ORBMINCO LIMITED - Annual Report 2007

MONARO MINING NL

ABN 99 073 155 781

FINANCIAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

MONARO MINING NL

ABN 99 073 155 781

ANNUAL FINANCIAL REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

CONTENTS
Corporate governance statement	3
Directors’ report	6
Auditors’ independence declaration	11
Independent audit report	12
Directors’ declaration	14
Income statement	15
Balance sheet	16
Statement of recognised income and expense	17
Cash flow statement	18
Notes to the financial statements	19
Additional stock exchange information	60

[2]

CORPORATE GOVERNANCE STATEMENT

This statement summarises the corporate governance practices adopted by the Board of Directors. Monaro Mining NL’s objective is to achieve the best practice in corporate governance commensurate with the Company’s size, its operations and the industry within which it participates.

It is noteworthy that in the Second Report to the ASX Corporate Governance Council in February 2005, the Implementation Review Group (“IRG”) reported that:

“there is no typical organisation and no single Entity readily identifiable model for corporate governance…At different times and stages in a Company’s life, some governance structures may be better for the generation of wealth of investors than others.”

“the IRG’s view is that effective governance practices will be those that address the 10 key Principles”

“the IRG considers that there is a need for further information targeted to smaller companies highlighting the acceptability of appropriately disclosed, alternative corporate governance practices.”

Given the background stated above, it should be appreciated that the practice adopted by the Board is evolving and subject to change in keeping with practices deemed appropriate by reason of the Company’s size and risk profile. This statement outlines the main corporate governances practices (‘Guidelines’) in place throughout the financial year, which comply with Australian Stock exchange (‘ASX’) Corporate Governance Council recommendations, unless otherwise stated.

The Company and its controlled entities together are referred to as Monaro in this statement.

Principle 1

Lay solid foundations for management and oversight

The Board operates in accordance with the broad principles set out below .

Role of the Board

The Board is responsible for corporate strategy, implementation of business plans, allocation of resources, approval of budgets and capital expenditure, and the adherence to Company policies. The Board is also responsible for compliance with the Code of Conduct, overseeing risk management and internal controls, and the assessment, appointment and removal of the Executive Directors and Company Secretary.

Principle 2 Structure the Board to add value

Board Composition

The company has a Board of three directors comprising a non executive chairman, an executive director and one independent non-executive director.

The directors have a broad mix of skills, experience and knowledge to enable them to effectively and efficiently discharge their responsibilities and duties.

Although a non executive of the company, the chairman does not satisfy the test of independence due to holding a beneficial interest in a substantial shareholder of the company. Whilst this is a departure from best practice there is an inherent acceptance by investors that Mr Grigor was the principle founder of the Company. Moderating this departure, the Board has established clear protocols for handling conflicts of interest and has agreed to review the composition should the Company’s market capitalisation exceed $100 million.

CORPORATE GOVERNANCE STATEMENT (Continued)

In addition, to facilitate independent decision making, each director of the company has the right to seek independent professional advice in the furtherance of their duties as directors at the Company’s expense provided they notify the company beforehand.

The constitution of the company provides that directors shall not retain office for more than three calendar years or beyond the third annual general meeting following election without submitting to re-election by shareholders.

Details of the members of the Board, their skills, experience, expertise, and qualifications are set out in the Director’s Report under the heading “Information on Directors.”

Meetings

The Board aims to hold at least 4 formal meetings in each calendar year corresponding where practical with the release to the ASX of the Quarterly Activity Reports. The number of meetings held is disclosed separately in the Director’s Report.

Board Committees

Other than for an audit committee, the Board does not have separately established committees dealing with nomination, remuneration risk management and disclosure functions. This constitutes a departure from the ASX Best Practice Recommendations and is dealt with more fully as follows:

Nomination Committee

The Board does not have a separate nomination committee. ASX Best Practice Recommendation 2.4 provides that the Board should establish a nomination committee notwithstanding recognition that for smaller Boards, the same efficiencies may not be apparent from a formal committee.

The full Board of Monaro undertakes an annual review of its size and composition to ensure an appropriate mix of expertise and experience. Currently the Board has an aggregate of 60 years plus experience within the resources sector. Where a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board will select appropriate candidates with relevant qualifications, skills and experience.
The company’s current policy places significant emphasis on the utilisation of the specialist skills of external consultants in geology, metallurgy and engineering usually only available in-house within larger organisations.

Principle 3: Promote ethical and responsible decision-making

The company has established a policy regarding trading in its securities by directors, officers and employees. Directors, officers and employees must not, directly or indirectly, buy or sell shares or other securities in the company when in possession of unpublished price sensitive information which could materially affect the value of those securities. Any trading in the company’s securities by those persons must first be notified to the chairman of the company.

The company has developed and continually reviews a formal code of conduct as part of its Board charter which requires all business affairs to be conducted legally, ethically and with integrity, and which allows breaches of the code to be reported by third parties. The code and the securities trading policy are available for review on Monaro’s website.

Principal 4: Safeguard integrity in financial reporting

The company has appointed two non executive directors to the audit committee, the Chairman of which is an independent member and experienced Chartered Accountant. The committee assesses and reviews the internal accounting and external audits and any material issues arising from those reviews. It also assesses and reviews the accounting policies and practices of the company as an integral part of reviewing the half year and full year accounts. It will make recommendations regarding the appointment of external auditors and the level of their fees and provide a facility, if necessary, to discuss any concerns raised by the auditors independently of management influence.

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CORPORATE GOVERNANCE STATEMENT (Continued)

The external auditors meet privately with the Chairman of the Audit Committee at least once per year.

Principal 5: Make timely and balanced disclosure

The company secretary has been nominated as the person responsible for communications with the Australian Stock Exchange (ASX). The company’s policy calls for the provision of relevant and timely information to its shareholders and is committed to fulfilling its obligations to the broader market for continuous disclosure. The company aims to ensure timely provision and equal access to material information about the company.

The Board has ensured that the procedure for identifying and disclosing material and price sensitive information is in accordance with the Corporations Act 2001 and the ASX Listing Rules. The company does not have a formal written policy regarding disclosure but the Board and management liaise closely to identify and approve information for disclosure.

The Monaro website contains copies of annual and half year reports, ASX announcements, investor relations publications, briefings and presentations given by executives.

Principal 6: Respect the rights of shareholders

All information disclosed to the ASX is posted on the company’s website following confirmation of receipt from the ASX. Shareholders may register on the site to receive electronic notification of releases of information by the company. A copy of the company’s annual report and notice of annual general meeting is sent to all shareholders.

Principal 7: Recognise and manage risk

The company is developing a risk management programme aimed at ensuring the company conducts its operations in a manner that enables risks to be identified, assessed and appropriately managed. The company secretary, reporting to the full Board, manages the company’s internal controls and risk management and the audit committee oversees risk management and internal compliance.

Principal 8: Encourage enhanced performance

Due to the size and infancy of the company, the Board has no formal performance evaluation policy at present. It is considered that the current directors have a sufficient mix of skills and experience to discharge their responsibilities effectively.

The directors are provided with access to the following resources: -

monthly financial reports with actual expenditure compared to budget;
subject to prior consultation with the chairman, the right to seek independent professional advice at the company’s expense;
unrestricted access to the executive director, company secretary and company information.

Principal 9: Remunerate fairly and responsibly

The Board determines the remuneration of the executive director. The Board believes that due to the size of the company, individual salary negotiation is more appropriate than formal remuneration policies.

The Board reviews market comparisons in determining remunerations and seeks independent external advice as necessary.

Non-executive directors are remunerated by way of directors’ fees within the limit approved by shareholders. The Board determines fees paid to individual Board members. Further information on directors’ remuneration is set out in the director’s report and notes to the annual financial report.

Principal 10: Recognise the legitimate interests of stakeholders

The company is developing a formal code of conduct for the Board, management and staff.

The directors continually review the business to determine the most effective and appropriate operating procedures. Review includes risk management approach to health, safety and the commercial operations of the business to ensure compliance with its legal and social obligations to all stakeholders.

DIRECTORS’ REPORT

The Directors of Monaro Mining NL submit herewith the annual financial report for the year ended 30 June 2007. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

DIRECTORS

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

W R Grigor - Non-Executive Chairman M Rampe - Managing Director M J Evans - Non-Executive Director

Further information concerning the particulars of the Directors is included elsewhere within this report.

PRINCIPAL ACTIVITIES

The principal activities of the Company and of the Consolidated Entity are:

(i) exploration for minerals including uranium, gold and base metals;

(ii) the acquisition and sale of mineral tenements;

OPERATING RESULTS

The loss of the Consolidated Entity for the year ended 30 June 2007 after income tax was $3,190,840 (2006: loss $921 337).

DIVIDENDS

The Directors recommend that no dividend be paid for the year ended 30 June 2007 nor have any amounts been paid or declared by way of dividend during the year.

REVIEW OF OPERATIONS

A review of operations carried on by the Company and the Consolidated Entity is set out in the Operations Review section of this Annual Report.

CHANGES IN THE STATE OF AFFAIRS

During the financial year, there was no significant change in the state of affairs of the Consolidated Entity other than that referred to in the financial statements or notes thereto.

SUBSEQUENT EVENTS

Since the end of the financial year the Directors are not aware of any matter or circumstance not disclosed elsewhere in the financial statements or notes thereto that has significantly, or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated Entity in subsequent financial years.

FUTURE DEVELOPMENTS

The Consolidated Entity intends to continue its present range of activities during the forthcoming year and, in accordance with its objectives, may participate in new exploration projects. Certain information concerning future activity is set out in the Operations Review Section. Other information on likely developments and the expected results of operations have not been included in this report, because, in the opinion of the Directors, it would prejudice the interests of the Consolidated Entity.

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DIRECTORS’ REPORT (continued)

ENVIRONMENTAL REGULATION

The Entity is subject to significant environmental regulation in respect of exploration activity. Approvals, licences, hearings and other regulatory requirements are observed by the Entity in respect of each tenement in which the Entity conducts exploration activity. At the date of this report, the Entity does not have any mines in production or under construction.

The Entity is potentially liable for any environmental damage from its activities, the extent of which cannot presently be quantified and would in any event be reduced by insurance carried by the Entity or joint venture operators. As at the date of this report the Company has not been notified of any breach.

SHARE OPTIONS

Details of share options over ordinary shares issued by the Company during the period together with details of options converted during the period and on issue at 30 June 2007 are set out in Note 17 to the financial statements and form part of this report.

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

During the period there were no incentive share options granted to Directors or Employees.

Details of unissued shares or interests under option at the date of this report are:

*Issuing entity*	*Number of shares* *under option*	*Class of shares*	*Exercise price* *of option*	*Expiry date* *of options*
Monaro Mining NL 1 800 000 Ordinary $0.60 31 Dec 2008 Monaro Mining NL 750 000 Ordinary $1.75 31 Dec 2008 Monaro Mining NL 350 000 Ordinary $1.07 19 Apr 2011

INDEMNIFICATION OF OFFICERS AND AUDITORS

During or since the financial year the Company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. In addition, the Company has not paid, or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor.

PARTICULARS OF DIRECTORS

WARWICK R GRIGOR

Mr Grigor, aged 48, is a graduate of the Australian National University having completed degrees in law and economics. He has spent a number of years in the stock broking sector as a senior mining analyst prior to establishing Far East Capital Limited, a specialist research and advisory company focusing on the junior resources sector.

Relevant interest in Monaro Mining NL shares 1,561,370 fully paid shares
2,000,000 contributing shares paid to 0.1 cents
Interest in contracts - refer note 30.

Mr Grigor attended all 4 Directors meetings.

Mr Grigor has also held Directorships in the following ASX listed entities:

Company Period of Directorship First Australian Resources Limited Since 26 April 1995 Peninsula Minerals Limited Since 11 April 2005 Heritage Gold NZ Ltd Since 18 April 2007

Mr Grigor has also been a Director of Tianshan Goldfields Limited during the past three years.

DIRECTORS’ REPORT (continued)

PARTICULARS OF DIRECTORS (continued)

MART RAMPE

Mr Rampe, aged 56, is a geologist with over thirty years experience in minerals exploration and development from grass roots exploration through to pre-mine development. He has worked with a number of commodities including gold, base metals, uranium and industrial minerals. Country experience includes Australia, Papua New Guinea, Solomon Islands, New Zealand and USA (Alaska) and more recently Central Asia. Since 1985 he has been the principal of Harvest Exploration Pty Ltd, a successful consultancy in the minerals and environmental industry. He has held senior exploration management positions in public listed and private exploration companies

Relevant interest in Monaro Mining NL shares
50,000 fully paid shares
1,500,000 contributing shares paid to 0.1 cents
Interest in contracts - refer note 30.

Mr Rampe attended all 4 Directors meetings.

MICHAEL J EVANS

Mr Evans, aged 57, is a Chartered Accountant holding two business degrees and has been involved in the natural resources sector since 1981. He has considerable experience in Australian public companies particularly in relation to financing both in Australia and internationally.

Relevant interest in Monaro Mining NL shares
62,500 fully paid shares
1,500,000 contributing shares paid to 0.1 cents
Interest in contracts - refer note 30.

Mr Evans attended all 4 Directors meetings.

Mr Evans has also held a Directorship in First Australian Resources Limited since 15 September 1992.

COMPANY SECRETARY

Mrs June Atling, aged 56, is a Certified Practising Accountant and holds a Bachelor of Commerce degree. Mrs Atling was appointed Company Secretary in 2005. Mrs Atling resigned on 11 July 2007.

Mrs Anne Adaley aged 47, was appointed Company Secretary on 11 July 2007. Mrs Adaley is a member of National Institute of Accountants and has held senior management roles with a number of listed public Australian exploration and mining companies over the last 25 years including 9 years as Company Secretary for several listed public companies.

DIRECTORS AND EXECUTIVE DETAILS

The Directors of the Consolidated Entity during the year were:

Warwick Robert Grigor (Non-Executive Chairman)
Mart Rampe (Managing Director)
Michael John Evans (Non-Executive Director)

The group executives of the Consolidated Entity during the year were:

June Ann Atling
Steven James McRobbie

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DIRECTORS’ REPORT (continued)

REMUNERATION REPORT

The broad policy calls for executives to be remunerated on terms that are competitive with those offered by entities of a similar size within the same industry. Packages are reviewed annually at full Board level.

As an exploration Entity, performance outcomes are uncertain, notwithstanding endeavour. As such remuneration packages are not linked to profit performance. Present policy is to reward successful performance via incentive options that are priced on market conditions at the time of issue.

The Entity does not have a remuneration committee however the remuneration of Directors is dealt with at full Board level.

Remuneration packages contain the following key elements:

(a) Primary benefits – salary/fees and non monetary benefits including provision of motor vehicles and health benefits.
(b) Post employment benefits – superannuation.
(c) Equity – Share option granted as disclosed in Note 29 of the financial statements.
(d) Other Benefits.

The following table discloses the remuneration of the Directors of the Company and the highest paid executives of the Consolidated group:

	Primary	Primary	Post-employment	Post-employment	Post-employment	Share-based payment	Total
	Short-term employee benefits

Name	Salary and Fees $	Other $*	Super $	Other long- term employee benefits $	Termination benefits $	Options $	$
WR Grigor M Rampe MJ Evans JA Atling SJ McRobbie Total	45 000 - 4 050 - - - 49 050 160 800 30 000 1 800 - - - 192 600 20 000 - 1 800 - - - 21 800 48 000 10 000 4 320 - - - 62 320 205 577 - - - - - 205 577
	479 377 40 000 11 970 - - - 531 347

Other short-term employee benefits includes a bonus paid to Mr M Rampe of $30,000 and Mrs J Atling of $10,000.

PROCEEDINGS ON BEHALF OF THE COMPANY

At the date of this report the Directors are not aware of any proceedings on behalf of the Entity.

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for audit and non-audit services provided during the year by the auditor are outlined in note 31 to the financial statements.

There were no non-audit services provided by the auditor (or by another person or firm on the auditor’s behalf) during the financial year.

DIRECTORS’ REPORT (continued)

AUDITOR’S INDEPENDENCE DECLARATION

In order to comply with Section 307 (c) of the Corporations Act 2001, the Directors’ report includes the auditor’s independence declaration on page 11 of the financial report.

Signed in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act 2001.

On behalf of the Directors

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Mr M Rampe Managing Director Sydney, 27 September 2007

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27 September 2007

Board of Directors Monaro Mining NL Level 2 87 Colin Street WEST PERTH WA 6005

Dear Sirs

RE: MONARO MINING NL

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Monaro Mining NL.

As Audit Director for the audit of the financial statements of Monaro Mining NL for the year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have been no contraventions of:

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

Yours sincerely STANTONS INTERNATIONAL (Authorised Audit Company)

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John Van Dieren Director

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Au: MON5384\Audit Independence Decl June 2007

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MONARO MINING NL

Report on the Financial Report

We have audited the accompanying financial report of Monaro Mining NL, which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes designing, implementing and maintaining internal control 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 3, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the Group, comprising the financial statements and notes, complies with International Financial Reporting Standards, but that the financial report of the Company does not comply.

Auditor’s Responsibility

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

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

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accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Auditor’s Opinion

In our opinion:
(a) the financial report of Monaro Mining NL is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.
(b) the financial report of the Group also complies with International Financial Reporting Standards as disclosed in note 3.

STANTONS INTERNATIONAL

(An Authorised Audit Company)

J P Van Dieren

Director

West Perth, Western Australia 27 September 2007

MONARO MINING NL DIRECTORS’ DECLARATION

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity; and
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

Mr M Rampe Managing Director Sydney, 27 September 2007

MONARO MINING NL AND CONTROLLED ENTITIES

Income statement for the financial year ended 30 June 2007

	Consolidated	Company
Note Continuing operations Other income 6 Accounting and audit Depreciation and amortisation Employee benefits expense Foreign exchange loss Insurance Occupancy & administration expenses Project expenditure Promotion Salary, wages, professional fees Travel Impairment of non current assets Other expenses (Loss) before income tax expense 7 Income tax expense 8 (Loss) from continuing operations (Loss) for the period (Loss) attributable to members of Monaro Mining NL Earnings per share: Basic profit (loss) cents per share Diluted profit (loss) cents per share 20 20	2007 $ 2006 $	2007 $ 2006 $
	299 535 112 287 (55 789) (17 880) (31 483) (6 528) - (192 080) (5 240) (541) (33 114) (5 087) (315 510) (81 384) (1 890 513) (253 198) (311 376) (48 178) (664 389) (357 775) (180 830) (70 973) - - (2 131) -	299 535 109 931 (51 136) (17 880) (3 200) (3 246) - (192 080) (151 988) - (4 383) (4 599) (189 140) (49 519) (518 448) (233 544) (305 371) (46 855) (355 732) (191 022) (134,795) (54 162) (1 722 474) (367 611) (1 381) -
	(3 190 840) (921 337) - -	(3 138 513) (1 050 587) - -
	(3 190 840) (921 337)	(3 138 513) (1 050 587)
	(3 190 840) (921 337)	(3 138 513) (1 050 587)
	(3 190 840) (921 337)	(3 138 513) (1 050 587)

	(11.7) (11.7) (4.8) (4.8)

Notes to the financial statements are included on pages 19 to 59.

MONARO MINING NL AND CONTROLLED ENTITIES Balance sheet as at 30 June 2007

Note	Consolidated	Company
	2007 $ 2006 $	2007 $ 2006 $
9 10 11 12 13 14 15 16 17 18 19	4 828 294 3 015 374 31 930 18 995 15 816 3 633	4 786 064 2 909 961 31 930 18 995 15 770 -
	4 876 040 3 038 002	4 833 764 2 928 956
	54 324 50 000 12 498 - 176 835 44 561 3 739 084 3 639 084	3 681 518 3 677 194 5 916 - 10 376 8 806 100 000 -
	3 982 741 3 733 645	3 797 810 3 686 000
	8 858 781 6 771 647	8 631 574 6 614 956
	206 310 130 027 6 308 -	82 785 103 898 2 704 -
	212 618 130 027	85 489 103 898
	212 618 130 027	85 489 103 898
	8 646 163 6 641 620	8 546 085 6 511 058
	11 217 416 5 673 722 1 547 575 1 895 886 (4 118 828) (927 988)	11 217 416 5 673 722 1 524 420 1 894 574 (4 195 751) (1 057 238)
	8 646 163 6 641 620	8 546 085 6 511 058

Notes to the financial statements are included on pages 19 to 59.

MONARO MINING NL AND CONTROLLED ENTITIES Statement of recognised income and expense for the financial year ended 30 June 2007

Note	Consolidated	Company
	2007 $ 2006 $	2007 $ 2006 $
18 18 19	21 843 1 312 (370 154) 1 894 574 (280 260) (270 898) - -	- - (370 154) 1 894 574 (280 260) (270 898) - -
	(628 571) 1 624 988	(650 414) 1 623 676
	(3 190 840) (921 337)	(3 138 513) (1 050 587)
	(3 819 411) (703 651)	(3 788 927) (573 089)
		(3 788 927) (573 089) - -
	(3 819 411) (703 651) - -

Notes to the financial statements are included on pages 19 to 59.

MONARO MINING NL AND CONTROLLED ENTITIES Cash flow statement for the financial year ended 30 June 2007

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers Net cash provided by/(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Payments for mineral properties Payments for property, plant, equipment and intangibles Amounts advanced to related parties Other Net cash from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares and other equity securities Repayment of borrowings Payment for share issue costs Net cash provided by financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period	Note	Consolidated Company
		2007 $ 2006 $ 2007 $ 2006 $
	26(b) 26(a)	- - - - (3 151 392) (733 548) (1 357 621) (510 737)
		(3 151 392) (733 548) (1 357 621) (510 737)
		243, 945 103 583 243 945 103 583 (100 000) (10 000) (100 000) (10 000) (199 562) (51 987) (18 570) (12 052) - - (1 874 461) (361 806) 45 675 7 677 45 675 -
		(9 942) 49 273 (1 703 411) (280 275)
		5 105 795 4 077 503 5 105 795 4 077 503 - (77 933) - (77 933) (168 660) (319 678) (168 660) (319 678)
		4 937 135 3 679 892 4 937 135 3 679 892
		1 775 801 2 995 617 1 876 103 2 888 880 3 015 374 21 081 2 909 961 21 081 37 119 (1 324) - -
		4 828 294 3 015 374 4 786 064 2 909 961

Notes to the financial statements are included on pages 19 to 59.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

Note	Contents
1	General information
2	Adoption of new and revised Accounting Standards
3	Significant accounting policies
4	Critical accounting judgements and key sources of estimation uncertainty
5	Business and geographical segments
6	Revenue
7	Loss for the year
8	Income taxes
9	Trade and other receivables
10	Other assets
11	Other financial assets
12	Other intangible assets
13	Property, plant and equipment
14	Mineral properties
15	Trade and other payables
16	Provisions
17	Issued capital
18	Reserves
19	Accumulated losses
20	Earnings per share
21	Commitments for expenditure
22	Contingent liabilities and contingent assets
23	Jointly controlled operations and assets
24	Subsidiaries
25	Acquisition of businesses
26	Notes to the cash flow statement
27	Financial instruments
28	Share-based payments
29	Key management personnel compensation
30	Related party transactions
31	Remuneration of auditors
32	Subsequent events

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

1. General information

Monaro Group Limited is a listed public company, incorporated in Australia and operating in Australia and the Kyrgyz Republic.

Registered office Principal place of business 1[st] Floor Unit 4a 87 Colin Street 20 Somerset Avenue West Perth WA 6005 Narellan NSW 2576

2. Adoption of new and revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Group’s accounting policies.

At the date of authorisation of the financial report, the following Standards and Interpretations were in issue but not yet effective:

AASB 7 ‘Financial Instruments: Disclosures’ and consequential amendments to other accounting standards resulting from its issue. This is effective for annual reporting periods beginning on or after 1 January 2007.
AASB 101 ‘Presentation of Financial Statements’ – revised standard. This is effective for annual reporting periods beginning on or after 1 July 2007
Interpretation 10 ‘Interim Financial Reporting and Impairment’. This is effective for annual reporting periods beginning on or after 1 November 2006.

Limitation of ability to designate financial assets and financial liabilities through profit or loss

The Australian Accounting Standards Board (‘AASB’) released AASB 2005-4 ‘Amendments to Australian Accounting Standards’ in June 2005. AASB 2005-4 amends AASB 139 ‘Financial Instruments: Recognition and Measurement’ by limiting the ability of entities to designate any financial asset or financial liability as ‘at fair value through profit or loss’.

Financial assets that can no longer be designated as ‘at fair value through profit or loss’ are now classified into either loans and receivables, held-to-maturity investments or available-for-sale investments, as appropriate, and measured at amortised cost or at fair value with changes in fair value recognised in equity, according to their classification. Financial liabilities that can no longer be designated as ‘at fair value through profit or loss’ are classified as ‘other’ financial liabilities and measured at amortised cost. Although ordinarily the designation of a financial asset as available-for-sale is made on initial recognition, the transitional provisions of the Standard allow such designation to be made on the date of de-designation .

The changes introduced by AASB 2005-4 are applied by the Group with effect from the beginning of the comparative reporting period presented in this financial report (i.e., with effect from 1 July 2005). This amendment has no effect on the financial statements of the company or Group for the current or prior reporting periods.

Accounting for business combinations involving entities or businesses under common control

The AASB released AASB 2005-6 ‘Amendments to Australian Accounting Standards’ in June 2006. AASB 2005-6 amends AASB 3 ‘Business Combinations’ by removing business combinations involving entities or business under common control from its scope. The effect of the scope amendment is that there is no longer any explicit guidance under Accounting Standards as to how to account for these types of business combinations.

Due to the requirements of AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’ permitting the non-restatement of pre-transition business combinations, the amendment has no effect on the financial statements of the company or Group for the current or prior reporting periods. However, future transactions involving entities under common control will be affected. Details of the entity’s accounting policies in relation to common control transactions are outlined in note 3(t).

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

2. Adoption of new and revised Accounting Standards (continued)

Accounting for rights to reimbursement

The AASB released AASB 2005-5 ‘Amendments to Australian Accounting Standards’ in June 2005. The amendment arose in the context of rights to receive reimbursement subject to Interpretation 5 ‘Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds’ and amends AASB 139 ‘Financial Instruments: Recognition and Measurement’ to exclude rights to reimbursement for expenditure required to settle a present or former provision recognised in accordance with AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’. The effect of the scope amendment is that a contractual right to receive such reimbursement in the form of cash will be accounted for in the same manner as other forms of rights to such reimbursements (i.e., non-cash rights), rather than as an available-for-sale financial asset.

The changes introduced by AASB 2005-5 are applied by the Group with effect from the beginning of the comparative reporting period presented in this financial report (i.e., with effect from 1 July 2005. The amendment has no effect on the financial statements of the company or the Group for the current or prior reporting periods. However, future transactions involving the application of these amendments result in such rights to reimbursements that were previously classified by the Group as available for sale financial assets (measured at fair value with changes in fair value recognised directly in equity) being now accounted for in accordance with the requirements of AASB 137 (measured at the best estimate of expenditure required to settle the obligation with changes in the carrying amount recognised in profit or loss for the period).

3. Significant accounting policies

The following is a summary of the significant accounting policies adopted by the Company and by the Parent Entity and its controlled entities in the preparation of these financial statements. The Company is a listed public company limited by shares, incorporated and domiciled in Australia.

(a)Basis of preparation of Accounts Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) and the Corporations Act 2001. The consolidated financial report of the Group also complies with the IFRS and interpretations adopted by the International Accounting Standards Board. The Company’s financial report does not comply with IFRS as the Company has elected to apply the relief provided to parent entities by AASB 132 ‘Financial Instruments: - Presentation and Disclosure and Presentation’ in respect of certain disclosure requirements.

The financial report has been prepared on the accruals basis and is based in historical cost basis, except for available-for –sale financial assets that have been measured at fair value, The presentation currency used in this financial report is Australian Dollars.

The financial statements were authorised for issue by the Directors on 27 September 2007.

(b) Borrowings

Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the borrowing using the effective interest rate method.

Borrowings are classified as current liabilities unless the Entity has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(c) Borrowing costs

Borrowing costs are expensed.

(d) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes on value, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

Cash flows have been allocated among operating, investing and financing activities which appropriately classify the Entity’s activities.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(e) Derivative financial instruments

The Entity does not presently hold derivatives.

(f) Employee benefits

General

Employee benefit expenses arising in respect of wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave, other leave entitlements and other types of employee benefits are charged to the income statement in the period in which they are incurred. Contributions to superannuation funds are charged to the income statement when due. A superannuation scheme is not maintained on behalf of employees.

Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Share based payments

The Entity has applied the requirements of AASB 1 ‘First-time adoption of Australian Equivalents to International Financial Reporting Standards’ in respect of equity instruments and share based payments.

Shares options granted after 7 November 2002 and vested after 1 January 2005

Equity-settled share-based payments granted after November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed at the date of issue.

For cash settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

(g) Investments and other financial assets

Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a financial asset as such if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Financial assets held for trading purposes are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in profit or loss.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Entity’s management has the positive intention and ability to hold to maturity.

Bills of exchange are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(g) Investments and other financial assets (continued)

Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Purchases and sales of investments are recognised on trade-date – the date on which the Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs.

Securities held by the Entity are classified as being available-for-sale and are stated at fair value less impairment. Realised and unrealised gains and losses arising from changes in fair value are recognised directly in equity in the available-for-sale revaluation reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale revaluation reserve is included in profit or loss for the period.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Entity establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

The Entity assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-forsale financial assets, the cumulative loss –measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loan and receivables are included in receivables in the balance sheet. Trade receivables, loans, and other receivables are recorded at amortised cost less impairment.

(h) Fair value estimation

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

Techniques, such as estimated discounted cash flows, are used to determine fair value for certain financial instruments. The fair value of forward exchange contracts, where applicable, is determined using forward exchange market rates at the balance sheet date.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Entity for similar financial instruments.

(i) Financial instruments issued by the company

Debt and equity instruments

Debt and equity instruments including ordinary shares and options are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments, including new shares and options, are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Interest and dividends

Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments. The Entity does not presently pay dividends.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(j) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each Entity are measured using the currency of the primary economic environment in which the Entity operates (“the functional currency”).

The financial statements are presented in Australian dollars, which is Monaro Mining NL’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Group companies and foreign operations

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.
• Income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings repaid a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign Entity on or after the date of transition to A-IFRS are treated as assets and liabilities of the foreign Entity and translated at exchange rates prevailing at the reporting date.

(k) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

(i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
(ii) for receivables and payables which are recognised inclusive of GST.

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

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

(l) Acquisition of assets and goodwill

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Entity’s share of the identifiable net assets acquired is recorded as goodwill and not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. If the cost of acquisition is less than the fair value of the business combination, the difference is recognised directly in the income statement.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the Entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

MONARO MINING NL AND CONTROLLED ENTITIES

Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(m) Exploration and evaluation costs

Exploration and evaluation costs are accumulated in respect of each “area of interest” or geographical segment in accordance with AASB 6 ‘ Exploration for and Evaluation of Mineral Resources’ and are disclosed as a separate class of assets. Costs are either expensed as incurred or partially or fully capitalised as an exploration and evaluation asset provided exploration titles are current and at least one of the following conditions are satisfied:

(i) the exploration and evaluation expenditures are expected to be recouped through development and exploitation of the area of interest or by future sale; and
(ii) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are classified between tangible and intangible and are assessed for impairment when facts and circumstances suggest the carrying amount may exceed recoverable amount. Impairment losses are recognised in the income statement.

(n) Impairment of assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Impairment losses are recognised in the income statement.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(o) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, and joint ventures except where the Entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(o) Income tax (continued)

Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/ Entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(p) Joint ventures

Jointly controlled assets and operations

Interests in jointly controlled assets and operations are reported in the financial statements by including the Entity’s share of assets employed in the joint ventures, the share of liabilities incurred in relation to the joint ventures and the share of any expenses incurred in relation to the joint ventures in their respective classification categories.

Jointly controlled entities

The interest in a joint venture partnership is accounted for in the financial statements using the equity method and is carried at cost by the parent Entity. Under the equity method, the share of the profits or losses of the partnership is recognised in the income statement, and the share of movements in reserves is recognised in reserves in the balance sheet.

Profits or losses on transactions establishing a joint venture partnership and transactions with the joint venture are eliminated to the extent of the Entity’s ownership interest until such time as they are realised by the joint venture partnership on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred.

(q) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Entity as lessee

Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income in accordance with the Entity’s general policy on borrowing costs. Refer to note 3 (b).

Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Lease incentives

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(r) Non-current assets held for sale

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. The sale of the asset (or disposal group) is expected to be completed within one year from the date of classification.

(s) Payables

Trade payables and other accounts payable are recognised when the Entity becomes obliged to make future payments resulting from the purchase of goods and services. The amounts are unsecured and usually paid within 30 days of recognition.

(t) Principles of consolidation

The financial statements are prepared by combining the financial statements of all the entities that comprise the Entity, being the company (the parent Entity) and its subsidiaries as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Monaro Mining NL (“company” or “parent Entity”) as at the reporting date and the results of all the subsidiaries for the year then ended. Monaro Mining NL and its subsidiaries together are referred to as the Group or the consolidated Entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another Entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries which are business combinations by the Group (refer to note 3 (l)).

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

(u) Property, plant and equipment

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

All tangible assets have limited useful lives and are depreciated/amortised using the diminishing balance method over their estimated useful lives, taking into account estimated residual values, with the exception of carried forward development expenditure in the production phase which is amortised on a units of production method based on the ratio of actual production to remaining proved reserves as estimated by independent experts, and finance lease assets which are amortised over the term of the relevant lease, or where it is likely the Entity will obtain ownership of the asset, the life of the asset.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(u) Property, plant and equipment (continued)

Depreciation is calculated on the diminishing balance method as follows:

- Motor vehicles	22.5%
- Computer hardware	40%
- Computer software	40%
- Website development	40%
- Office Furniture and Equipment	20%
- Telephones	30%
- Field Equipment	30%

The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period and adjusted if appropriate.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is Entity policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(v) Share based payments

Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed at the date of issue.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

(w) Provisions

Provisions are recognised when the Entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

An onerous contract is considered to exist where the Entity has a contract under which the unavoidable cost of meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligation exceeds the economic benefits estimated to be received.

The Entity recognises any obligations for removal and restoration that are incurred during a particular period as a consequence of having undertaken exploration and evaluation activity. Restoration and abandonment obligations are reviewed annually taking into account estimates by independent consultants.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

3. Significant accounting policies (continued)

(x) Revenue recognition

Sale of mineral products .

Revenue from the sale of minerals is recognised when the Entity has transferred to the buyer the significant risks and rewards of ownership and can be measured reliably.

Dividend and interest revenue

Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(y) Segment reporting

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

(z) Trade receivables

Trade receivables are recognised initially at fair value. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for doubtful receivables is established when there is objective evidence that the Entity will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The movement of the allowance is recognised in the income statement.

(aa) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

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 dilutive potential ordinary shares.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policies

The following are the critical judgements including those involving estimations, that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

(i) Mine rehabilitation

The Consolidated Entity recognises any obligations for removal and restoration that are incurred during a particular period as a consequence of having undertaken exploration and evaluation activity. Future restoration and abandonment obligations are reviewed annually taking into account estimates by independent mine engineers. Presently the Consolidated Entity does not have any large scale production facilities that would have a material impact in relation to future restoration costs and accordingly there are no provisions for future restoration costs. This position is likely to change should the entity embark on a more substantial development project.

(ii) Share-based payments

The Group is required to use assumptions in respect of the fair value models, and the variable elements in these models, used in determining the share based payments.

(iii) Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to the environmental restoration obligations) and changes to commodity prices.

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

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made.

(iv) Provision for intercompany receivables

Monaro Mining NL provides loans to its subsidiaries in order for them to fund their exploration activities. In assessing the recoverability of these intercompany receivables, management has determined that the ability of the subsidiaries to repay these loans is dependent on the success of the exploration activities. Given the inherently high risk nature of mineral exploration, there is no certainty that sufficient income will be generated by these projects to repay the amounts due to the parent company. As a result, all intercompany receivables have been provided for in full at balance date.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements 30 June 2007

5. Business and geographical segments

During the year the Consolidated Entity operated predominantly in one business segment that consisted of mineral exploration. Geographically, the group operates in Australia and Kyrgyz. Offices are maintained in Australia and in Kyrgyz where operations comprise the operations of Zona Noblus. Segment accounting policies are the same as the Consolidated Entity’s policies described in Note 3. Segment results are classified in accordance with their use within geographic segments regardless of legal Entity ownership.

2007	Australia $	Kyrgyz $	Total $
Revenue Other revenue Total of all segments Eliminations Unallocated Consolidated Segment Assets Eliminations Consolidated Segment Liabilities Eliminations Consolidated Other Segment Information Acquisition of segment assets Impairment losses	249 535	-
			249 535
	249 535	-	249 535
			0
			50 000
			299 535

	8 641 041 98 847 122 894 -	215 307 2 215 670 180992 -	8 856 348
			2 433
			8 858 781

			2 314 517
			(2 101 899)
			212 618

			303 886
			-
Depreciation and amortization of segment assets	3 200	28 283	31 483
Significant other non cash expenses	-	-	-
Significant revenues or expenses	-	-	-

2006	Australia $	Kyrgyz $	Total $
Revenue Other revenue Total of all segments Eliminations Unallocated Consolidated Segment Assets Eliminations Consolidated Segment Liabilities Eliminations Consolidated Other Segment Information Acquisition of segment assets Impairment losses	109 931	-
			109 931
	109 931	-	109 931
			-
			2 356
			112 287

	6 625 906 117 044 3 661 136 -	144 793 393 749 39016 -	6 770 699
			948
			6 771 647

			510 793
			(380 766)
			130 027

			3 700 152
			-
Depreciation and amortization of segment assets	3 246	3 282	6 528
Significant other non cash expenses Significant revenues or expenses	- -	- -	-
			-

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

6. Revenue

An analysis of the Group’s revenue for the year, from both continuing and discontinued operations, is as follows:

Other Income: Interest revenue: Bank deposits Other Attributable to: Continuing operations Discontinued operations	Consolidated 2007 $ 2006 $	Company
		2007 $ 2006 $
		249 535 109 931

	249 535 109 931
		50 000 -
	50 000 2 356
	299 535 112 287	299 535 109 931
	299 535 112 287 - - 299 535 112 287	299 535 109 931 - -
		299 535 109 931

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

7. Loss for the year

(a) Losses

Loss for the year has been arrived at after crediting/(charging) the following gains and losses:

Net foreign exchange gains/(losses)	Consolidated 2007 $ 2006 $ (5 240) (541)	Company
		2007 $ 2006 $
		(151 988) -
	(5 240) (541)	(151 988) -

(b) Other expenses

Loss for the year includes the following expenses:

Impairment of non-current assets: Exploration costs expensed Depreciation of non-current assets Amortisation of intangible assets Share-based payments: Equity-settled share-based payments (consultants) Employee benefit expense: Post employment benefits: - Defined contribution plans Other employee benefits Share-based payments: Equity-settled share-based payments	Consolidated 2007 $ 2006 $ (1 890 513) (253 198) (27 173) (6 528) (4 310) - (31 483) (6 528) (236 405) - (13 334) (13 275) - (7652) (13 334) (20927) - (192 080)	Company
		2007 $ 2006 $
		(518 448) (233 544)
		(3 081) (3 246) (119) -
		(3 200) (3 246)
		(236 405) -
		(13 334) (13 275) - -
		(13 334) (13 275)
		- (192 080)

	(13 334) (213 007)	(13 334) (205 355)

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

8. Income Taxes

(a) Income tax recognised in profit or loss Tax expense/(income) comprises: Current tax expense/(income) Deferred tax expense/(income) Total tax expense/(income) The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: Loss from ordinary activities before income tax expense Prima facie tax payable on profit (loss) from ordinary activities ** Foreign tax rate differential Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible expenses Capital raising costs Movement in capitalised exploration expenditure Provisions Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax	Consolidated	Company
	2007 $ 2006 $	2007 $ 2006 $
	- - - -	- - - -
	- -	- -
	(3 190 840) (921 337) (957 252) (276 401) 192 849 - 94 147 58 029 (47 302) - (30 000) - 2 781 - 744 777 218 372	(3 138 513) (1 050 587) (941 554) (315 176) - - 94 147 58 029 (47 302) - (30 000) - 565 827 - 358 882 257 147
	- -	- -

**The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. Adjustment has been made for the impact of the Kyrgyz income tax rate which is 20% for the purpose of this disclosure note with respect to the operations of the Consolidated Entity .

(b) Income tax recognised directly in equity

There were no current and deferred amounts charged directly to equity during the period:

(c) Deferred Tax Assets

Capital raising costs Provisions Carry forward tax losses Total	Consolidated Company 2007 2006 2007 2006 162 722 105 948 162 722 105 948 7 731 4 950 677 053 111 290 946 295 201 518 510 185 151 303 1 116 748 312 416 1 349 960 368 541

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

8. Income Taxes (continued)

(d) Deferred Tax Liabilities (at 30%)

(d) Deferred Tax Liabilities (at 30%)
Capitalised exploration costs Other Total	Consolidated Company 2007 2006 2007 2006 30 000 - 30 000 - 3 581 1904 3 581 1904
	33 581 1 904 3 581 1 904

The above deferred tax assets and liabilities have not been brought to account as assets and liabilities.

The carried forward tax losses used in the determination of the deferred tax asset calculation are as follows:

Tax losses in Australia (net) Tax losses in the Kyrgyz Republic (net) Total	Consolidated Company 2007 2006 2007 2006 (1 701 712) (504 785) (1 700 618) (504 344) (2 178 905) (250 413) - - (3 880 617) (755 198) (1 700 618) (504 344)

For the purposes of determining deferred tax asset calculations the tax rate used for the Australian parent and subsidiary is 30%. The corporate tax rate for the Kyrgyz Republic is 20%.

Tax consolidation

Relevance of tax consolidation to the Consolidated Entity

The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2006 and are therefore taxed as a single entity from that date. The head Entity within the tax-Consolidated Group is Monaro Mining NL. The members of the tax-consolidated group are identified at note 24.

9. Trade and other receivables

	Consolidated Company
Other receivables Total	2007 $ 2006 $ 2007 $ 2006 $ 31 930 18 995 31 930 18 995 31 930 18 995 31 930 18 995

10. Other assets

Prepayments

Consolidated	Consolidated
2007	2006	2007	2006
$	$	$	$
15 816	3 633	15 770	-

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

11. Other financial assets

Investments carried at cost: Non-current Investments in subsidiaries Non-current Loans to subsidiaries Allowance for doubtful debts Security Deposits with the NSW Government Other Disclosed in the financial statements as: Non-current other financial assets 12. Intangible assets Computer software Provision for depreciation	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
	- - 3 627 194 3 627 194
	- - 2,092,442 369 968 - - (2,092,442) (369 968) 50 000 50 000 50 000 50 000 4 324 - 4 324 -
	54 324 50 000 54 324 50 000
	54 324 50 000 3 681 518 3 677 194
	54 324 50,000 3 681 518 3,677,194
	54 324 50,000 3 681 518 3,677,194
	16 808 - 6 035 - (4310) - (119) -
	12 498 - 5 916 -

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

13. Property, Plant and Equipment

	Consolidated	Consolidated		Monaro Mining NL	Monaro Mining NL	Monaro Mining NL
	Plant and Equipment	Equipment under finance lease	TOTAL	Plant and Equipment	Equipment under finance lease	TOTAL
Gross Carrying Amount Balance at 1 July 2005 Additions Disposals Impairment Net foreign currency exchange differences Balance at 1 July 2006 Additions Disposals/write off Impairment Net foreign currency exchange differences Balance at 30 June 2007 Accumulated Depreciation /amortisation and impairment Balance at 1 July 2005 Disposals Impairment Depreciation expense Net foreign currency exchange differences Balance at 1 July 2006 Disposals Impairment Depreciation expense Net foreign currency exchange differences Balance at 30 June 2007 NET BOOK VALUE 30 June 2006 30 June 2007	$ $ - - 51 372 - - - (50) - (254) -		$ $ $ - - - 51 372 12 052 - - - - (50) - - (254) - -			$
						-
						12 052
						-
						-
						-
	51 068 - 182 754 - (12 860) - (17 420) -		51 068 12 052 -			12 052
			182 754 12 535 - (12 860) (12 052) - (17 420) - -			12 535
						(12 052)

						-
	203 542 -		203 542 12 535 -			12 535
	- - - - - - 6 528 - (21) -
			- - - - - - - - - 6 528 3 246 - (21) - -
						-
						-
						-
						3 246
						-
	6 507 - (4 829) - - - 27 173 (2 144) -		6 507 3 246 - (4 829) (4 167) - - - - 27 173 3 080 (2 144) - -			3 246
						(4 167)
						-
						3 080
						-
	26 707 -		26 707 2 159 -			2 159
	44 561 -		44 561 8 806 -

						8 806
	176 835 -		176 835 10 376 -			10 376

Aggregate depreciation allocated, whether recognised as an expense, or capitalised as part of the carrying amount of other assets during the year.

	Consolidated	Company
Plant and equipment	2007 $ 2006 $ 2007 $ 2006 $
	27 173 6 528 3 080 3 246

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

14. Mineral Properties

14. Mineral Properties
	Consolidated	Company
Non-producing properties Exploration and evaluation expenditure: Intangible Balance at 1 July 2006 Additions Impairment losses Net foreign currency exchange differences Balance at 30 June 2007	2007 $ 2006 $	2007 $ 2006 $
	3 639 084 - 100 000 3 639 084 - - - -	- 100 000 - - - - -
	3 739 084 3 639 084	100 000 -

(a) The ultimate recoupment of balances carried forward in relation to areas of interest still in the exploration or valuation phase is dependant on successful development, and commercial exploitation, or alternatively sale of the respective areas.

15. Trade and other payables

	Consolidated	Company
Trade payables Other (accruals)	2007 $ 2006 $ 2007 $ 2006 $ 166 594 75 980 54 686 75 980 39 716 54 047 28 099 27 918 206 310 130 027 82 785 103 898

16. Provisions

Current Employee benefits	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
	6 308 - 2 704 -
	6 308 - 2 704 -

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

17. Issued capital

24,954,929 fully paid ordinary shares (2006: 19,700,100) 5,200,000 partly paid ordinary shares (2006: 5,200,000) Share issue expenses	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
	11 763 374 5 939 420 11 763 374 5 939 420 5 200 5 200 5 200 5 200 (551 158) (270 898) (551 158) (270 898)
	11 217 416 5 673 722 11 217 416 5 673 722

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.

Fully paid ordinary shares Balance at beginning of financial year Transfer from option reserve account Shares allotted during the year Share issue costs Ordinary fully paid shares at end of year	Consolidated and Company
	2007 Number 2007 $ 2006 Number 2006 $
	19 700 100 5 668 522 100 20 - 718 159 - 323 400 5 254 829 5 105 795 19 700 000 5 616 000 - (280 260) - (270 898)
	24 954 929 11 212 216 19 700 100 5 668 522

Fully paid ordinary shares carry one vote per share and carry the right to dividends. Partly paid ordinary shares entitle the holder to vote, participate in dividends and proceeds on a winding up in proportion to the number of and amounts paid on the shares held.

Partly paid ordinary shares Balance at beginning of financial year Movements Balance at end of financial year	Consolidated Company
	2007 Number 2007 $ 2006 Number 2006 $
	5 200 000 5 200 5 200 000 5 200 - - - -
	5 200 000 5 200 5 200 000 5 200

Partly paid ordinary shares carry one vote per share and carry the right to dividends. These shares are paid to 0.1 cents each. The balance of 19.9 cents payable on each of these shares has been called and is payable on or before 31 May 2010.

MONARO MINING NL AND CONTROLLED ENTITIES

Notes to the financial statements

30 June 2007

17. Issued capital (continued)

Share Issues

The following share and option placements were issued during the financial year to raise working capital for the Company:

a) During the period 1,800,000 unlisted options were converted to ordinary shares at an exercise price of 40 cents each raising $720,000.
b) On 10 November 2006 an option holder converted 600,000 June 2007 options into ordinary shares by payment of 60 cents each raising $360,000
c) On 18 December 2006, the Company allotted 2 million ordinary shares at an issue price of $1.50 raising $3,000,000 before costs. Costs associated with the capital raising amounted to $273,476. Of these costs $111,600 was satisfied by the allotment of 200,000 Options which expire on 31 December 2008 and are exercisable into ordinary shares by payment of $1.75 each. These Options have been valued using the Binomial Tree Option Calculator with regard to an in accordance with ASIC guidance.
d) During the period 854,829 listed options were converted to ordinary shares at an exercise price of $1.20 each raising $1,025,794.

Share options granted under the employee share option plan

In accordance with the provisions of the employee share option plan, approved by shareholders at a General Meeting held on 11 January 2006, at balance date, executives and senior employees had options over 350,000 ordinary shares, in aggregate, exercisable at $1.07 expiring on 19 April 2011.

Share options granted under the employee share option plan carry no rights to dividends and no voting rights. Further details of the employee share option plan are contained in note 29 to the financial statements.

Other share options on issue

At balance date the Company had the following options available to be exercised:
4 170 196 listed options to subscribe for ordinary shares at $1.20 on or before 31 July 2007.
1 800 000 unlisted options to subscribe for ordinary shares at 60 cents on or before 31 December 2008.
750 000 unlisted options to subscribe for ordinary shares at $1.75 on or before 31 December 2008.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

18. Reserves

18. Reserves
Summary	Consolidated	Company
Option reserve – listed Option reserve – unlisted Employee equity-settled benefits Total Option reserve Foreign currency translation	2007 $ 2006 $ 2007 $ 2006 $
	339 335 408 894 339 335 408 894 993 005 1 293 600 993 005 1 293 600 192 080 192 080 192 080 192 080
	1 524 420 1 894 574 1 524 420 1 894 574 23 155 1 312 - -
	1 547 575 1 895 886 1 524 420 1 894 574

	Consolidated	Company
(i) Option reserve – listed - opening balance - options allotted - options converted - balance at end of year (ii) Option reserve – unlisted - opening balance - options allotted - options converted - balance at end of year (iii) Employee equity-settled benefits reserve - balance at beginning of financial year - share-based payment - transfer to share capital - balance at end of financial year	2007 $ 2006 $ 2007 $ 2006 $
	408 894 - 408 894 - - 502 502 - 502 502 (69 559) (93 608) (69 559) (93 608)
	339 335 408 894 339 335 408 894

	1 293 600 - 1 293 600 - 348 005 1 617 000 348 005 1 617 000 (648 600) (323 400) (648 600) (323 400)
	993 005 1 293 600 993 005 1 293 600

	192 080 - 192 080 - - 192 080 - 192 080 - -
	192 080 192 080 192 080 192 080

The employee equity-settled benefits reserve arises on the grant of share options to executives under the executive share option plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information about share-based payments to employees is made in note 28 to the financial statements.

(iv) Foreign currency translation reserve - balance at beginning of year - deficit on translation of overseas controlled entity	1 312 - - - 21 843 1 312 - -
	23 155 1 312 - -

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

18. Reserves (continued)

a) On 18 December 2006, the Company allotted 500,000 Options to a consultant for financial public relations services. The Options expire on 31 December 2008 and are exercisable into ordinary shares by payment of $1.75 each. These Options have been valued at $189,000 using the Binomial Tree Option Calculator with regard to an in accordance with ASIC guidance.
b) On 18 December 2006, the Company allotted 200,000 Options to a consultant to partly satisfy consulting service costs associated with the capital raising of $3,000,000. The Options expire on 31 December 2008 and are exercisable into ordinary shares by payment of $1.75 each. These Options have been valued at $111,600 using the Binomial Tree Option Calculator with regard to an in accordance with ASIC guidance
c) On 2 March 2007, the Company allotted 50,000 options to a consultant for marketing and promotional services. The Options expire on 31 December 2008 and are exercisable into ordinary shares by payment of $1.75 each. These options were valued at approximately $47,405 using the Binomial Tree Option Calculator with regard to an in accordance with ASIC guidance.

19. Accumulated losses

19. Accumulated losses
	Consolidated	Company
Balance at beginning of financial year Loss attributable to members of the Parent entity Balance at end of financial year	2007 $ 2006 $ 2007 $ 2006 $
	(927 988) (6 651) (1 057 238) (6 651) (3 190 840) (921 337) (3 138 513) (1 050 587)
	(4 118 828) (927 988) (4 195 751) (1 057 238)

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

20. Earnings Per Share

Basic earnings per share (loss) Diluted earnings per share (loss) Basic Earnings per Share The earnings and weighted average number of ordinary shares used in the calculation of the basic earnings per share are as follows: Earnings (a) Weighted average number of ordinary shares for the purposes of basic earnings per share (b) (a) Earnings used in the calculation of basic earnings per share is net profit (loss) from ordinary activities after related income tax expense (b)The employee options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share (refer below) Diluted Earnings per Share The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows: Earnings (a) Weighted average number of ordinary shares for the purposes of diluted earnings per share (b) and (c) (a) Earnings used in the calculation of basic earnings per share reconciles to net profit(loss) in the income statement as follows: Net profit (loss) after related income tax expense	2007 2006
	Centsper share Centsper share
	(11.7) (4.8) (11.7) (4.8) 27 262 109 19 003 388
	2007 2006
	$ $
	(3 190 840) (921 337)

	Number Number
	27 262 109 19 003 388

	$ $
	(3 190 840) (921 337) (3,190,840) (921 337)

	Number Number
	27 262 109 19 003 388

	$ $
	(3 190 840) (921 337)

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

20. Earnings Per Share (continued)

20. Earnings Per Share (continued)
(b)The weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares used in the calculation of basic EPS Weighted average number of ordinary shares and potential ordinary shares used in the calculation of the diluted EPS The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares and potential ordinary share used in the calculation of diluted EPS $1.20 July 2007 listed options (MROO) $0.40 June 2007 unlisted options $0.60 Dec 2008 unlisted options $1.75 Dec 2008 unlisted options $1.07 Apr 2011 unlisted options	2007 2006 Number Number
	27 262 109 19 003 388 27 262 109 19 003 388 4 170 196 5 025 025 - 2 400 000 1 800 000 2 400 000 750 000 - 350 000 350 000

20.
Earnings Per Share (continued)

(b)The weighted average number of ordinary shares and
potential ordinary shares used in the calculation of diluted
earnings per share reconciles to the weighted average
number of ordinary shares used in the calculation of basic
earnings per share as follows:
Weighted average number of ordinary shares used in the
calculation of basic EPS
Weighted average number of ordinary shares and potential
ordinary shares used in the calculation of the diluted EPS
The following potential ordinary shares are not dilutive
and are therefore excluded from the weighted average
number of ordinary shares and potential ordinary share
used in the calculation of diluted EPS
$1.20 July 2007 listed options (MROO)
$0.40 June 2007 unlisted options
$0.60 Dec 2008 unlisted options
$1.75 Dec 2008 unlisted options
$1.07 Apr 2011 unlisted options

2007
2006
Number
Number

27 262 109
19 003 388
27 262 109
19 003 388
4 170 196
5 025 025
-
2 400 000
1 800 000
2 400 000
750 000
-
350 000
350 000

21. Commitments for expenditure

Mineral Properties Not longer than 1 year Longer than 1 year and not longer than 5 years	Consolidated	Company
	2007 $ 2006 $ 2007 $ 2006 $
	2 302 740 620 781 512 300 314 027 4 448 730 723 132 3 563 611 723 132
	6 751 470 1 343 913 4 075 911 1 037 159

The exploration commitments reflect the minimum expenditure to meet the conditions under which the properties are granted or such greater amounts that have been contractually committed. These commitments may vary from time to time, subject to approval by the grantor of titles or by variation of contractual agreements. The expenditure represents potential expenditure which may be reduced by entering into sale, joint venture or relinquishment of the interests and may vary depending upon the results of exploration. Should expenditure not reach the required level in respect of each area of interest, the Consolidated Entity's interest could be either reduced or forfeited.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

22. Contingent liabilities and contingent assets

		Consolidated	Company
		2007 $ 2006 $	2007 $ 2006 $
Contingent liabilities Contingent assets		32,300 32 300 32, 300 32 300 - - - -

Details of service contracts with executives are set out in Note 29(d). In the event that service contracts are terminated early then the Company may become liable for payments in lieu of notice. In relation to the McRobbie contract this comprises 2 months or approximately $32,300. In the case of the Rampe contract this amount is not presently quantifiable. There are no other contingent liabilities arising from service contracts with executives.

Pursuant to an Agreement to acquire uranium and gold exploration licences in the Kyrgyz Republic settled on 30 January 2006 a further 2,000,000 fully paid ordinary shares will be issued upon the grant of a mining licence and all mining, environmental and export approvals for a uranium mining operation on one of the projects. The Company applied for and was granted a waiver from Listing Rule 7.3.2 as the shares would not be issued within three months of the General Meeting of Shareholders but will be issued no later than 36 months after the date of the meeting.

Pursuant to an Exploration Heads of Agreement dated 20 September 2006 between Monaro Mining NL and Hapsburg Exploration Pty Ltd (“Hapsburg”), Hapsburg undertook to apply for a number of exploration licences under permits in various states of Australia prospective for uranium, gold and base metals. On successful grant of all of the applications, Monaro will issue fully paid shares in Monaro to the value of AUD 100,000 and 500,000 share purchase options in Monaro at an exercise price of AUD 1.20 with a term of four years.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements 30 June 2007

23. Interests in Joint Venture Operations

The Consolidated Entity has an interest in the following material joint venture operations whose principal activities are mineral exploration and development.

Name of venture	Notes	Principal activity
Australia Hapsburg Exploration Pty Ltd i) Exploration – uranium, gold, base metals. Ironbark Gold Limited ii) Exploration – base metals, gold. Noah Resources NL iii) Exploration – molybdenum, tin, tungsten.

Notes

i) Hapsburg Exploration Pty Ltd

Under the terms of the joint venture agreement, Monaro shall fund 100% of the expenditure on exploration on granted exploration licenses to a minimum of AUD 1.5 million over a two year period. At the completion of the minimum expenditure the respective interests of the parties will be Monaro 35% and Hapsburg 65%. Monaro has the right to further increase its interest in the joint venture:

to 51% by the definition of an inferred mineral resource totaling 5000 tonnes of contained U308, and
to 75% by the completion of a Feasibility Study on any one of the licence areas.
It is the intention of the parties that Monaro shall sole-fund the joint venture up to Monaro having earned a 75% interest in any one project.

ii) Ironbark Gold Limited (“Ironbark”)

On 18 August 2006, the Company announced an agreement had been entered into with Ironbark Gold Limited (Ironbark) over the Captains Flat Exploration Licence whereby Ironbark is entitled to earn up to a 75 percent interest by meeting certain obligations including expenditure obligations to keep the licence in good standing for at least two years. Under the agreement Ironbark paid the company a non-refundable deposit of $50,000.

iii) Noah Resources NL (“Noah”)

The Company and Noah Resources NL have signed a Heads of Agreement covering the Company’s molybdenum, tin and tungsten projects located in southern NSW. Under the terms of the Agreement, Noah will expend up to $400,000 over 2 years to earn a 70% interest in both projects.

The Consolidated Entity’s has contributed to the above joint venture operations as detailed below. The amounts are included in the consolidated financial statements under their respective asset categories:

Non-current assets Property, plant and equipment Mineral prospects Total non-current assets	Consolidated
	2007 $’000 2006 $’000
	100 000 -
	100 000 -

Contingent liabilities and capital commitments

Contingent liabilities and capital commitments arising from the Group’s interests in joint ventures are disclosed in notes 22 and 21 respectively.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements 30 June 2007

24. Subsidiaries

Name of Entity	*Country* of *incorporation*	*Ownership interest*	*Ownership interest*
		*2007* %	*2006* %
Parent Entity
Monaro Mining NL (i)	Australia
Subsidiaries
Carbeck Pty Ltd	Australia 100 100
Zona Noblus LLC	Kyrgyz 100 100
Ou Balti Kaevandusedja Uuringud	Estonia 100 -

(i) Monaro Mining NL is the Head Entity within the tax Consolidated Group that includes Carbeck Pty Ltd.

The income statement and balance sheet of subsidiary, Carbeck Pty Ltd, as at date of acquisition.

Carbeck Pty Ltd
General and administrative Other (Loss) before income tax Income tax expense (Loss) from continuing operations (Loss) for the period (Loss) attributable to members CURRENT ASSETS Cash and cash equivalents Total Current Assets NON CURRENT ASSETS Receivables Other Non Current Assets Total Non-Current Assets TOTAL ASSETS NON CURRENT LIABILITIES Payables Total Non Current Liabilities TOTAL LIABILITIES NET ASSETS/(LIABILITIES) EQUITY Contributed equity Accumulated losses TOTAL EQUITY	2006 $
	-
	-

	-

	-
	-

	-
	-

	8
	8

	10 940
	2
	10 942

	10 950
	13 146
	13 146
	13 146
	(2 196)

	10
	(2 206)
	(2 196)

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

25. Acquisition of business

2006 Name of business acquired			*Proportion of*	*Cost of acquisition* $


	*Principal*	*Date of*	*shares acquired*
	*activity*	*acquisition*	*(%)*
Carbeck Pty Ltd	Mineral Exploration	30 January 2006	100	$3 633 000

The cost of acquisition of all of the Carbeck Shares, Carbeck Options and Loans comprised:-

3,500,000 fully paid ordinary Monaro shares at a deemed value of 57.6 cents per share. Total amount of $2,016,000.
A further 2,000,000 fully paid ordinary Monaro shares will be issued upon the grant of a mining licence and all mining, environmental and export approvals for a uranium mining operation on one of the projects (as disclosed in Note 22).
3,000,000 unlisted Monaro options at a deemed value of 26.8 cents each convertible to shares on payment of 60 cents each on or before 31 December 2008. Total amount of $804,000.
3,000,000 unlisted Monaro options at a deemed value of 27.1 cents each convertible to shares on payment of 40 cents each on or before 30 June 2007. Total amount of $813,000.

The consolidated entity has paid a premium for the acquiree as it believes the acquisition will introduce additional synergies to its existing operations.

	Carbeck Pty Ltd
Net asset acquired	Book value $ Fair value adjustment $ Fair value on acquisition $
CURRENT ASSETS Cash and cash equivalents Total current assets NON-CURRENT ASSETS Receivables Other non-current assets Total non-current assets TOTAL ASSETS NON-CURRENT LIABILITIES Payables Total non-current liabilities TOTAL LIABILITIES NET ASSETS/(LIABILITIES) EQUITY Contributed equity Accumulated losses TOTAL EQUITY	8 - 8
	8 - 8
	10 940 - 10 940 2 - 2
	10 942 - 10 942
	10 950 - 10 950
	13 146 - 13 146
	13 146 - 13 146
	13 146 - 13 146
	(2 196) - (2 196)

	10 - 10 (2 206) - (2 206)
	(2 196) - (2 196)

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

26. Notes to the cash flow statement

(a) Reconciliation of cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows: Cash and cash equivalents (b)Reconciliation of profit (loss) for the period to net cash flows from operating activities Profit/(loss) for the period (Gain) on sale or disposal of non-current assets Depreciation and amortisation of non-current assets Foreign exchange (gain)/loss – net Foreign exchange (gain)/loss on working capital Equity settled share-based payment Interest income received Write down of intercompany receivable Expenditure not capitalised Asset write down Amounts set aside for provision Other revenue Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets: Current receivables Other current assets Increase/(decrease) in liabilities: Current payables Net cash from operating activities	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $

	4 828 294 3 015 374 4 786 064 2 909 961
	(3 190 840) (921 337) (3 138 513) (1 050 587) 31 483 6 528 3 200 3 246 - (6 581) 151 988 - - (3 646) - - 236 405 192 080 236 405 192 080 (243 945) (103 583) (243 945) (103 583) - - 1 722 474 367 612 - - - - 8 031 - 7 885 - 6 308 - 2 704 - (50 000) - (50 000) - (12 936) (18 995) (12 936) (18 995) (12 183) (3 633) (15 770) - 76 285 125 619 (21 113) 99 490
	(3 151 392) (733 548) (1 357 621) (510 737)

(c) Non-cash financing and investing activities

During the financial year, the Consolidated Entity paid for consulting services by way of equity instruments of the Company. As disclosed in note 18, a total of 750,000 options were issued to consultants for services rendered at an aggregate deemed value of $348,005. This expense is not reflected in the cash flow statement.

(d) Cash balances not available for use

There are no restrictions on cash balances at the reporting date

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

27. Financial Instruments

(a) Financial risk management objectives The Consolidated Entity’s management provides services to the business, co-ordinates access to domestic and international financial markets, and manages the financial risks relating to the operations of the Consolidated Entity.

The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by the Consolidated Entity’s policies approved by the Board of Directors.

The Consolidated Entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Consolidated Entity does not presently enter into derivative financial instruments to manage its exposure to interest rate and foreign currency risk.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

(c) Foreign currency risk management

The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters which may include forward foreign exchange contracts against specific obligations denominated in foreign currency.

(d) Forward Exchange Contracts

The Consolidated Entity may enter into forward foreign exchange contracts to cover specific foreign currency payments from time to time relating to specific drilling obligations that are denominated in US dollars. There were no forward foreign currency contracts outstanding at the reporting date.

(e) Interest rate risk management

The Consolidated Entity is exposed to interest rate risk as it borrows funds at floating interest rates.

(f) Maturity profile of financial instruments

The following table details the Consolidated Entity’s exposure to interest rate risk as at 30 June 2007:

2007	Original Currency	Weighted average effective interest rate	Variable interest rate	Fixed Maturity dates	Fixed Maturity dates	Fixed Maturity dates	Non interest bearing	Total

				Less than 1 year	1-2 years	2-3 years
		%	$	$	$	$	$	$
Financial assets: Cash and cash equivalents Cash and cash equivalents Trade receivables Other financial assets Financial liabilities: Trade payables Accruals	AUD USD		4 786 064 42 230
		6.21						4 786 064
								42 230
			4 828 294					4 828 294
						31 930 54 324		31 930
								54 324
			4 828 294			86 254		4 914 548

						166 594 39 716		166 594
								39 716
						206 310		206 310

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

27. Financial instruments (continued)

The following table details the Consolidated Entity’s exposure to interest rate risk as at 30 June 2006:

2006	Original Currency	Weighted average effective interest rate	Variable interest rate	Maturity dates	Maturity dates	Maturity dates	Non interest bearing	Total
				Less	1-5 years	More than 5 years
				than 1
				year
		%	$	$	$	$	$	$
Financial assets: Cash and cash equivalents Cash and cash equivalents Trade receivables Other financial assets Financial liabilities: Trade payables Accruals	AUD USD		2 909 969 - - - - 2 909 969 105 405 - - - - 105 405
		5.75

			3 015 374 - - - - 3 015 374 - - - - 18 995 18 995 - - - - 53 633 53 633


			3 015 374 - - - 72 628 3 088 002
			- - - - 75 980 75 980 - - - - 54 047 54 047


			- - - - 130 027 130 027

(g) Credit risk management

The Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Consolidated Entity’s maximum exposure to credit risk.

(h) Fair value of financial instruments

The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values (2006: net fair value).

(i) Liquidity risk management

The Consolidated Entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

28. Share based payments

Employee share option plan

An Incentive Option Scheme was approved by shareholders at a General Meeting held on 11 January 2006 pursuant to which, certain share options have been granted to executives. Each option converts into one ordinary share of the Company on exercise. No amounts have been paid or are payable by the recipient upon receipt of the options. The options neither carry rights to dividends nor voting rights. Options may be exercised on expiry of six months from the date the Option is granted and ending on its Expiry Date except to the extent that any terms and conditions imposed in relation to any Options granted by the Board at or prior to the time of grant state otherwise.

The following share-based payment arrangements were in existence during the current and comparative reporting periods:

Options series	Number	Grant date	Expiry date	Exercise price $	Fair value at grant date $
Issued 19 April 2006 350 000 19 April 2006 19 April 2011 $1.07 $192 080

(*) In accordance with the terms of the share-based arrangement, options issued during the financial year ended 30 June 2006 and on 19 April 2006 vest at the date of their issue.

The 2006 option valuation model assumed an option life of five years, volatility of 67% and interest risk free rate of 5.75% discounted by 20% as the securities are not listed.

No incentive options were granted during the previous financial year.

The following reconciles the outstanding share options granted under the employee share option plan at the beginning and end of the financial year:

Balance at beginning of the financial year Granted during the financial year Forfeited during the financial year Exercised during the financial year (i) Expired during the financial year Balance at end of the financial year (ii) Exercisable at end of the financial year	2007 2006
	Number of options Weighted average exercise price $ Number of options Weighted average exercise price $
	350 000 1.07 - - - - 350 000 1.07 - - - - - - - - - - - -
	350 000 1.07 350 000 1.07
	350 000 1.07 350 000 1.07

(i) Exercised during the financial year

There were no incentive options exercised during the 2007 or 2006 financial year by executives or Directors.

(ii) Balance at end of the financial year

The share options outstanding at the end of the financial year had an exercise price of $1.07 (2006: $1.07), and a weighted average remaining contractual life of 1,389 days (2006:1,754 days).

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

28. Share based payments (continued)

Other share options on issue

The following share-based payment arrangements were in existence during the current and comparative reporting periods:

Options series	Number	Grant date	Expiry date
Issued 18 December 2006 Issued 18 December 2006 Issued 02 March 2007	500 000 18 Dec 2006 18 Dec 2008 $1.75 $189 000 200 000 18 Dec 2006 18 Dec 2008 $1.75 $111 600 50 000 02 Mar 2007 31 Dec 2008 $1.75 $47 405 Option series Option series Option series 18 Dec 2006 18 Dec 2006 02 Mar 2007 $1.75 $1.75 $1.75 60.0% 60.0% 60.0% 791 days 755 days 684 days - - - 6.0% 6.0% 6.12%
Inputs into the model
	Option series	Option series	Option series
Grant date share price Exercise price Expected volatility Option life Dividend yield Risk-free interest rate

The following reconciles other outstanding share options granted at the beginning and end of the financial year:

	2007
		Weighted		Weighted
		average		average
		exercise		exercise
	Number of	price	Number of	price
	options	$	options	$
Balance at beginning of the financial year	-	-	-	-
Granted during the financial year	750 000	1.75	-	-
Forfeited during the financial year	-	-	-	-
Exercised during the financial year (i)	-	-	-	-
Expired during the financial year	-	-	-	-
Balance at end of the financial year (ii)	750 000	1.75	-	-
Exercisable at end of the financial year	750 000	1.75	-	-

(i) Exercised during the financial year

These other share options have not been exercised during the 2007 financial year.

(ii) Balance at end of the financial year

The share options outstanding at the end of the financial year had an exercise price of $1.75 (2006: nil), and a weighted average remaining contractual life of 550 days (2006: nil).

29. Key management personnel compensation

(a) Details of key management personnel

The key management personnel of the Consolidated Entity during the year were:

WR Grigor (Non-Executive Chairman)
Mart Rampe (Managing Director)
MJ Evans (Non-Executive Director)
JA Atling (Administration Manager Australia)
SJ McRobbie (Manager Kyrgyz)

(b) Key management personnel compensation policy

The Entity does not have a remuneration committee however the remuneration of key management personnel is dealt with at full Board level. The broad policy calls for executives to be remunerated on terms that are competitive with those offered by entities of a similar size within the same industry. Packages are reviewed annually by the executive chairman. As an exploration Entity, performance outcomes are uncertain, notwithstanding endeavour. As such remuneration packages are not linked to profit performance. Present policy is to reward successful performance via incentive options that are priced on market conditions at the time of issue.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

29. Key management personnel compensation (continued)

(c) Key management personnel compensation

The aggregate compensation of the key management personnel of the Consolidated Entity and the company is set out below:

Short-term employee benefits Post employment benefits Other long-term benefits Termination benefits Share-based payment Total 2007	Short-term employee benefits Post employment benefits Other long-term benefits Termination benefits Share-based payment Total 2007	Short-term employee benefits Post employment benefits Other long-term benefits Termination benefits Share-based payment Total 2007	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 519 377 461 230 313 800 362 890 11 970 13 275 11 970 13 275 - - - - - - - - - 192 080 - 192 080 531 347 666 585 325 770 568 245	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 519 377 461 230 313 800 362 890 11 970 13 275 11 970 13 275 - - - - - - - - - 192 080 - 192 080 531 347 666 585 325 770 568 245	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 519 377 461 230 313 800 362 890 11 970 13 275 11 970 13 275 - - - - - - - - - 192 080 - 192 080 531 347 666 585 325 770 568 245	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 519 377 461 230 313 800 362 890 11 970 13 275 11 970 13 275 - - - - - - - - - 192 080 - 192 080 531 347 666 585 325 770 568 245
Name	Short-term employee benefits	Post- employment	Other long- term employee benefits	Termination benefits	Share- based payment	Total
WR Grigor M Rampe MJ Evans JA Atling SJ McRobbie Total	Salary/ Fees $ Other $ Super $ $ $ Options (e) $ $* 45 000 - 4 050 - - - 49 050 160 800 30 000 1 800 - - - 192 600 20 000 - 1 800 - - - 21 800 48 000 10 000 4 320 - - - 62 320 205 577 - - - - - 205 577
	479 377 40 000 11 970 - - - 531 347

Other short-term employee benefits includes a bonus paid to Mr R Rampe of $30,000 and Mrs J Atling of $10,000.

2006

Name	Short-term employee benefits

		Termination benefits
WR Grigor M Rampe MJ Evans JA Atling SJ McRobbie Total	Salary/ Fee $ Other Benefits $ Super $ $ Options (e) $ $
	30 000 108 690 2 700 - - - 141 390
	99 200 27 500 1 800 - - - 128 500 20 000 25 000 4 050 - - - 49 050 52 500 - 4 725 - - 54 880 112 105 90 688 7 652 - - - 137 200 235 540
	292 388 168 842 13 275 - - 192 080 666 585

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements 30 June 2007

29. Key management personnel compensation (continued)

(d) Contracts for services of key management personnel

There are written contracts between the Messrs Rampe and McRobbie and the Consolidated Entity.

M Rampe: By an agreement dated 1 April 2005 the Company engaged the services of Harvest Exploration Pty Ltd (“Harvest”) (a company connected with Mr Mart Rampe) to provide consulting geological and management services to the Company for a period of 24 months and then afterwards until terminated commencing on the date the Company was listed on the ASX (15 September 2005).

Either party may terminate the agreement at any time, on reasonable notice, with reasonable termination payments, to be negotiated in good faith, taking into account length of service and performance.

Under the terms of the Agreement, Harvest is required to provide the services of Mr Mart Rampe for 120 hours per month to be dedicated to the affairs of the Company.

The Agreement currently states that the Company is to pay to Harvest $12,000 plus GST per month which amount covers the hourly services of Mr Mart Rampe.

Under the Agreement the Company is to pay for office costs in connection with the consulting services by Harvest including costs of separate phone and fax and broadband and vehicle mileage. Should other employees of Harvest be required from time to time to perform services for the Company then, subject to Board approval, their services will be charged to the Company at agreed rates.

Under the Agreement the Company is to provide directors liability insurance (ie for Mr Rampe who is a Managing Director of the Company) and public liability insurance. At the date of this report, such insurance had not been arranged.

S McRobbie: By an agreement dated 1 December 2005 the Company engaged the services of Steven McRobbie (“McRobbie”) to serve as Operations manager in Kyrgystan for a minimum period of 12 months and then afterwards until terminated. The contract may be terminated by either party giving not less than 2 months notice. The service agreement was amended on 23 November 2006 to a monthly fee at the rate of AU $16,000. Under the Agreement the Company is to reimburse McRobbie for costs incurred in the proper performance of his duties and to provide an appropriate standard of accommodation.

Under the Agreement the Company is to provide insurance coverage in relation to travel and medical evacuation if required.

(e) Incentive Options Granted as Remuneration

No incentive options were granted as remuneration during the financial year.

Details of incentive options granted during 2006 are shown in the table below:

Name			Fair value at
	Granted	Grant	grant date
	No.	date	$	Expiry date
WR Grigor - - - - - - - M Rampe - - - - - - - MJ Evans - - - - - - - JA Atling 100 000 100 000 19 April 2006 54 880 19 April 2011 $1.07 54 880 SJ McRobbie 250 000 250 000 19 April 2006 137 200 19 April 2011 $1.07 137 200

These forgoing options were granted to executives pursuant to an Incentive Option Scheme approved by shareholders at a General Meeting held on 11 January 2006. Option valuation amounts shown above have been calculated using the Binomial Tree Option Calculator with regard to and in accordance with ASIC guidance.

The model assumes an option life of five years, volatility of 67% and interest risk free rate of 5.75% discounted by 20% as the securities are not listed. Although a value is ascribed and included in total compensation, it should be noted that this amount has not actually been received and may have no financial value unless the options achieve their exercise price of $1.07. On the date of grant of the options the ordinary shares were trading at $1.15.

These options carry no voting rights and no rights to dividends.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

30. Related party disclosures

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 24 to the financial statements.

Equity interests in associates and joint ventures

Nil.

(b) Key Management Personnel compensation

Details of key management personnel compensation are disclosed in note 29 to the financial statements.

(c) Key Management Personnel equity holdings

Fully Paid Ordinary Shares

2007	Balance 30/6/06	Received on Exercise of Options		Balance held nominally

			Net Other Change Balance 30/6/07
Directors WR Grigor 1 285 100 - - 1 285 100 1 285 080 M Rampe 40 000 - - 40 000 40 000 MJ Evans 50 000 - - 50 000 50 000 Executives JA Atling 29 000 - (29 000) - - SJ McRobbie - - - - -

Fully Paid Ordinary Shares

2006

	Net Other Change	Balance 30/6/06
Directors WR Grigor 100 - 1 285 000 1 285 100 1 285 080 M Rampe - - 40 000 40 000 40 000 MJ Evans - - 50 000 50 000 50 000 Executives JA Atling - - 29 000 29 000 29 000 SJ McRobbie - - - - -

Net other changes comprise shares purchased and sold.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements 30 June 2007

30. Related party disclosures (continued)

(c) Key Management Personnel equity holdings (continued)

Partly Paid Ordinary Shares

2007	Balance 30/6/06	Received on Exercise of Options		Balance held nominally

			Net Other Change Balance 30/6/07
Directors WR Grigor 2 000 000 - - 2 000 000 2 000 000 M Rampe 1 500 000 - - 1 500 000 - MJ Evans 1 500 000 - - 1 500 000 1 500 000 Executives JA Atling 100 000 - - 100 000 - SJ McRobbie - - - - -

Partly Paid Ordinary Shares

2006

	Net Other Change	Balance 30/6/06
Directors WR Grigor 2 000 000 - - 2 000 000 2 000 000 M Rampe 1 500 000 - - 1 500 000 - MJ Evans 1 500 000 - - 1 500 000 1 500 000 Executives JA Atling 100 000 - - 100 000 - SJ McRobbie - - - - -

Net other changes comprise shares purchased and sold.

Options Expiring 31 July 2007

2007	Balance	Net Other	Options	Balance	Balance held nominally
	30/6/06	Change	converted	30/6/07
Directors WR Grigor 321 275 - - 321 275 321 275 M Rampe 10 000 - - 10 000 10 000 MJ Evans 12 500 - - 12 500 12 500 Executives JA Atling 6 250 - - 6 250 6 250 SJ McRobbie - - - - -

2006	Balance 30/6/05	Net Other Change	Options converted	Balance 30/6/06	Balance held nominally
Directors WR Grigor - 321 275 - 321 275 321 275 M Rampe - 10 000 - 10 000 10 000 MJ Evans - 12 500 - 12 500 12 500 Executives JA Atling - 6 250 - 6 250 6 250 SJ McRobbie - - - - -

Net other charges comprise options purchased.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

30. Related party disclosures (continued)

(c) Key Management Personnel equity holdings (continued)

Executive Share Options

Details of executive share options have been disclosed at note 29 to the financial statements .

(d) Transactions with the Directors of the Consolidated Entity

Fees of $140,800 (2006: $27,500) were paid to Harvest Exploration Pty Ltd in which Mr Rampe has an interest, for providing consulting geological and management of services to the Company.

Fees of $6,600 (2006: nil) were paid to Harvest Holding Pty Ltd in which Mr Rampe has an interest, for providing office premises.

There were no transactions with Mr W Grigor during the reporting period. During the reporting period ended 30 June 2006, $108,690 was paid to Far East Capital Limited in which Mr W Grigor has an interest, as underwriting fees in connection with the initial public offer capital raising.

There were no transactions with Mr M J Evans during the reporting period. During the reporting period ended 30 June 2006, $27,250 was paid to Tevlo Pty Ltd in which Mr Evans has an interest, for work performed in connection with the initial public offer capital raising.

(e) Controlling Entity

The Parent Entity in the Consolidated Entity is Monaro Mining NL. Both the ultimate Parent Entity and the ultimate Australian Entity in the wholly owned group is Monaro Mining NL.

(f) Transactions with other related parties

By an agreement dated 29 April 2005, the Parent Entity contracted with First Australian Resources Ltd (“FAR”) to share for a period of two years the administrative office premises and facilities presently operated by the Parent Entity in West Perth. Under the Agreement, First Australian Resources Ltd will be responsible for payment of half the fixed costs of the premises such as rent and outgoings together with certain other costs divided on a fair and reasonable apportionment basis depending on the extent to which the costs are for the benefit of each Company. Where apportionment is not practicable, the costs will be shared equally. During the financial year, the Consolidated Entity incurred costs of $61,625 in respect of the forgoing agreement. First Australian Resources Limited is a publicly listed Entity in which Mr. Michael Evans and Mr. Warwick Grigor hold Directorships and shares.

31. Remuneration of auditors

	Consolidated	Company
Auditor of the parent entity Audit or review of the financial report Taxation services Other Auditors Auditing the financial report Non audit services Total The auditor of the Consolidated Entity	2007 $ 2006 $	2007 $ 2006 $
	23 585 15 030	23 585 15 030 - 385 - -
	- 385 - -
	23 585 15 415	23 585 15 415
		- 2 450 - -
	- 2 450 - -
	23 585 17 865	23 585 17 865
	is Stantons International.

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

30 June 2007

32. Subsequent Events

Subsequent to the financial year end,

a) 4,170,196 listed options to subscribe for ordinary shares at $1.20 on or before 31 July 2007 were exercised by option holders raising $5,004,235 before the costs of issue.
b) On 18 September 2007, the Company announced plans to list its shares for trading in the United States of America.

Other than as stated in this note, the Directors are not aware of any other matters or circumstances at the date of this report, that have significantly affected or may significantly affect the operations, the results of the operations or the state of affairs of the Consolidated Entity in subsequent financial years.

MONARO MINING NL SUPPLEMENTARY INFORMATION PURSUANT TO THE LISTING REQUIREMENTS OF THE AUSTRALIAN STOCK EXCHANGE LIMITED

Number of holders of equity securities

Ordinary shares

At 24 September 2007, the issued capital comprised of 29,125,125 ordinary fully paid shares (ASX code: MRO) held by 838 holders and 5,200,000 ordinary shares (not quoted) paid to .01 cents per share held by 5 holders .

Options

At 24 September 2007, the Company had the following options available to be exercised:

600,000 unlisted options each convertible to shares on payment of 40 cents per share expiring 30 June 2007.
1,850,000 unlisted options each convertible to shares on payment of 60 cents per share expiring 31 December 2008.
350,000 Employee Incentive Options exercisable at $1.07 cents expiring on 19 April 2011.
750,000 unlisted options to subscribe for ordinary shares at $1.75 on 31 December 2008

Each option converts to one share. Options do not carry the right to vote.

Distribution of holders equity security 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Holding less than a marketable parcel	Ordinary shares
	Number of holders
	143 276 136 249 34
	838
	52

Ordinary shareholders	Number of shares	Percentage
ANZ Nominees Limited Fortis Clearing Nominees P/L Nikam Investments Pty Ltd Gregorach Pty Ltd Citicorp Nominees Pty Limited Sergei Shestaev Obi-Wan Investments Pty Ltd UBS Wealth Management Australia Nominees Pty Ltd Manfree Nominees PtyLtd Mr George Panagakis & Mrs Anastasia Panagakis Uuro Pty Ltd Yatesbury Pty Limited NEFCO Nominees Pty Ltd National Nominees Limited Nikam Investments Pty Ltd Jenmah Pty Ltd & Grundy-Reid Pty Ltd Walpett Engineering PtyLtd Blackmort Nominees PtyLtd Douglass Financial Consultants Pty Ltd HSBC Custody Nominees (Australia) Limited	7 298 974 25.06 1 849 690 6.35 1 597 087 5.48 1 250 000 4.29 672 778 2.31 571 000 1.96 560 000 1.92 528 800 1.82 516 500 1.77 435 000 1.49 335 500 1.15 334 500 1.15 327 955 1.13 325 660 1.12 306 250 1.05 250 000 0.86 250 000 0.86 237 500 0.82 195 198 0.67 194 000 0.67
	18 036 392 61.93

MONARO MINING NL SUPPLEMENTARY INFORMATION PURSUANT TO THE LISTING REQUIREMENTS OF THE AUSTRALIAN STOCK EXCHANGE LIMITED

Substantial shareholders

Ordinary shareholders	Fully paid ordinary shares
	Number
Warwick Grigor	1 561 370

ASX Rule 4.10.19

The Company was admitted to the Official List of ASX on Tuesday 13 September 2005. Official Quotation of the Company’s securities commenced on Thursday 15 September 2005 at 11am W.S.T (1pm E.S.T.). The entity was admitted under rule 1.3.2(b) and accordingly confirms that it has used the cash and assets in a form readily convertible to cash at the time of admission on 13 September 2005 through to the 30 June 2007 in a way consistent to its business objectives as stated in the IPO Prospectus dated 1 August 2005.

AI assistant

ORBMINCO LIMITED — Annual Report 2007

65473_rns_2007-09-26_0da5be78-a8f8-4f94-9766-097ea891250b.pdf

MONARO MINING NL

MONARO MINING NL

ABN 99 073 155 781

ANNUAL FINANCIAL REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

CORPORATE GOVERNANCE STATEMENT

Principle 1

Lay solid foundations for management and oversight

Role of the Board

Principle 2 Structure the Board to add value

Board Composition

CORPORATE GOVERNANCE STATEMENT (Continued)

Meetings

Board Committees

Nomination Committee

Principle 3: Promote ethical and responsible decision-making

Principal 4: Safeguard integrity in financial reporting

CORPORATE GOVERNANCE STATEMENT (Continued)

Principal 5: Make timely and balanced disclosure

Principal 6: Respect the rights of shareholders

Principal 7: Recognise and manage risk

Principal 8: Encourage enhanced performance

Principal 9: Remunerate fairly and responsibly

Principal 10: Recognise the legitimate interests of stakeholders

DIRECTORS’ REPORT

DIRECTORS

OPERATING RESULTS

DIVIDENDS

REVIEW OF OPERATIONS

CHANGES IN THE STATE OF AFFAIRS

SUBSEQUENT EVENTS

FUTURE DEVELOPMENTS

DIRECTORS’ REPORT (continued)

ENVIRONMENTAL REGULATION

SHARE OPTIONS

INDEMNIFICATION OF OFFICERS AND AUDITORS

PARTICULARS OF DIRECTORS

WARWICK R GRIGOR

DIRECTORS’ REPORT (continued)

PARTICULARS OF DIRECTORS (continued)

MART RAMPE

MICHAEL J EVANS

COMPANY SECRETARY

DIRECTORS AND EXECUTIVE DETAILS

DIRECTORS’ REPORT (continued)

REMUNERATION REPORT

PROCEEDINGS ON BEHALF OF THE COMPANY

NON-AUDIT SERVICES

DIRECTORS’ REPORT (continued)

AUDITOR’S INDEPENDENCE DECLARATION

RE: MONARO MINING NL

John Van Dieren Director

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MONARO MINING NL

Report on the Financial Report

Directors’ Responsibility for the Financial Report

Auditor’s Responsibility

Independence

Auditor’s Opinion

STANTONS INTERNATIONAL

(An Authorised Audit Company)

J P Van Dieren

MONARO MINING NL DIRECTORS’ DECLARATION

MONARO MINING NL AND CONTROLLED ENTITIES

Income statement for the financial year ended 30 June 2007

MONARO MINING NL AND CONTROLLED ENTITIES Balance sheet as at 30 June 2007

MONARO MINING NL AND CONTROLLED ENTITIES Statement of recognised income and expense for the financial year ended 30 June 2007

MONARO MINING NL AND CONTROLLED ENTITIES Cash flow statement for the financial year ended 30 June 2007

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

1. General information

2. Adoption of new and revised Accounting Standards

Limitation of ability to designate financial assets and financial liabilities through profit or loss

Accounting for business combinations involving entities or businesses under common control

MONARO MINING NL AND CONTROLLED ENTITIES Notes to the financial statements

2. Adoption of new and revised Accounting Standards (continued)

Accounting for rights to reimbursement

3. Significant accounting policies

ORBMINCO LIMITED Annual Report 2007