PROSPECT RESOURCES LIMITED — Annual Report 2009

Dec 1, 2009

ETHAN MINERALS LIMITED

ACN 124 354 329

Annual Financial Report

for the year ended 30 June 2009

Corporate Information

ABN 74 084 669 036

Directors

Graham Anderson (Non-Executive Chairman) Kenneth Fitzgerald (Executive Director) Julie Glanville (Executive Director) Nigel Ferguson (Non-Executive Director)

Company Secretary

Leonard Math

Registered Office

Level 24, 443 Albany Highway VICTORIA PARK WA 6100 Tel: (618) 9472 5502 Fax: (618) 9362 2805

Auditors

PKF Chartered Accountants Level 7, BGC Centre 28 The Esplanade PERTH WA 6805 Tel: (618) 9278 2222 Fax: (618) 9278 2200

Contents

Directors' Report	3
Auditor's Independence Declaration	9
Income Statement	10
Balance Sheet	11
Statement of Changes in Equity	12
Cash Flow Statement	13
Notes to the Financial Statements	14
Directors' Declaration	36
Independent Audit Report	37

Directors' Report

The directors of Ethan Minerals Limited submit herewith the annual report of the company for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

INFORMATION ABOUT THE DIRECTORS AND SENIOR MANAGEMENT

The names and particulars of the directors of the company during or since the end of the financial year ended are:

Name	Particulars
Graham AndersonBBus, CA(Non Executive Chairman)	Graham Anderson is a graduate of Curtin University and has over 20 years' commercial experience as a CharteredAccountant. He operates his own specialist accounting and management consultancy practise, providing a range ofcorporate advisory and audit services to both public and private companies. From 1990 to 1999 he was an audit
Appointed 9 March 2007	partner at Horwath Perth. He is a Director and Company Secretary of a number of listed and unlisted publiccompanies in both the resource and industrial sectors. He is a Director of ASX listed APA Financial Services Limited,Dynasty Metals Australia Limited, Echo Resources Limited, Globe Securities Ltd and Pegasus Metals Limited and isCompany Secretary of these companies and a number of other ASX listed companies.
Kenneth Fitzgerald	Kenneth (Ken) Fitzgerald has worked for over 30 years in commercial business including mining, earth moving,transportation and agricultural industries.Ken has extensive experience in identifying and managing mineral
(Executive Director)	resources in Western Australia including the Goldfields, Eastern and Northern Wheatbelt and Murchison areas.
Appointed 9 March 2007	Furthermore Ken was a founding operator of Gypsum Resources in the Wheatbelt regions. Ken has acted as anagent in environmental and responsible mining negotiations with Government agencies involving environmentalclearances and provision of gypsum and mineral clay product for the enhancement of arable land in the Wheatbeltregions. Ken is a founder of Ethan Resources Pty. Ltd. and a founding Director of Ethan Minerals Limited.
Julie Glanville	Julie Glanville has a Masters Degree in Educational Management and has 32 years' experience as an educator.During that time Julie was a Primary and a Special Educator Principal for 20 years, a Special Education Consultant,
(Executive Director)Appointed 9 March 2007	a Primary and a Special Education Teacher and a Guest Lecturer at Tertiary Institutions and ProfessionalAssociations. Julie's professional career has developed both leadership and management skills of exceptionalquality. Preceding her career in Education, Julie completed a Secretarial Diploma with Honours culminating in herappointment as a secretary to the Deputy Leader of the State Opposition at Parliament House, Sydney, New SouthWales. Recently Julie has embarked on a new career path integrating her established skill set as Sole Trader ofEthan Park Contractors, Managing Director of Ethan Resources Pty. Ltd. and a founding Director of Ethan MineralsLimited.
Nigel FergusonBSc, AusIMM(Non Executive Director)	Mr. Ferguson is a geologist with over 22 years of experience in the exploration and definition of precious and basemetal mineral resources. Mr. Ferguson is also experienced at working in overseas locations having worked in SaudiArabia, South East Asia, Central America and Africa in both generative and management roles.
Appointed 25 October 2007	Mr. Ferguson has held several senior technical management roles and was Ashanti Goldfield's country manager for

Tanzania, being instrumental in assessing the now multi million ounce Geita Gold Project for acquisition by Ashanti. Mr. Ferguson held the principal role of Chief Executive Officer for AIM listed mineral explorer Condor Resources plc, as well as being a non executive director for Burey Gold Ltd (ASX), African Metals Corp. (TSX_V), and Samba Minerals Limited (Unlisted ASX).

Ethan Minerals Limited – Annual Report

Directors' shareholdings

The following table sets out each director's relevant interest in shares or options in shares of the Company as at the date of this report.

	Fully Paid OrdinaryShares	ShareOptions
Graham Anderson	1,500,000	1,500,000
Kenneth Fitzgerald	1,500,000	3,000,000
Julie Glanville	1,500,000	3,000,000
Nigel Ferguson	1,550,000	1,500,000

Remuneration of directors and senior management

Information about remuneration of the directors and senior management is set out in the remuneration report of this directors' report, on pages 7 to 8.

Share options granted to directors and senior management

Information about share options granted to directors and senior management during or since the end of the year is set out in the remuneration report of this directors' report, on pages 7 to 8.

Company secretary
Name	Particulars
Leonard Math	Mr. Leonard Math graduated from Edith Cowan University, majoring in Accounting and Information Systems, in 2003
BBus, CA	and is a member of the Institute of Chartered Accountants. In 2005 Leonard worked as an Auditor at Deloitte before
Appointed 25 October 2007	joining GDA Corporate as a Manager – Corporate Services.
	Mr. Math is the Company Secretary of Catalpa Resources Limited and Ishine International Resources Limited.

Ethan Minerals Limited – Annual Report

PRINCIPAL ACTIVITIES

Ethan Minerals Limited is based in Perth, Western Australia and was established to explore for and develop copper, lead, zinc and associated gold and silver resource opportunities in Australia.

Ethan has a focus on base metal exploration of four licences in Western Australia, surrounding and predominantly north of the town of Northampton, Western Australia. The Company's lead prospect is the historical Mary Springs Mine Prospect with a JORC Inferred Resource of some 16,000 tonnes of contained lead and an as yet, undefined contained metal content of copper, zinc, gold and silver.

With an initial drilled inferred base metals resource at Mary Springs and historically recorded mineralisation within each licence, the Company has planned early commencement of drilling upon successful completion of the IPO on these lead projects to increase its resource base.

The Northampton Project is bisected by the Northwest Coastal Highway and a grid power source passes within 500 metres of the Mary Springs Prospect site. Several sealed roads cross the licence package with additional access gained through well maintained shire gravel roads and farm access roads and tracks.

Ethan Minerals Limited will maintain an active program of identifying projects that complement the existing portfolio and the Company's corporate strategy.

OPERATING RESULTS

The Company incurred an after tax operating loss of $453,508 (2008: $1,091,833) during the year ended 30 June 2009.

CHANGES IN THE STATE OF AFFAIRS

As noted elsewhere in this report, no significant changes in the state of affairs of the Company occurred during the financial year.

SUBSEQUENT EVENTS

No matters or circumstances, besides those disclosed at note 25, have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

DIVIDENDS

No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made.

ENVIRONMENTAL REGULATIONS

The Company is subject to significant environmental regulation in respect to its exploration activities. The Company aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year under review.

SHARES UNDER OPTION

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

Issuing entity	Number of shares underoption	Class of shares	Exercise price of option	Expiry date ofoptions
Ethan Minerals Limited	10,000,000	Ordinary	20 cents	18 Oct 2012
Ethan Minerals Limited	1,500,000	Ordinary	20 cents	5 Nov 2013

The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company.

No shares have been issued during or since the end of the financial year as a result of exercise of an option.

DIRECTORS' MEETINGS

The following table sets out the number of directors' meetings and committee meetings held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the year 7 board meetings and nil audit committee meetings were held.

	Board of Directors
Directors	Held	Attended
Graham Anderson	7	7
Kenneth Fitzgerald	7	7
Julie Glanville	7	7
Nigel Ferguson	7	7

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 24 to the financial statements.

The directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services disclosed in note 25 to the financial statements do not compromise the external auditor's independence, based on advice received from the Audit Committee, for the following reasons:

• All non-audit services have been reviewed to ensure they do not impact the integrity and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

AUDITOR'S INDEPENDENCE DECLARATION

The Auditor's Independence Declaration is included on page 9 of the financial report.

REMUNERATION REPORT (audited)

This remuneration report, which forms part of the directors' report, sets out information about the remuneration of the Company's directors and senior management for the year ended 30 June 2009. The prescribed details for each person covered by this report are detailed below under the following headings:

• − director and senior management details
• − remuneration policy
• − relationship between the remuneration policy and Company performance
• − remuneration of directors and senior management
• − key terms of employment contracts

Director and senior management details

The following persons acted as directors or senior management during or since the end of the financial year:

Graham Anderson	non-executive chairman
Kenneth Fitzgerald	executive director
Julie Glanville	executive director
Nigel Ferguson	non-executive director

The term "senior management" is used in this remuneration report to refer to the following persons. These persons include the five members of senior management who received the highest remuneration during the year. Except as noted the named persons held their current positions for the whole of the financial year and since the end of the financial year:

Leonard Math	company secretary

Remuneration policy

The remuneration policy of Ethan Minerals Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Company's financial results. The board of Ethan Minerals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain high calibre executives and directors to run and manage the Company.

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the board. All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation. The board reviews executive packages annually by reference to the Company's performance, executive performance and comparable information from industry sectors and other companies in similar industries.

The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements.

Executive directors and senior management receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. Fees for non-executive directors are not linked to the performance of the Company. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in employee option plans.

Relationship between the remuneration policy and company performance

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. Currently, this is facilitated through the issue of options to directors and employees under the employees and contractors option plan to encourage the alignment of personal and shareholder interests. Under this plan the options generally vest over a five year period and vesting is subject to persons remaining in employment with the Company. The company believes this policy will be effective in increasing shareholder wealth. For details of directors and senior management interests in options at year end, refer note 23.

No component of director or senior management salary is dependent on company performance. The Company did not have a formal cash incentive or bonus scheme for the year ended 30 June 2009.

Remuneration of directors and senior management

The directors and the Company executives and Company executives received the following amounts as compensation for their services as directors and executives of the Company during the year:

Year ended 30 June 2009

		Short-term employee benefits	Postemploymentbenefits
Name	Cash salaryand fees	Other services	Superannuation	Share-basedpayment –options	Total	% consistingof options
	$	$	$	$	$	%
Directors
Graham Anderson (i)	29,750	-	-	-	29,750	-
Kenneth Fitzgerald	55,000	-	-	-	55,000	-
Julie Glanville	55,000	-	-	-	55,000	-
Nigel Ferguson	12,250	-	-	-	12,250	-
Executives
Leonard Math	-	-	-	-	-	-
TOTAL	152,000		-	-	152,000

(i) These payments are to GDA Corporate, a company in which Graham Anderson is a Director and Leonard Math is an employee. The fees include accounting services and company secretarial services provided to Ethan Minerals Limited.

Ethan Minerals Limited – Annual Report

Period ended 30 June 2008

		Short-term employee benefits	Postemploymentbenefits
Name	Cash salaryand fees	Other services	Superannuation	Share-basedpayment –options	Total	% consistingof options
	$	$	$	$	$	%
Directors
Graham Anderson (i)	30,030	-	-	36,900	66,930	55.1
Kenneth Fitzgerald	75,000	-	-	73,800	148,800	49.6
Julie Glanville	75,000	-	-	73,800	148,800	49.6
Nigel Ferguson	-	-	-	36,900	36,900	100
Executives
Leonard Math	-	-	-	12,300	12,300	100
TOTAL	180,030	-	-	233,700	413,730

(i) These payments are to GDA Corporate, a company in which Graham Anderson is a Director and Leonard Math is an employee. The fees include accounting services provided to Ethan Minerals Limited.

No director or member of senior management appointed during the year received a payment as part of consideration for agreeing to hold the position.

Share-based payments granted as compensation

There were no share-based payments granted as compensation to directors and senior management during the year ended 30 June 2009. No options issued during the year were exercised or lapsed during the year**.**

Signed in accordance with a resolution of the directors.

Graham Anderson Chairman Perth, 30 November 2009

Auditor's Independence Declaration

Ethan Minerals Limited - Annual Report

Income Statement

YEAR ENDED 30 JUNE 2009	Notes
		2009	2008
		$	$
Revenue	6	959	9,089
Depreciation expense	7	(4,910)	(3,771)
Corporate expenses		(115,645)	(110,629)
Occupancy expenses	7	(19,570)	(19,977)
Employee and consultant expenses	7	(110,500)	(184,399)
Travel and accommodation expenses		(20,752)	(18,052)
Exploration, evaluation and development expenditure		(125,940)	(518,094)
Share based payments	7	(57,150)	(246,000)
LOSS BEFORE TAX		(453,508)	(1,091,833)
INCOME TAX		-	-
NET LOSS ATTRIBUTABLE TO EQUITY HOLDERS OFETHAN MINERALS LIMITED		(453,508)	(1,091,833)
Basic and diluted loss per share (cents per share)	16	(2.0)	(7.7)

Ethan Minerals Limited - Annual Report

Balance Sheet

AT 30 JUNE 2009	Notes
		2009	2008
		$	$
CURRENT ASSETS
Cash and cash equivalents	5	31,997	35,127
Other receivables	9	17,059	29,554
TOTAL CURRENT ASSETS		49,056	64,681
NON-CURRENT ASSETS
Property, plant and equipment	11	5,395	8,685
Exploration, evaluation and development expenditure	12	100,000	-
Other assets	10	82,736	57,173
TOTAL NON-CURRENT ASSETS		188,131	65,858
TOTAL ASSETS		237,187	130,539
CURRENT LIABILITIES
Trade and other payables	13	165,216	112,210
TOTAL CURRENT LIABILITIES		165,216	112,210
TOTAL LIABILITIES		165,216	112,210
NET ASSETS		71,971	18,329
EQUITY
Issued capital	14	1,314,162	864,162
Reserves	15	303,150	246,000
Accumulated losses	15	(1,545,341)	(1,091,833)
TOTAL EQUITY		71,971	18,329

Statement of Changes in Equity

YEAR ENDED 30 JUNE 2009	Issued Capital	Reserves	AccumulatedLosses	Total
Consolidated	$	$	$	$
AT 1 JULY 2008	864,162	246,000	(1,091,833)	18,329
Loss for the year	-	-	(453,508)	(453,508)
Total recognised income and expense	864,162	246,000	(1,545,341)	(435,179)
Issue of shares	450,000	-	-	450,000
Recognition of share based payments	-	57,150	-	57,150
AT 30 JUNE 2009	1,314,162	303,150	(1,545,341)	71,971

PERIOD ENDED 30 JUNE 2008	Issued Capital	Reserves	AccumulatedLosses	Total
Consolidated	$	$	$	$
AT INCORPORATION (9 MARCH 2007)	-	-	-	-
Loss for the period	-	-	(1,091,833)	(1,091,833)
Total recognised income and expense	-	-	(1,091,833)	(1,091,833)
Issue of shares	901,500	-	-	901,500
Cost of capital raising	(37,338)	-	-	(37,338)
Recognition of share based payments	-	246,000	-	246,000
AT 30 JUNE 2008	864,162	246,000	(1,091,833)	18,329

Ethan Minerals Limited - Annual Report

Cash Flow Statement

YEAR ENDED 30 JUNE 2009	Notes
		2009	2008
		$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(190,966)	(346,053)
Interest received		959	4,741
NET CASH OUTFLOW FROM OPERATING ACTIVITIES	20	(190,007)	(341,312)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(1,620)	(12,456)
Payments for exploration activities		(175,940)	(518,094)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES		(177,560)	(530,550)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares		390,000	901,500
Proceeds from unallocated issue of ordinary shares		-	100,000
Payment of share issue costs		(25,563)	(94,511)
NET CASH INFLOW FROM FINANCING ACTIVITIES		364,437	906,989
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS		(3,130)	35,127
Cash and cash equivalents at the beginning of the year		35,127	-
CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR/PERIOD	5	31,997	35,127

Notes to the Financial Statements

30 JUNE 2009

1. General information

Ethan Minerals Limited is an unlisted public company, incorporated on the 9 March 2007 and operating in Australia.

2. Significant accounting policies

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

Accounting Standards include Australian equivalents to International Financial Reporting Standards ("AIFRS"). Compliance with AIFRS ensures that the financial statements and notes of the Company comply with International Financial Reporting Standards (IFRS).

The financial statements were authorised for issue by the directors on 30 November 2009.

Basis of preparation

The financial statements have been prepared for the financial year ending 30 June 2009 in accordance with s323D of the Corporations Act.

The financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian Dollars unless otherwise noted.

Going concern

At 30 June 2009, the entity had incurred losses of $453,508 (2008:$1,091,833) for the year then ended and has a working capital deficiency of $116,160 (2008:$47,529). At the date of signing of this report the company had a cash balance of $4,536,033 (2008:$136,405).

As at the date of this report the company is currently undertaking an Initial Public Offering ("IPO") of shares on the Australian Securities Exchange ("ASX"). Based on the existing timetable the company is expected to list on the ASX in December 2009. The IPO is currently oversubscribed and the sponsoring broker has received applications for $5,000,000.

Should the company not list then the planned exploration program would be significantly reduced from the budgeted $688,000 to meeting only the contractually committed expenditure as disclosed in note 17 in order for the company to continue as a going concern. On this basis the company would continue to raise further funds from existing shareholders.

The directors have prepared a cashflow forecast which indicates that the company will have sufficient cash flow for a period of twelve months from the date of signing this report.

Based on the cashflow forecast and the funds received from the IPO ($5,000,000) the directors are satisfied that the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

Critical accounting judgements and key sources of estimation uncertainty

In the application of AIFRS 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. Refer to Note 3 for a discussion of critical judgements in applying the entity's accounting policies and key sources of estimation uncertainty.

Adoption of new and revised accounting standards

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Company's assessment of these new standards and interpretations is set out below

Reference	Title	Details	Application date ofstandard	Impact on the Company	Application date forCompany
AASB 8 andAASB 2007-3	Operating Segmentsand consequentialamendments to otherAustralian AccountingStandards	New standard replacing AASB 114Segment Reporting, which adopts amanagement reporting approach tosegment reporting.	1 January2009	AASB 8 is a disclosure standardso will have no direct impact onthe amounts included in theCompany's financial statements,although it may have an impacton the Company's segmentdisclosures.	1 July2009
AASB 123(revised) andAASB 2007-6	Borrowing Costs andconsequentialamendments to otherAustralian AccountingStandards	The amendments to AASB 123 requirethat all borrowing costs associated with aqualifying asset be capitalised.	1 January2009	These amendments to AASB 123require that all borrowing costsassociated with a qualifying assetbe capitalised. The Company hasno borrowing costs associatedwith qualifying assets and assuch the amendments are notexpected to have any impact onthe Company's financial report.	1 July2009
AASB 101(revised) andAASB 2007-8	Presentation ofFinancial Statementsand consequentialamendments to otherAustralian AccountingStandards	Introduces a statement of comprehensiveincome.Other revisions include impacts on thepresentation of items in the statement ofchanges in equity, new presentationrequirements for restatements orreclassifications of items in the financialstatements, changes in the presentationrequirements for dividends and changesto the titles of the financial statements.	1 January2009	These amendments are onlyexpected to affect thepresentation of the Company'sfinancial report and will not havea direct impact on themeasurement and recognition ofamounts disclosed in thefinancial report. The Companyhas not determined at this stagewhether to present a singlestatement of comprehensiveincome or two separatestatements.	1 July2009
AASB 2008-1	Amendments toAustralian AccountingStandard – Sharebased Payments:Vesting Conditionsand Cancellations	The amendments clarify the definition of'vesting conditions', introducing the term'non-vesting conditions' for conditionsother than vesting conditions asspecifically defined and prescribe theaccounting treatment of an award that iseffectively cancelled because a nonvesting condition is not satisfied.	1 January2009	The Company has share-basedpayment arrangements that maybe affected by theseamendments. However, theCompany has not yet determinedthe extent of the impact, if any.	1 July2009
AASB 2008-2	Amendments toAustralian AccountingStandards – PuttableFinancial Instrumentsand Obligationsarising on Liquidation	The amendments provide a limitedexception to the definition of a liability soas to allow an entity that issues puttablefinancial instruments with certain specifiedfeatures, to classify those instruments asequity rather than financial liabilities.	1 January2009	These amendments are notexpected to have any impact onthe Company's financial report asthe Company does not have onissue or expect to issue anyputtable financial instruments asdefined by the amendments.	1 July2009
AASB 3(revised)	BusinessCombinations	The revised standard introduces anumber of changes to the accounting forbusiness combinations, the mostsignificant of which allows entities achoice for each business combinationentered into – to measure a noncontrolling interest (formerly a minorityinterest) in the acquiree either at its fairvalue or at its proportionate interest in theacquiree's net assets. This choice willeffectively result in recognising goodwillrelating to 100% of the business (applyingthe fair value option) or recognising	1 July 2009	The Company has no currentplans to enter into any businesscombinations during the nextfinancial year. The Company hasnot yet assessed the impact ofearly adoption, including whichaccounting policy to adopt.	1 July2009

		goodwill relating to the percentageinterest acquired. The changes apply
AASB 127(revised)	Consolidated andSeparate FinancialStatements	prospectively.Under the revised standard, a change inthe ownership interest of a subsidiary(that does not result in loss of control) willbe accounted for as an equity transaction.	1 July 2009	If the Company changes itsownership interest in existingsubsidiaries in the future, thechange will be accounted for asan equity transaction. This willnot give rise to a gain or a loss inthe Company's incomestatement.	1 July2009
AASB 2008-3	Amendments toAustralian AccountingStandards arising fromAASB 3 and AASB127	Amending standard issued as aconsequence of revisions to AASB 3 andAASB 127.	1 July 2009	Refer to AASB 3 (revised) andAASB 127 (revised) above.	1 July2009
AASB 2008 - 5	Amendments toAustralian AccountingStandards arising fromthe AnnualImprovementsProcess	Makes amendments to 25 differentStandards and is equivalent to the IASBStandard Improvements to IFRSsissuedin May 2008. The IASB's annualimprovements project provides a vehiclefor making non-urgent but necessaryamendments to Standards. Theamendments to some Standards result inaccounting changes for presentation,recognition or measurement purposes,while some amendments that relate toterminology and editorial changes areexpected to have no or minimal effect onaccounting.	1 January2009	These amendments are notexpected to have a materialimpact on the Company'sfinancial report.	1 July2009
AASB 2008-6	Further Amendmentsto AustralianAccounting Standardsarising from theAnnual ImprovementsProcess	Makes amendments to AustralianAccounting Standards AASB 1 First-timeAdoption of Australian Equivalents toInternational Financial ReportingStandards and AASB 5 Non-currentAssets Held for Sale and DiscontinuedOperations. These amendments areadditional to those in AASB 2008-5Amendments to Australian AccountingStandards arising from the AnnualImprovements Project.	1 January2009	These amendments are notexpected to have a materialimpact on the Company'sfinancial report.	1 July2009

AASB 2008 - 7	Amendments toAustralianAccountingStandards - Costof an Investmentin a Subsidiary,Jointly ControlledEntity orAssociate	This Amending Standard:•amends AASB 127 Consolidated andSeparate Financial Statements to removethe definition of the 'cost method' and torequire the separate financial statementsof a new parent formed as the result of aspecific type of reorganisation to measurethe cost of its investment in the previousparent at the carrying amount of its shareof the equity items of the previous parentat the date of the reorganisation•removes from AASB 118 Revenue therequirement to deduct dividends declaredout of pre-acquisition profits from the costof an investment in a subsidiary, jointlycontrolled entity or associate. Therefore,all dividends from a subsidiary, jointlycontrolled entity or associate arerecognised by the investor as income•implements consequential amendmentsto AASB 136 Impairment of Assets,introducing a new indicator of impairmentfor investments in subsidiaries, jointlycontrolled entities and associates where adividend has been recognised•allow first-time adopters to use a deemedcost of either fair value or the carryingamount under previous GAAP to measurethe initial cost of investments insubsidiaries, jointly controlled entities and	1 January2009	These amendments are notexpected to have a materialimpact on the Company'sfinancial report.	1 July2009
		associates in the separate financialstatements.
Amendmentsto InternationalFinancialReportingStandards	Cost of anInvestment in aSubsidiary, JointlyControlled Entityor Associate	The main amendments of relevance toAustralian entities are those made to IAS 27deleting the 'cost method' and requiring alldividends from a subsidiary, jointly controlledentity or associate to be recognised in profit orloss in an entity's separate financialstatements (i.e., parent company accounts).The distinction between pre- and postacquisition profits is no longer required.However, the payment of such dividendsrequires the entity to consider whether there isan indicator of impairment.AASB 127 has also been amended toeffectively allow the cost of an investment in asubsidiary, in limited reorganisations, to bebased on the previous carrying amount of thesubsidiary (that is, share of equity) rather thanits fair value.	1 January2009	Recognising all dividendsreceived from subsidiaries, jointlycontrolled entities and associatesas income will likely give rise togreater income being recognisedby the Company after adoption ofthese amendments.In addition, if the Companyenters into any Companyreorganisation establishing newparent entities, an assessmentwill need to be made todetermine if the reorganisationmeets the conditions imposed tobe effectively accounted for on a'carry-over basis' rather than atfair value.	1 July2009

30 JUNE 2009

Amendmentsto InternationalFinancialReportingStandards	Improvements toIFRSs	The improvements project is an annual projectthat provides a mechanism for making nonurgent, but necessary, amendments to IFRSs.The IASB has separated the amendments intotwo parts: Part 1 deals with changes the IASBidentified resulting in accounting changes;Part II deals with either terminology or editorialamendments that the IASB believes will haveminimal impact.	1 January2009 exceptfor amendments toIFRS 5,which areeffectivefrom 1 July2009.	The Company has not yetdetermined the extent of theimpact of the amendments, ifany.	1 July2009
IFRIC 15	Agreements forthe Constructionof Real Estate	This interpretation proposes that when thereal estate developer is providing constructionservices to the buyer's specifications, revenuecan be recorded only as constructionprogresses. Otherwise, revenue should berecognised on completion of the relevant realestate unit.	1 January2009	The Company does not enter intoagreements to provideconstruction services to thebuyer's specifications and assuch this interpretation is notexpected to have any impact onthe Company's financial report.	1 July2009
IFRIC 16	Hedges of a NetInvestment in aForeign Operation	This interpretation proposes that the hedgedrisk in a hedge of a net investment in a foreignoperation is the foreign currency risk arisingbetween the functional currency of the netinvestment and the functional currency of anyCompany. This also applies to foreignoperations in the form of joint ventures,associates or branches.	1 January2009	The Interpretation is unlikely tohave any impact on theCompany since it does notsignificantly restrict the hedgedrisk or where the hedginginstrument can be held.	1 July2009

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Revenue recognition

Interest revenue is recognised when receivable.

(b) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(c) Impairment of assets

At each reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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

30 JUNE 2009

specific to the asset for which the estimates of future cash flows have not been adjusted.

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 (cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

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.

(d) Cash and cash equivalents

For cash flow statement presentation purposes, 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 insignificant risk of changes in value, and bank overdrafts.

(e) Trade and other receivables

Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.

(f) Fair value estimation

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

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Company is the last trade price.

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

(g) Property, plant and equipment

Land is carried at historical cost. All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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 Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Land is not depreciated. Depreciation of plant and equipment is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives. The rates vary between 22.5% and 40% per annum.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(c)).

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 Company policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(h) Exploration, evaluation and development expenditure

Exploration and evaluation expenditure in relation to its mineral tenements is expensed as incurred. Where the Directors decide to progress the development in an area of interest all further expenditure incurred relating to the area is capitalised. Projects are advanced to development status and classified as mining properties when it is expected that further expenditure can be recouped through sale or successful development and exploitation of the area of interest. Such expenditure is carried forward up to commencement of production at which time it is amortised over the life of the economically recoverable reserves. All projects are subject to detailed review on an annual basis and accumulated costs written off to the extent that they will not be recoverable in the future.

Tenement acquisition costs are capitalised as part of deferred exploration and evaluation assets. Subsequent to acquisition exploration expenditure is expensed in accordance with the Company's accounting policy.

30 JUNE 2009

An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances apply:

• Unexpected geological occurrences that render the resource uneconomic;
• Title to asset is compromised;
• Variations in prices that render the project uneconomic; and
• Variations in the currency of operation.

(i) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are paid on normal commercial terms.

(j) Employee benefits

(i) Wages and salaries, annual leave and other employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave.

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

(ii) Share-based payments

The Company has an 'Employee and Share Option Plan' ("ESOP") for employees, contractors and executives (including executive directors) of the company.

The plan permits the company, at the discretion of the directors, to grant options over unissued ordinary shares of the company to eligible directors, members of staff and contractors as specified in the plan rules.

The options, issued for nil consideration, are granted in accordance with performance guidelines established by the directors of the company.

The options are issued for a specified period and each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the market price of a share on invitation date, grant date, or another specified date after grant close. All options expire on the earlier of their expiry date or termination of the employee's employment.

Options do not vest until a specified period after granting and their exercise is conditional on the consolidated entity achieving certain performance hurdles.

There are no voting or dividend rights attached to the options. Voting rights will attach to the ordinary shares when the options have been exercised. The options cannot be transferred and will not be quoted on the ASX.

(k) Issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

(l) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit 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 financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) 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.

30 JUNE 2009

(m) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(n) Share based payments

Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black & Scholes option pricing 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 on a straight-line basis over the vesting period, based on the consolidated entity's estimate of shares that will eventually vest.

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.

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying the Company's accounting policies

The following are the critical judgments (apart from those involving estimations which are dealt with below) that management has made in the process of applying the Company's accounting policies and that have the most significant effects on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

Impairment of property, plant and equipment

The Company reviews for impairment of property, plant and equipment, in accordance with its accounting policy. The recoverable amount of these assets has been determined based on higher of the assets' fair value less costs to sell and value in use. These calculations require the use of estimates and judgements.

4. SEGMENT INFORMATION

Description of segments

The Company's operations are in the mining industry in Australia.

	$	$
5.CASH
Cash and cash equivalents	31,997	35,127
6.REVENUE
Interest revenue	959	9,089
7.OTHER INCOME AND EXPENSES
(a) Loss before income tax includes the following specificexpenses:
Depreciation	4,910	3,771
Rental of premises	19,570	19,977
Consulting fees	110,500	184,399
Share based payments	57,150	246,000

30 JUNE 2009

	2009$	2008$
8.INCOME TAX
(a) Income tax expense/(benefit)Deferred tax benefit on origination and reversal of temporarydifferences	-	-
Total income tax benefit per income statement	-	-
(b) Numerical reconciliation of income tax benefit toprima facie tax payable
Loss from continuing operations before income tax benefit	(458,072)	(1,091,833)
Prima facie tax benefit at the Australian tax rate of 30%	(136,052)	(327,550)
Add tax effect of:
Non-deductible expenses	17,145	86,213
Effect of current year tax losses not recognisedEffect of reversal of temporary differences	89,32033,362	241,0272,551
	136,052	329,790
Less tax effect of:
Tax deductible equity raising costs	-	(2,240)
	-	(2,240)
Income tax (benefit)	-	-
(c) Amounts recognised directly in equity
Relating to equity raising costs	-	-
Deferred tax expense/(benefit) attributable to entity
recognised in equity	-	-

(d) Recognised deferred tax assets & liabilities

	Assets2009$	Liabilities2009$	Net2009$
Accruals & provisions	-	-	-
Other items	-	-	-
	-	-	-

	Assets2008$	Liabilities2008$	Net2008$
Accruals & provisions	-	-	-
Other items	-	-	-
	-	-	-

30 JUNE 2009

8. INCOME TAX (cont'd)

(e) Movement in temporary differences recognised during

the year

	Balance atbeginning year	Recognised inincome	Recognised inequity	Balance at30 June 2009
	$	$	$	$
Accruals & provisions	-	-	-	-
Other items	-	-	-	-
Net tax assets/(liabilities)	-	-	-	-

(f) Unrecognised deferred tax assets

	2009	2008
	$	$
Deferred tax assets at 30% have not been recognised in respect of the following:
Deductible temporary differences	18,101	11,361
Tax losses	-	241,027
	18,101	252,388

No income tax is payable by the consolidated entity. The directors have considered it prudent not to bring to account the deferred tax asset of income tax losses and exploration deductions until there is probable certainty of deriving assessable income of a nature and amount to enable such benefit to be realised.

This deferred tax asset will only be obtained if:

(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

• (b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
• (c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

	2009$	2008$
9.OTHER RECEIVABLES
Government taxes receivable	17,059	18,822
Other receivables	-	10,732
	17,059	29,554

10.OTHER ASSETS
Preliminary cost of capital raising	82,736	57,173

30 JUNE 2009

11. PROPERTY, PLANT AND EQUIPMENT

	ComputerSoftware &Equipment	Plant &Equipment	Total
	$	$	$
Gross carrying amount
Balance at beginning period	-	-	-
Additions	8,956	3,500	12,456
Balance at 30 June 2008	8,956	3,500	12,456
Additions	1,620	-	1,620
Balance at 30 June 2009	10,576	3,500	14,076
Accumulated depreciation, amortisation and impairment
Balance at beginning period	-	-	-
Depreciation charge	(2,983)	(788)	(3,771)
Balance at 30 June 2008	(2,983)	(788)	(3,771)
Depreciation charges	(4,123)	(787)	(4,910)
Balance at 30 June 2009	(7,106)	(1,575)	(8,681)
Net book value
As at 30 June 2008	5,973	2,712	8,685
As at 30 June 2009	3,470	1,925	5,395
			2009	2008
12.EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE			$	$
Balance at beginning year			-	-
Exploration, evaluation and development expenditure incurredduring the year			100,000	-
Balance at end of year			100,000	-
13.TRADE AND OTHER PAYABLES
Trade payables			37,474	4,210
Other payables* and accruals			127,742	108,000
			165,216	112,210

*Other payables of $40,000 (2008:$100,000) relates to money received for further capital raising at $0.10 each in which the shares were subsequently issued on the 19 August 2009.

14. ISSUED CAPITAL

(a) Share capital
	2009		2008
	Number ofshares	$	Number ofshares	$
Ordinary shares fully paid	24,706,250	1,314,162	20,206,250	864,162

30 JUNE 2009

(b) Movements in ordinary share capital

	2009
	Number ofshares	$
Beginning of the financial period	-	-
Issued during the period:
−Issue of shares at $0.001 each	9,000,000	9,000
−Issue of shares at $0.075 each	5,400,000	405,000
−Issue of shares at $0.08 each	4,656,250	372,500
−Issue of shares at $0.10 each	1,150,000	115,000
Less transaction costs	-	(37,338)
Balance at 30 June 2008	20,206,250	864,162
Issued during the year:
−Issue of shares at $0.10 each	4,500,000	450,000
Less transaction costs	-	-
Balance at 30 June 2009	24,706,250	1,314,162

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(c) Options on issue	Number of options
	2009	2008
Unlisted
−Exercisable at 20 cents, on or before 18 October 2012	10,000,000	10,000,000
−Exercisable at 20 cents, on or before 5 November 2013	1,500,000	-
Total options on issue at end of year	11,500,000	10,000,000
Share options carry no rights to dividends and no voting rights.
	2009	2008
	$	$
15.RESERVES AND ACCUMULATED LOSSES
(a) Reserves
Share-based payments reserve
Balance at beginning year	246,000	-
Employee share options	57,150	246,000
Balance at end year	303,150	246,000
(b) Accumulated losses
Balance at beginning year	(1,091,833)	-
Net loss for the year	(453,508)	(1,091,833)
Balance at end year	(1,545,341)	(1,091,833)

(c) Nature and purpose of reserves

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued.

30 JUNE 2009

16. LOSS PER SHARE

	2009$	2008
		$
(a) Reconciliation of earnings used in calculating loss pershare
Loss attributable to the ordinary equity holders of the
company used in calculating basic and diluted loss per share	453,508	1,091,833
	Number ofshares	Number ofshares
(b) Weighted average number of shares used as thedenominator
Weighted average number of ordinary shares used as the
denominator in calculating basic and diluted loss per share	22,792,551	14,188,174

(c) Information on the classification of options

As the Company has made a loss for the year ended 30 June 2009, all options on issue are considered antidilutive and have not been included in the calculation of diluted loss per share. These options could potentially dilute basic loss per share in the future.

17. DIVIDENDS

No dividends were paid during the financial year. No recommendation for payment of dividends has been made.

	2009$	2008$
18.COMMITMENTS
(a) Exploration commitments
Within one year	261,000	70,000

All of the company's tenements are situated in the state of Western Australia.

In order to maintain an interest in the mining and exploration tenements in which the company is involved, the company is committed to meet the conditions under which the tenements were granted and the obligations of any joint venture agreements. The timing and amount of exploration expenditure commitments and obligations of the company are subject to the minimum expenditure commitments required as per the Mining Act, as amended, and may vary significantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest. These obligations are not provided for in the financial report.

No estimate has been given of expenditure commitments beyond 12 months as this is dependent on the directors' ongoing assessment of operations and, in certain circumstances, native title negotiations.

19. CONTINGENCIES

There are no material contingent liabilities or contingent assets of the Company at balance date.

30 JUNE 2009

20. CASH FLOW STATEMENT

	2009	2008
	$	$
(a)Reconciliation of cash and cash equivalents
Cash and cash equivalents as shown in the balance sheets
and the statements of cash flows	31,997	35,127
(b)Reconciliation of loss for the year to net cashoutflow from operating activities
Loss for the year	(453,508)	(1,091,833)
Non-Cash Items:
Depreciation of non-current assets	4,910	3,771
Share based payments	57,150	246,000
Non-Operating activities
Tenement acquisition cost	50,000	-
Exploration expenditure	125,940	518,094
(Increase)/decrease in assets:
(Increase)/decrease in other receivables	12,495	(29,554)
Increase/(decrease) in liabilities:
(Decrease)/increase in trade and other payables	13,006	12,210
Net cash outflow from operating activities	(190,007)	(341,312)

30 JUNE 2009

21. FINANCIAL INSTRUMENTS

(a) Financial risk management objectives

The Company is exposed to financial risk through the normal course of their business operations. The key risks impacting the Company's financial instruments are considered to be interest rate risk and credit risk. The Company's financial instruments exposed to these risks are cash and short term deposits, receivables and trade payables.

The Company's managing director and chief financial officer monitor the Company's risks on an ongoing basis and report to the Board.

(b) Categories of financial instruments

The Company hold the following financial instruments

	2009$	2008$
Financial assets
Cash and cash equivalents	31,997	35,126
Other receivables	17,059	29,554
	49,056	64,680
Financial liabilities
Trade and other payables	165,216	112,210
	165,216	112,210

(c) Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide future returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Company's capital is performed by the Board.

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the consolidated entity defines as net operating income divided by total shareholders' equity.

There were no changes in the Company's approach to capital management during the year.

The Company operate primarily in Australia.

(d) Interest rate risk management

The Company is exposed to interest rate risk as entities in the Company deposit funds at both short-term fixed and floating rates of interest and have variable interest rate borrowings.

The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease represents management's assessment of the possible change in interest rates.

At reporting date, had interest rates been 50 basis points higher or lower and all other variables were held constant, the Company's net loss and reserves would be immaterially affected.

30 JUNE 2009

(e) Liquidity risk management

Prudent liquidity risk management implies maintaining sufficient cash and term deposits, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Maturities of financial assets and liabilities

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

The tables below have been drawn up based on the undiscounted cash flows (including both interest and principal cash flows expected) using contractual maturities of financial assets and the earliest date on which the Company can be required to pay financial liabilities. Amounts for financial assets include interest earned on those assets except where it is anticipated the cash flow will occur in a different period.

	Weightedaverageeffectiveinterest rate	Less than 1month	1 to 3months	3 months to1 year	1 to 5 years	5+ years
	%	$	$	$	$	$
2009
Financial assets
Variable interest rate instruments	3.5	31,997	-	-	-	-
Fixed interest rate instruments		-	-	-	-	-
Non-interest bearing		-	-	-	-	-
		31,997	-	-	-	-
Financial liabilities
Non-interest bearing		165,216	-	-	-	-
		165,216	-	-	-	-

	Weightedaverageeffectiveinterest rate	Less than 1month	1 to 3months	3 months to1 year	1 to 5 years	5+ years
	%	$	$	$	$	$
2008
Financial assets
Variable interest rate instruments	3	35,127	-	-	-	-
Fixed interest rate instruments		-	-	-	-	-
Non-interest bearing		-	-	-	-	-
		35,127	-	-	-	-
Financial liabilities
Non-interest bearing		112,210	-	-	-	-
		112,210	-	-	-	-

30 JUNE 2009

(f) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company. The Company's potential concentration of credit risk consists mainly of cash deposits with banks. The Company's short term cash surpluses are placed with banks that have investment grade ratings. The maximum credit risk exposure relating to the financial assets is represented by the carrying value as at the balance sheet date. The Company considers the credit standing of counterparties when making deposits to manage the credit risk.

Considering the nature of the business at current, the Company believes that the credit risk is not material to the Company's operations.

(g) Fair value

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

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in note 2 to the financial statements.

22. SHARE-BASED PAYMENTS

The options, issued for nil consideration, are granted to directors and key management personnel of the company. In exercising their discretion under the rules, the directors will take into account matters such as the position of the eligible person, the role they play in the company, the nature or terms of their employment or contract and the contribution they make to the company as a whole.

The options are issued for a specified period and each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the market price of a share on invitation date, grant date, or another specified date after grant close. All options expire on the earlier of their expiry date or termination of the employee's employment. Options issued vest immediately.

There are no voting or dividend rights attached to the options. Voting rights will attach to the ordinary shares when the options have been exercised. Set out below are summaries of the options granted:

Option series	Number	Grant date	Expiry Date	ExercisePricecents
Nov 08 at 20 cents	1,500,000	5 Nov 08	5 Nov 13	20

The weighted average fair value of options granted during the year was $0.0381. Options were priced using a Black-Scholes European Option Pricing Model. Where relevant, the expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability and exercise restrictions.

Inputs into the model
Option series	Nov 08 at
	20 cents
Grant date share price	5 Nov 08
Exercise price (cents)	20
Expected volatility (%)	50
Option life (years)	5
Dividend yield	-
Risk-free interest rate (%)	3.75

30 JUNE 2009

The following reconciles the outstanding share options granted at the beginning and end of the year.

	2009			2008
		Weightedaverage exercise
	Number ofoptions	pricecents	Number ofoptions	pricecents
Outstanding at the beginning of the year	10,000,000	20	-	-
Granted	1,500,000	20	10,000,000	20
Outstanding at end year	11,500,000	20	10,000,000	20
Exercisable at end year	11,500,000	20	10,000,000	20

23. KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Details of key management personnel

(i) Directors

The following persons were directors of Ethan Minerals Limited during the year ended 30 June 2009:

Graham Anderson	Non Executive Chairman
Kenneth Fitzgerald	Executive Director
Julie Glanville	Executive Director
Nigel Ferguson	Non Executive Director

(ii) Other Key Management Personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, during the year ended 30 June 2009:

Leonard Math Company Secretary

(b) Key management personnel compensation

	2009	2008
	$	$
Consultancy fees (i)	110,000	150,000
Professional fees (ii)	29,750	30,030
Geologist Consulting fees (iii)	12,250	-
Share-based payments	57,150	233,700
	209,150	413,730

(i) During the year ended 30 June 2009, the Company paid $110,000 (2008:$150,000) to Ethan Park Contractors for consultancy services to the Company. Ms Glanville is a Director and beneficiary of Ethan Park Contractors and Mr Fitzgerald is a beneficiary of Ethan Park Contractors.

(ii) During the year ended 30 June 2009, the Company paid $29,750 (2008:$30,030) to GDA Corporate for accounting and company secretarial services to the Company. Graham Anderson is a Director of GDA Corporate and Leonard Math is an employee of GDA Corporate.

(iii) During the year ended 30 June 2009, the Company paid $12,250 (2008:$Nil) to Ridgeback Holdings Pty Ltd for geology consultancy services to the Company. Mr Ferguson is a Director and beneficiary of Ridgeback Holdings Pty Ltd.

(c) Transactions with key management personnel

Key management personnel compensation

Details of key management personnel compensation are provided in the Remuneration Report of the Directors' Report designated as audited.

Loans to key management personnel.

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

30 JUNE 2009

24. RELATED PARTY TRANSACTIONS

(d) Key management personnel equity holdings

(i) Fully paid ordinary shares of Ethan Minerals Limited

	Balance at startof year	Granted ascompensation	Received onexercise ofoptions	Net other change	Balance at endof year or date ofresignation
	No	No	No	No	No
2009
Directors
Graham Anderson	1,500,000	-	-	-	1,500,000
Kenneth Fitzgerald	1,500,000	-	-	-	1,500,000
Julie Glanville	1,500,000	-	-	-	1,500,000
Nigel Ferguson	1,500,000	-	-	50,000	1,550,000
Executives
Leonard Math	-	-	-	-	-

	Balance at startof period	Granted ascompensation	Received onexercise ofoptions	Net other change	Balance at endof period or dateof resignation
	No	No	No	No	No
2008
Directors
Graham Anderson	-	-	-	1,500,000	1,500,000
Kenneth Fitzgerald	-	-	-	1,500,000	1,500,000
Julie Glanville	-	-	-	1,500,000	1,500,000
Nigel Ferguson	-	-	-	1,500,000	1,500,000
Executives
Leonard Math	-	-	-	-	-

(ii) Options

The numbers of options over ordinary shares in the company held during the year by each director of Ethan Minerals Limited and other key management personnel of the Company, including their personally related parties, are set out below:

						At end of year
	Balance	Granted	Exer	Net	Balance at	Balance	Vested	Vested	Options
	at start	as	cised	other	year end	vested	but not	and	vested
	of year	compensation		change	orresignationdate		exerciseexerciseableable		duringyear
	No	No	No	No	No	No	No	No	No
2009
Directors
Graham Anderson	1,500,000	-	-	-	1,500,000	1,500,000	-	1,500,000	-
Kenneth Fitzgerald	3,000,000	-	-	-	3,000,000	3,000,000	-	3,000,000	-
Julie Glanville	3,000,000	-	-	-	3,000,000	3,000,000	-	3,000,000	-
Nigel Ferguson	1,500,000	-	-	-	1,500,000	1,500,000	-	1,500,000	-
Executives
Leonard Math	500,000	-	-	-	500,000	500,000	-	500,000	-

30 JUNE 2009

	At end of period
	Balanceat start	Grantedas	Exercised	Netother	Balance atyear end	Balancevested	Vestedbut not	Vestedand	Optionsvested
	of period	compensation			change	orresignationdate		exerciseexerciseableable		duringperiod
	No	No	No	No	No	No	No	No	No
2008
Directors
Graham Anderson	-	1,500,000	-	-	1,500,000	1,500,000	-	1,500,000	-
Kenneth Fitzgerald	-	3,000,000	-	-	3,000,000	3,000,000	-	3,000,000	-
Julie Glanville	-	3,000,000	-	-	3,000,000	3,000,000	-	3,000,000	-
Nigel Ferguson	-	1,500,000	-	-	1,500,000	1,500,000	-	1,500,000	-
Executives
Leonard Math	-	500,000	-	-	500,000	500,000	-	500,000	-

Transactions with other related parties

Ethan Park Contractor

The company paid $110,000 (2008:$150,000) in lieu of executive directors' fees, to Ethan Park Contractors, the management company responsible for the operation of Ethan Park Contractors, for the services of Mr Kenneth Fitzgerald and Ms Julie Glanville as Executive Directors. Ms Glanville is a Director and beneficiary of Ethan Park Contractors and Mr Fitzgerald is a beneficiary of Ethan Park Contractors.

Payments were made at commercial rates.

GDA Corporate

GDA Corporate, a company of which Mr Graham Anderson is a Director and Leonard Math is an employee, provided company secretarial, accounting and other corporate services to Ethan Minerals Limited during the year. The amount paid and payable for the year was $29,750 (2008:$30,030).

Ridgeback Holdings Pty Ltd

The company paid $12,250 (2008:$Nil) to Ridgeback Holdings Pty Ltd for geology consultancy services to the Company. Mr Ferguson is a Director and beneficiary of Ridgeback Holdings Pty Ltd.

Cat Tech Limited

Cat Tech Limited, a company of which Mr Graham Anderson is a Director, provided computer softwares, hardware and support to Ethan Minerals Limited during the year. The amount paid and payable for the year was $2,997 (2008:$7,674).

	2009$	2008$
25.REMUNERATION OF AUDITORS
During the year the following fees were payable for services provided bythe auditor of the Company, its related practices and non-related auditfirms:
Audit services
Audit or review of financial reports	10,000	4,824
	10,000	4,824

30 JUNE 2009

26. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Subsequent to 30 June 2009, the Company has issued 3,725,000 ordinary shares at $0.10 each raising $372,500.

The Company has lodged its Prospectus with ASIC on the 9 October 2009 and has applied for listing on the Australian Securities Exchange. The Company has successfully raised $5,000,000 through the issue of 25,000,000 ordinary shares at $0.20 through the Prospectus and currently in the final stages of listing on the Australian Securities Exchange. The date of listing is anticipated to be in December 2009.

No other matter or circumstance has arisen since 30 June 2009, which has significantly affected, or may significantly affect the operations of the Company, the result of those operations, or the state of affairs of the Company in subsequent financial periods.

Ethan Minerals Limited - Annual Report

DIRECTORS' DECLARATION

The directors of Ethan Minerals Limited declare that:

(a) in the directors' opinion the financial statements and notes and the Remuneration report in the Directors Report set out on pages 6 to 8, are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the company's financial position as at 30 June 2009 and of their performance, for the financial year ended on that date; and
• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.
• (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2; and
• (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Graham Anderson Chairman

Perth, 30 November 2009

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF ETHAN MINERALS LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Ethan Minerals Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration.

Directors' Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian Equivalents to International Financial Reporting ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor's Responsibility

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

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

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

Tel: 61 8 9278 2222 | Fax: 61 8 9278 2200 | www.pkf.com.au West Australian Partnership | ABN 39 542 778 278 Level 7, BGC Centre | 28 The Esplanade | Perth | Western Australia 6000 | Australia PO Box Z5066 | St Georges Terrace | Perth | Western Australia 6831

PKF Perth is a member of the PKF International Limited network of legally independent member firms. PKF Perth is also a member of PKF Australia Limited, a national network of legally independent firms each trading as PKF. PKF Perth does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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 Ethan Minerals Limited is in accordance with the Corporations Act 2001, including:
  • (i) giving a true and fair view of the entity's financial position as at 30 June 2009 and of its performance for the year ended on that date; and
  • (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 6 to 8 of the directors' report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor's Opinion

In our opinion the Remuneration Report of Ethan Minerals Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Acts 2001.

PKF Chartered Accountants

Chris Nicoloff Partner

Dated in Perth, Western Australia on this the 30 th day of November 2009.