price	-		-		-	-	-	-
M Kiernan (i)	3,333,334		-		-	(3,333,334)	-	-
M Maluish (ii)	-		-		-	-	-	-
J Baxter (iii)	-		-		-	-	-	-
*Administrators*
B Hughes (iv)	-		-		-	-	-	-

(i) Mr Kiernan resigned on 28 June 2010.

(ii) Mr Maluish resigned on 17 June 2010.

(iii) Mr Baxter resigned on 17 June 2010.

(iv) Mr Hughes retired on 26 February 2010.

Other changes during the year include allocations of options issued pursuant to the Recapitalisation Deed, effect upon resignation and expiration of options.

During the year ended 30 June 2010 there were no individuals (other than the directors) who were responsible for the strategic direction and management of the consolidated entity, hence no executives are named above in respect of this period.

59 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

18. KEY MANAGEMENT PERSONNEL (continued)

(b) Option holdings of key management personnel (consolidated) (continued)

		Granted		Options				Balance vested and
	Balance at	as		exercised		Net change	Balance at	exercisable at
30 June 2009	1 July 2008	remuneration				other	30 June 2009	30 June 2009
*Directors*
M Kiernan	3,333,334		-		-	-	3,333,334	2,000,000
J Davis (i)	1,700,000		-		-	(1,700,000)	-	-
I Huitson (ii)	1,166,668		-		-	(1,166,668)	-	-
K Vuleta	1,166,668		-		-	(333,334)	833,334	833,334
P Botsis (iii)	-		-		-	-	-	-
D Humann (iv)	833,334		-		-	(833,334)	-	-
*Administrators*
C Munday (v)	-		-		-	-	-	-
B Hughes	-		-		-	-	-	-

(i) Mr Davis resigned on 1 August 2008.

(ii) Mr Huitson resigned on 30 January 2009.

(iii) Mr Botsis resigned on 14 July 2008.

(iv) Mr Humann resigned on 11 July 2008.

(v) Mr Munday retired on 30 January 2009.

Other changes during the year include effect upon resignation and expiration of options.

As a result of the Administrator’s appointment on 10 July 2008, during the year ended 30 June 2009 there were no individuals (other than the directors) who were responsible for the strategic direction and management of the consolidated entity, hence no executives are named above in respect of this period.

(c) Shareholdings of key management personnel (consolidated)

Shares in Swan Gold Mining Limited (number)

30 June 2010	Balance at	On the		Balance at
	1 July 2009	exercise of options	Net change other	30 June 2010
*Directors*
K Vuleta	333,334	-	-	333,334
A Brown	-	-	-	-
I Price	-	-	-	-
M Kiernan (i)	14,977,849	-	(14,977,849)	-
M Maluish (ii)	-	-	-	-
J Baxter (iii)	-	-	-	-
*Administrators*
B Hughes (iv)	-	-	-	-

(i) Mr Kiernan resigned on 28 June 2010.

(ii) Mr Maluish resigned on 17 June 2010.

(iii) Mr Baxter resigned on 17 June 2010.

(iv) Mr Hughes retired on 26 February 2010.

Other changes during the year include allocations of shares issued pursuant to the Recapitalisation Deed and effect upon resignation.

60 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

18. KEY MANAGEMENT PERSONNEL (continued)

(c) Shareholdings of key management personnel (consolidated) (continued) Shares in Swan Gold Mining Limited (number)

30 June 2009	Balance at	On the		Balance at
	1 July 2008	exercise of options	Net change other	30 June 2009
*Directors*
M Kiernan	14,977,849	-	-	14,977,849
J Davis (i)	93,508	-	(93,508)	-
I Huitson (ii)	358,334	-	(358,334)	-
K Vuleta	333,334	-	-	333,334
P Botsis (iii)	1,950,582	-	(1,950,582)	-
D Humann (iv)	-	-	-	-
*Administrators*
C Munday (v)	-	-	-	-
B Hughes	-	-	-	-

(i) Mr Davis resigned on 1 August 2008.

(ii) Mr Huitson resigned on 30 January 2009.

(iii) Mr Botsis resigned on 14 July 2008.

(iv) Mr Humann resigned on 11 July 2008.

(v) Mr Munday retired on 30 January 2009.

Other changes during the year include effect upon resignation.

Except for equity issued as part of remuneration, all equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the consolidated entity would have adopted if dealing at arm’s length.

Loans to key management personnel

There were no loans to key management personnel during the financial year.

Other transactions with directors

Transactions during the year between the consolidated entity and directors or their director-related entities are set out in Note 22.

19. REMUNERATION OF AUDITORS Amounts paid or due and payable to the auditors for: Auditing or reviewing the financial reports Taxation advisory services	CONSOLIDATED 2010 2009 $ $ 229,500 - - 51,317 229,500 51,317	CONSOLIDATED 2010 2009 $ $ 229,500 - - 51,317 229,500 51,317
		51,317

61 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

CONSOLIDATED 2010 2009 $’000 $’000

20. EXPENDITURE COMMITMENTS

(a) Operating leases (non-cancellable) Minimum lease payments - not later than one year - later than one year but not later than five years	- - -	151 -
		151

Operating leases relate to office space and car parks.

(b) Finance leases

The consolidated entity has entered into finance leases for various items of plant and machinery. These leases have terms of renewal but no purchase terms or escalation clauses. Renewals are at the option of the entity that hold the lease. Future minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows:

Within one year After one year but not more than five years Total minimum lease payments Less: Future finance charges Present value of minimum lease payments	CONSOLIDATED 2010 2009 $’000 $’000 624 693 82 677
	706 1,370 (98) (143)
	608 1,227

(c) Capital expenditure commitments

Under the terms of mineral tenement licences held by the consolidated entity, minimum annual expenditure obligations of $4,646,920 (2009: $5,400,000) may be required to be expended during the forthcoming financial year in order for the tenements to maintain a status of good standing. This expenditure may be incurred by the consolidated entity or its joint venture partners and may be subject to variation from time to time in accordance with Department of Industry and Resources regulations.

62 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

21. SEGMENT INFORMATION

The Group has adopted AASB 8 Operating Segments with effect from 1 July 2009. The Group has identified its segments based on the internal management reporting that is used by the executive management team in assessing performance and allocating resources. Segments have been identified as the ongoing care and maintenance and mine development work segment, and the exploration activities segment. Previously the Group presented their segments geographically. The Group operates in one geographical segment – Australia.

The accounting policies used by the Group in reporting segment information internally, is the same as those contained in Note 2 to the financial statements.

The following items and associated assets and liabilities are not allocated to operating segments as management do not consider these to be part of the core operations of both segments:

Impairment of assets
Corporate assets and liabilities
Administrative expenses.

Segments Year ended 30 June 2010 Segment revenue Segment profit/(loss) Segment Assets Segment Liabilities Included within segment loss: Interest expense Interest revenue Additions to non-current assets Segments Year ended 30 June 2009 Segment revenue Segment loss Segment Assets Segment Liabilities Included within segment loss: Interest expense Interest revenue Additions to non-current assets	Mine Under Care and Maintenance Exploration Unallocated Consolidated $’000 $’000 $’000 $’000 1,345 - 6 1,351
	16,447 - (25,512) (9,065)
	14,060 21,499 546 36,105 (6,078) - (26,266) (32,344) (72) - (10) (82) 1,299 - 6 1,305 88 - 4 92 Mine Under Care and Maintenance Exploration Unallocated Consolidated $’000 $’000 $’000 $’000 4,703 - 294 4,997
	(6,522) - (5,289) (11,811)
	14,140 (25,282) 21,499 - 9,911 (35,103) 45,550 (60,385) - - - - 1,280 - 238 1,518 - - - -

63 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

22. RELATED PARTIES

(a) Transactions with related parties
i. During the year consulting fees totalling $30,499 were charged by Mr I Price, a director of the Company (2009: nil). The consulting fees are based upon an agreed hourly rate of $133/hr.
ii. During the year geological services totalling $23,550 (2009: nil) were charged by Hermitage Holdings Pty Ltd, a company of which Mr J Baxter is a director. The fees are based upon an agreed hourly rate $150/hour.
iii. During the year the Company received advances totalling $220,000 (2009: nil) from Stirling Resources Ltd, in which Mr M Kiernan was a director. This amount was provided unsecured and non-interest bearing and is outstanding at 30 June 2010.
iv. During the year management fees totalling $205,078 (2009: nil) were charged by Stirling Operations Ltd, a fully owned subsidiary of Stirling Resources Ltd. The management fees were charged for services and facilities provided by Stirling Resources Ltd, based upon an agreed monthly rate.

Other transactions with directors and specified executives are set out in Note 18.

23. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Policies and Objectives

The Group’s activities expose it to a variety of financial risks: market risk (including commodity risk), credit risk, liquidity risk, and interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance without limiting the Group’s potential upside.

The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to gold price risk and assessments of market forecasts for gold prices. Liquidity risk is measured through the development of rolling future cash flow forecasts at various gold prices.

Risk management is carried out by executive management with guidance from the Audit Committee under policies approved by the Board. The Board also provides regular guidance for overall risk management, including guidance on specific areas, such as mitigating commodity price, interest rate and credit risks where applicable.

Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for any hedging coverage of gold, credit allowances, and future cash flow forecast projections.

(b) Net Fair Values

The methods of estimating fair values are outlined in the relevant notes to the financial statements. The carrying amounts of financial assets and liabilities of the Group approximate their fair value.

(c) Credit Risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The Group’s maximum exposure to credit risk at reporting date in relation to each class of financial asset is the carrying amount of those assets as indicated in the Statement of Financial Position.

In relation to managing potential credit risk exposures, the Group has in place policies that aim to ensure that cash transactions are limited to high credit quality financial institutions and that the amount of credit exposure to any one financial institution is limited as far as is considered commercially appropriate.

(d) Interest Rate Risk

Interest rate risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market interest rates. The exposure of the consolidated entity to interest rate risk and the effective weighted average interest rate for classes of financial assets and liabilities is set out below.

64 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

23. FINANCIAL INSTRUMENTS (continued)

CONSOLIDATED

30 June 2010 Financial assets Floating rate Cash Security deposits Fixed rate Sundry receivables (i) Total Financial liabilities Fixed rate Finance lease liability Unsecured loans Floating rate Unsecured loans Total	$’000 30 June 2009 Financial assets Floating rate 16 Cash 5,218 Security deposits Fixed rate - Sundry receivables (i) 5,234 Total Financial liabilities Fixed rate 608 Finance lease liability - Unsecured loans Floating rate - Unsecured loans 608 Total	$’000 1,445 5,390 -
		6,835 1,227 - 29,711
		30,938

The Group’s policy is to manage its exposure to interest rate risk by holding cash on short term, fixed rate deposits and variable rate deposits with reputable high credit quality financial institutions.

The Group constantly analyses its interest rate exposure. Consideration is given to potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.

(i) Refer to note 25 for details.

(e) Commodity Price Risk

The Group is exposed to movements in the gold price, although the exposure is not material.

Management, in conjunction with guidance from the Board, regularly reviews the need for gold derivatives. Management will continue to monitor movements in the gold price.

(f) Sensitivity Analysis

The following tables summaries the sensitivity of the Group’s financial assets and liabilities to interest rate risk. Had the relevant variables, as illustrated in the tables, moved, with all other variables held constant, post tax profit and equity would have been affected as shown. The analysis has been performed on the same basis for 2010 and 2009.

65 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

23. FINANCIAL INSTRUMENTS (continued)

CONSOLIDATED Financial assets Cash Security deposits Financial liabilities Unsecured loans Total increase/(decrease)	30 June 2010 Interest rate risk Interest rate risk -1% (i) +1% (i) Profit Equity Profit Equity $'000 $'000 $'000 $'000 - - - - (52) - 52 - - - - - (52) - 52 -	30 June 2009 Interest rate risk Interest rate risk -1% (i) +1% (i) Profit Equity Profit Equity $'000 $'000 $'000 $'000 (15) - 15 - (54) - 54 - 297 - (297) - 228 - (228) -	30 June 2009 Interest rate risk Interest rate risk -1% (i) +1% (i) Profit Equity Profit Equity $'000 $'000 $'000 $'000 (15) - 15 - (54) - 54 - 297 - (297) - 228 - (228) -
			(228) -

(i) The rate of 1% applied in the above analysis for 2010 and 2009 is based on management’s expected movement for the interest rate over the next financial year.

66 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

23. FINANCIAL INSTRUMENTS (continued)

(g) Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of loans and other available credit lines.

The Group manages liquidity risk by monitoring forecast cash flows.

The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognised financial assets and liabilities as of 30 June 2010. Cash flows for financial assets and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2010.

Subsequent to 30 June 2010, the consolidated entity continued to meet their commitments with funds provided by DCM DECOmetal GmbH. It then executed a Restructure Deed with Investmet Limited (Investmet) and DCM whereby Investmet plans to recapitalise Swan Gold Mining to fund a review into the recommencement of operations at the Carnegie and Mt Ida gold projects.

Maturity analysis of financial assets and liabilities based on management’s expectations.

Trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations. These assets are considered in the Group’s overall liquidity risk. To monitor existing financial assets and liabilities as well as to enable an effective controlling of future risks, the Company has established comprehensive risk reporting covering its business that reflects expectations of management of expected settlement of financial assets and liabilities.

CONSOLIDATED 30 June 2010 Financial assets Cash Trade and other receivables Financial liabilities Trade and other payables Interest bearing loans & borrowings Obligations to the Group Trust Obligations to the Mt Ida Trust Obligations to the Territory Trust Net Maturity	< 6 months 6 - 12 months 1 - 5 years >5 years Total $’000 $’000 $’000 $’000 $’000 16 - - - 16 5 325 5,218 - 5,548
	21 325 5,218 - 5,564
	2,672 201 - - 2,873 474 150 302 - 926 6,419 3,551 - - 9,970 1,013 - - - 1,013 - - 13,477 - 13,477
	10,578 3,902 13,779 - 28,259
	(10,557) (3,577) (8,561) - (22,695)

67 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

23. FINANCIAL INSTRUMENTS (continued)

30 June 2009 Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Interest bearing loans and borrowings Net Maturity	< 6 months 6 - 12 months 1 - 5 years >5 years Total $’000 $’000 $’000 $’000 $’000 1,445 - - - 1,445 5,190 3,250 5,390 - 13,830
	6,635 3,250 5,390 - 15,275
	248 25,016 - - 25,264 346 30,058 677 - 31,081
	594 55,074 677 - 56,345
	6,041 (51,824) 4,713 - (41,070)

24. INVESTMENTS IN CONTROLLED ENTITIES

	Country of	Class	Equity	holding
Name of entity	incorporation	of shares	2010	2009
			%	%
Monarch Nickel Pty Ltd	Australia	Ordinary	100	100
Monarch Gold Pty Ltd	Australia	Ordinary	80	80
Carnegie Gold Pty Ltd	Australia	Ordinary	100	100
Siberia Mining Corporation Pty Ltd	Australia	Ordinary	100	100
Mt Ida Gold Pty Ltd	Australia	Ordinary	100	100
Mount Magnet Gold Pty Ltd(1)	Australia	Ordinary	-	-
Controlled entities of Siberia Mining Corporation Pty Ltd
Ida Gold Operations Pty Ltd	Australia	Ordinary	100	100
Pilbara Metals Pty Ltd	Australia	Ordinary	100	100
Siberia Gold Operations Pty Ltd	Australia	Ordinary	100	100

(1) Company placed into voluntary liquidation on 19 December 2008.

68 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

24. INVESTMENTS IN CONTROLLED ENTITIES (continued)

Disposal of Minjar Gold Pty Ltd

On 25 March 2009, the Administrator sold 100% of subsidiary Minjar Gold Pty Ltd to Golden Stallion Resources Pty Ltd for the consideration of $9,250,000, including a deferred consideration component of $3,250,000 that has subsequently been received.

*Written down value of Minjar Gold assets:* Plant and equipment Deferred exploration expenditure *Proceeds:* Deposit paid 27 March 2009 Final payment 31 December 2009 Deferred consideration received prior to 26 February 2010 Loss on disposal of subsidiary	CONSOLIDATED $’000 3,611 5,639
	9,250 1,000 5,000 3,250
	9,250 Nil

25. INTERESTS IN JOINT VENTURES

The consolidated entity entered into a joint venture arrangement with Kingsday Holdings Pty Ltd for the operation of the Mt Ida Excluded Area joint venture. Under the agreement Swan Gold retains a 70% interest in the asset. The consolidated entity contributes 100% of the funding of the joint venture with the other participant’s share repayable from the gold production of the asset. Swan Gold will be paid interest on the funds used and in relation to the other participant’s share of costs at a rate of 30% per annum during periods where mining operations are accruing on the Mt Ida Excluded Area. The face value of the amount repayable as at 30 June 2009 is $6.534 million with an applicable notional interest rate of 30%, subject to an interest free period of 20 months when Swan Gold had yet to recommence mining operations. This balance was fully impaired during the year as the recovery of this balance is dependent on gold production and remains uncertain.

The joint venture has no contingent liabilities or capital commitments.

26. CONTINGENT LIABILITIES

There were no contingent liabilities identified as at 30 June 2010.

69 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

CONSOLIDATED 2010 2009 $’000 $’000

27. CASH FLOW STATEMENT

a) Reconciliation of cash

Cash balances comprise: Cash at bank 16 1,445

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

b) Reconciliation of net cash outflow from operating activities to loss after income tax Loss after income tax Profit on sale of financial assets Impairment of available for sale financial assets Impairment of receivables (Gain)/loss on disposal of property, plant and equipment Net loss on release of net liabilities Share based payments Changes in operating assets and liabilities (Increase)/decrease in receivables Increase/(decrease) in payables (Increase)/decrease of prepayments Increase/(decrease) of provisions (Increase)/decrease of inventory Net cash outflow from operating activities	(9,065) (2) - 1,543 - 224 469 (1,683) (12,017) (200) - - (20,731)	(11,811) - 37 1,307 (2) 765 - (371) 6,072 13 (403) 967
		(3,426)

Payments to suppliers and employees include creditors held in the creditors’ trust. These payments include a mix of operating and financing creditors which could not be separated and have been included in operating cash flows.

Non-cash financing and investing activities

During the financial year the consolidated entity entered into non-cash financing and investing transactions which are not reflected in the statement of cash flows. These related to the recapitalisation of the Group. Refer Note 15.

70 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

28. EARNINGS PER SHARE Loss used in the calculation of basic earnings per share Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share Effect of dilution: Share options Weighted average number of ordinary shares on issue adjusted for the effect of dilution	CONSOLIDATED 2010 2009 $’000 $’000 (9,065) (11,811) Number Number 654,913,847 198,988,649 nil nil 654,913,847 198,988,649

Options granted to employees including Key Management Personnel are considered to be potential ordinary shares and have been considered in the determination of diluted earnings per share to the extent they are dilutive.

There are no options excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share because they are anti-dilutive for either of the periods presented. Total anti-dilutive options as at 30 June 2010 were 133,583,336 (2009: 18,583,336).

There is no impact of dilutive shares as the consolidated entity made a loss for the year, hence any dilution would reduce the loss per share. Diluted earnings per share is therefore the same as basic loss per share.

At various dates subsequent to 30 June 2010 and up to the signing of this report a total of 18,583,336 options lapsed or expired. There were no other movements in ordinary shares and options which occurred subsequent to balance date.

29. SUBSEQUENT EVENTS

The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000;
DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the agreement and $9,000,000 payable within 6 months;
Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000;
All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be extinguished by DCM at settlement;
Amounts to be paid to Swan of $5,000,000 at settlement;
All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement;
DCM fund the ongoing operations of Swan until the transaction is completed; and
Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.
71 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

29. SUBSEQUENT EVENTS (Continued)

The agreement does not become binding until the following conditions precedent are met:

(a) the Financial Investment Review Board (FIRB) Condition has been satisfied;
(b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser with a copy of such consents;
(c) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules in relation to the Transaction;
(d) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida Trust to the Purchaser in accordance with the Mt Ida Assignment Deed;
(f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary under the Territory Trust pursuant to which the Territory Resources Limited will assign to the Purchaser and the Purchaser will take an assignment of all Territory Resources Limited’s rights and interests as beneficiary under the Territory Trust;
(g) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and
(h) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring on 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet had been entered into by Swan, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012.

The main terms and conditions of the Restructure Deed are as follows:

Swan will conduct a share placement to sophisticated investors to raise working capital of a minimum of $7,500,000 by the issue of new ordinary shares at $0.02 effective on completion of the transaction (Completion). The issue will be fully underwritten by Investmet on terms reasonably satisfactory to Investmet and the Company;
DCM will transfer 39,849,657 Swan shares to Investment in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;
The Group Trustee will transfer 134,483,578 Swan shares to Investmet as consideration for the payment by Investmet to the Group Trust of $10,000,000; the payment will also extinguish all claims by the Group Trust under the recapitalization deed;
Investmet will pay $144,240 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to repay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.
Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security is to be granted by Swan as required to Investmet;
DCM to fund ongoing operations of Swan until Completion; and
The Conditions of the Restructure Deed are to be satisfied or waived on or before 31 October 2012, with the exception of shareholder and regulatory approvals, and Loan Syndicate Arrangements which are to be finalised by 31 December 2012. Beyond these dates an alternative restructure or extension period are to be negotiated in good faith, but should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring any liability.
72 -

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

29. SUBSEQUENT EVENTS (Continued)

The Conditions for Completion to occur includes amongst other items:

Agreement on documentation relating to Investmet’s funding arrangements;
The share sale agreement between Swan and DCM dated 18 August 2011 (as varied) being terminated on Completion with no further liability for either party;
The Recapitalisation Deed between Swan, Stirling Resources Ltd and others dated 21 June 2009 (as amended) being terminated on Completion with no further liability for Swan;
Any plaint proceedings relating to the tenements of Swan and its subsidiaries are to be discontinued or withdrawn on terms satisfactory to Investmet by 31 October 2012. Investmet may immediately terminate if it considers that the plaint condition will, or may, not be satisfied by 31 October 2012; and
All necessary shareholder, third party or regulatory approvals;

Subsequent to period end a number of the Group’s tenements were subject to plaint proceedings due to the Group not meeting its minimum expenditure requirements on the tenements. The majority of the plaints have now been settled by the Company. The ability of the Group to maintain tenure to its tenements is dependent upon it continuing to meet the minimum expenditures on the tenements or obtaining exemptions for tenements in which the minimum expenditures have not been met.

30. PARENT ENTITY INFORMATION

(a) Financial Position

(a) Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non -current liabilities Total liabilities Equity Contributed equity Accumulated losses Reserves Total equity (b) Financial performance Profit/(Loss) for the year Other comprehensive income Total loss for the year	2010 $’000 202 29,825 30,027 26,266 - 26,266 164,666 (166,197) 5,292 3,761 (9,065) - (9,065)	2009 $’000 8,452 11,820
		20,272
		35,103 4
		35,107
		137,474 (157,132) 4,823
		(14,835)
		(11,811) -
		(11,811)

73 -

AND CONTROLLED ENTITIES

SWAN GOLD MINING LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

30. PARENT ENTITY INFORMATION (Continued)

Guarantees

The parent has issued the following guarantees in relation to the debts of its subsidiaries:

Swan Gold and its subsidiaries have entered into a Deed of Cross Guarantee. The effect of the deed is that Swan Gold has guaranteed to pay any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event that Swan Gold is wound up or if it does not meet its obligations under the terms of loans, leases or other liabilities subject to the guarantee.

Tax consolidation

For the purposes of income taxation, Swan Gold Mining Limited and its 100% owned subsidiaries have formed a tax consolidated group. Swan Gold Mining Limited is the head entity of the tax consolidated group.

(i) Members of the tax consolidated group and the tax sharing agreement
Swan Gold Mining Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2002. Swan Gold Mining Limited is the head entity of the tax consolidated group. Members of The Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.
(ii) Tax effect accounting by members of the tax consolidated group. The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied The Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes.
74 -

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

Directors Declaration

In accordance with a resolution of the directors of Swan Gold Mining Limited, I state that:

In the opinion of the directors:

a. The financial statements, notes and the additional disclosures included in the directors’ report designed as audited, of the consolidated entity are in accordance with the Corporations Act 2001, including:

i. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its performance for the year ended on that date.

ii. Complying with Accounting Standards and Corporations Regulations 2001.

b. Subject to the matters disclosed in Note 2(d), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2010.

On behalf of the board

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D Delaney Director

Perth, Western Australia 19 October 2012

75 -

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Independent audit report to members of Swan Gold Mining Limited

Report on the Financial Report

We have audited the accompanying financial report of Swan Gold Mining Limited, which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows 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 the 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 2, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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 our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls 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 controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.

Liability limited by a scheme approved under Professional Standards Legislation

GB:KE:SWA:010

Auditor’s Opinion

In our opinion:

the financial report of Swan Gold Mining Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated entity’s financial position at 30 June 2010 and of its 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 .
the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 2(d) in the financial report. As a result of the matters described in Note 2(d), there is significant uncertainty whether the consolidated entity will continue as a going concern, and therefore whether the consolidated entity will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 12 to 16 of the directors’ report for the year ended 30 June 2010. 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 Swan Gold Mining Limited for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001 .

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Ernst & Young

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G A Buckingham Partner Perth 19 October 2012

GB:KE:SWA:010

AI assistant

ORA BANDA MINING LTD — Annual Report 2010

65475_rns_2012-10-22_f522b455-7c00-4a2b-9934-0de7723619d3.pdf

SWAN GOLD MINING LIMITED (previously named Monarch Gold Mining Company Limited) ABN 69 100 038 266

FINANCIAL REPORT

CORPORATE DIRECTORY

CONTENTS

BOARD OF DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

SHARE REGISTRY

AUDITORS

SOLICITORS

BANKERS

STOCK EXCHANGE LISTING

DIRECTORS' REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS OF OPERATIONS

OPERATING AND FINANCIAL REVIEW

DIVIDENDS

DIRECTORS' REPORT

LIKELY DEVELOPMENTS

DIRECTORS' REPORT

LIKELY DEVELOPMENTS (ontinued)

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

OPTIONS GRANTED OVER UNISSUED SHARES

Number

SIGNIFICANT CHANGES

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

DIRECTORS' REPORT

INFORMATION ON DIRECTORS

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

DIRECTORS' REPORT

Other current directorships: Nil

Other current directorships: Nil

DIRECTORS' REPORT

Interests in the shares and options of Swan Gold

COMPANY SECRETARIES

Ildiko Wowesny B.Bus.

Keith J Vuleta B.Bus (Acc & Com Law), CA, MAICD

MEETINGS OF DIRECTORS

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

REMUNERATION REPORT (audited)

Principles used to determine the nature and amount of remuneration

Directors and executives remuneration

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

DIRECTORS' REPORT

Non-executive directors’ remuneration

SWAN GOLD MINING LIMITED

DIRECTORS' REPORT

Details of remuneration

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

DIRECTORS' REPORT

SWAN GOLD MINING LIMITED

AND CONTROLLED ENTITIES

DIRECTORS' REPORT

Service agreements

Share-based compensation

Company performance

End of Remuneration Report (audited)

DIRECTORS' REPORT

ENVIRONMENTAL REGULATIONS

NON-AUDIT SERVICES

AUDITOR INDEPENDENCE

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

DIRECTORS' REPORT

ROUNDING

ORA BANDA MINING LTD Annual Report 2010