PROSPECT RESOURCES LIMITED — Annual Report 2008

Dec 1, 2009

ETHAN MINERALS LIMITED

ACN 124 354 329

Annual Financial Report

for the period ending 30 June 2008

Ethan Minerals Limited - Annual Report

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

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Ethan Minerals Limited – Annual Report

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	34
Independent Audit Report	35

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Ethan Minerals Limited – Annual Report

Directors’ Report

The directors of Ethan Minerals Limited submit herewith the annual report of the company for the financial period since incorporation on the 9 March 2007 to 30 June 2008. 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 period are:

Name Particulars

Graham Anderson BBus, CA (Non Executive Chairman) Appointed 9 March 2007

Graham Anderson is a graduate of Curtin University and has over 20 years’ commercial experience as a Chartered Accountant. He operates his own specialist accounting and management consultancy practise, providing a range of corporate advisory and audit services to both public and private companies. From 1990 to 1999 he was an audit partner at Horwath Perth. He is a Director and Company Secretary of a number of listed and unlisted public companies 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 is Company 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. Furthermore Ken was a founding operator of Gypsum Resources in the Wheatbelt regions. Ken has acted as an Appointed 9 March 2007 agent in environmental and responsible mining negotiations with Government agencies involving environmental clearances and provision of gypsum and mineral clay product for the enhancement of arable land in the Wheatbelt regions. Ken is a founder of Ethan Resources Pty. Ltd. and a founding Director of Ethan Minerals Limited.

Julie Glanville

(Executive Director) Appointed 9 March 2007

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, a Primary and a Special Education Teacher and a Guest Lecturer at Tertiary Institutions and Professional Associations. Julie’s professional career has developed both leadership and management skills of exceptional quality. Preceding her career in Education, Julie completed a Secretarial Diploma with Honours culminating in her appointment as a secretary to the Deputy Leader of the State Opposition at Parliament House, Sydney, New South Wales. Recently Julie has embarked on a new career path integrating her established skill set as Sole Trader of Ethan Park Contractors, Managing Director of Ethan Resources Pty. Ltd. and a founding Director of Ethan Minerals Limited.

Nigel Ferguson BSc, AusIMM (Non Executive Director) Appointed 25 October 2007

Mr. Ferguson is a geologist with over 22 years of experience in the exploration and definition of precious and base metal mineral resources. Mr. Ferguson is also experienced at working in overseas locations having worked in Saudi Arabia, South East Asia, Central America and Africa in both generative and management roles.

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).

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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 Ordinary	Share
	Shares	Options
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	1,500,000	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 period is set out in the remuneration report of this directors’ report, on pages 7 to 8.

Company secretary

Name

Particulars

Leonard Math BBus, CA Appointed 25 October 2007

Leonard Math graduated from Edith Cowan University, majoring in Accounting and Information Systems, in 2003 and is a member of the Institute of Chartered Accountants. In 2005 Leonard worked as an Auditor at Deloitte before joining GDA Corporate as a Manager – Corporate Services.

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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 $1,091,833 during the period from 9 March 2007 to 30 June 2008.

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 period.

SUBSEQUENT EVENTS

No matters or circumstances, besides those disclosed at note 25, have arisen since the end of the financial period 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 period. 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 period 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 under	Class of shares	Exercise price of option	Expiry date of
	option			options
Ethan Minerals Limited	10,000,000	Ordinary	20 cents	18 Oct 2012

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.

There were 1,500,000 options issued after 30 June 2008. The details are:

Issuing entity	Number of shares under	Class of shares	Exercise price of option	Expiry date of
	option			options
Ethan Minerals Limited	1,500,000	Ordinary	20 cents	5 Nov 2013

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

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Ethan Minerals Limited – Annual Report

DIRECTORS’ MEETINGS

The following table sets out the number of directors’ meetings and committee meetings held during the financial period and the number of meetings attended by each director (while they were a director or committee member). During the period 5 board meetings and nil audit committee meetings were held.

		Board of Directors
Directors	Held		Attended
Graham Anderson	5		5
Kenneth Fitzgerald	5		5
Julie Glanville	5		5
Nigel Ferguson	5		2

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the period 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 period 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 24 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 period ended 30 June 2008. 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 period:

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 period. Except as noted the named persons held their current positions for the whole of the financial period and since the end of the financial period:

Leonard Math

company secretary

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Ethan Minerals Limited – Annual Report

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 22.

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 period ending 30 June 2008.

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 period:

Period ended 30 June 2008

Name Directors Graham Anderson (i) Kenneth Fitzgerald Julie Glanville Nigel Ferguson Executives Leonard Math TOTAL	Short-term employee benefits Post- employment benefits Cash salary and fees Other services Super- annuation Share-based payment – options Total % consisting of options $ $ $ $ $ % 30,030 - - 36,900 66,930 55.1 75,000 - - 73,800 148,800 49.6 75,000 - - 73,800 148,800 49.6 - - - 36,900 36,900 100 - - - 12,300 12,300 100 180,030 - - 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 period received a payment as part of consideration for agreeing to hold the position.

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Ethan Minerals Limited – Annual Report

Share-based payments granted as compensation in the period ended 30 June 2008

The following grants of share-based payment compensation to directors and senior management relate to the period ended 30 June 2008. No options issued during the period were exercised or lapsed during the period .

Name	Expiry date / Exercise	Number	Number	% of grant	% of grant	Value of options granted
	price	granted	vested	vested	forfeited	at the grant date
						$
Graham Anderson	18 Oct 2012 at 20 cents	1,500,000	1,500,000	100	-	36,900
Kenneth Fitzgerald	18 Oct 2012 at 20 cents	3,000,000	3,000,000	100	-	73,800
Julie Glanville	18 Oct 2012 at 20 cents	3,000,000	3,000,000	100	-	73,800
Nigel Ferguson	18 Oct 2012 at 20 cents	1,500,000	1,500,000	100	-	36,900
Leonard Math	18 Oct 2012 at 20 cents	500,000	500,000	100	-	12,300

Signed in accordance with a resolution of the directors.

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Graham Anderson

Chairman

Perth, 14 September 2009

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Ethan Minerals Limited - Annual Report

Auditor’s Independence Declaration

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Ethan Minerals Limited - Annual Report

Income Statement

Ethan Minerals Limited - Annual Report Income Statement
PERIOD ENDED 30 JUNE 2008 Notes	2008 $
Revenue 6 Depreciation expense 7 Corporate expenses Occupancy expenses 7 Employee and consultant expenses 7 Travel and accommodation expenses Exploration, evaluation and development expenditure Share based payments 7 LOSS BEFORE TAX INCOME TAX NET LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF ETHAN MINERALS LIMITED Basic and diluted loss per share (cents per share) 15	9,089 (3,771) (110,629) (19,977) (184,399) (18,052) (518,094) (246,000)
	(1,091,833) -
	(1,091,833)
	(7.7)

Notes to the Financial Statements are included on pages 14 to 33

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Ethan Minerals Limited - Annual Report

Balance Sheet

Ethan Minerals Limited - Annual Report Balance Sheet
AT 30 JUNE 2008 Notes	2008 $
CURRENT ASSETS Cash and cash equivalents 5 Other receivables 9 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 11 Other assets 10 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 12 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 13 Reserves 14 Accumulated losses 14 TOTAL EQUITY	35,127 29,554
	64,681
	8,685 57,173
	65,858
	130,539
	112,210
	112,210
	112,210
	18,329
	864,162 246,000 (1,091,833)
	18,329

Notes to the Financial Statements are included on pages 14 to 33

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Ethan Minerals Limited - Annual Report

Statement of Changes in Equity

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

Notes to the Financial Statements are included on pages 14 to 33

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Ethan Minerals Limited - Annual Report

Cash Flow Statement

Ethan Minerals Limited - Annual Report Cash Flow Statement
PERIOD ENDED 30 JUNE 2008 Notes	2008 $
CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received NET CASH OUTFLOW FROM OPERATING ACTIVITIES 19 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Payments for exploration activities NET CASH OUTFLOW FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Proceeds from unallocated issue of ordinary shares Payment of share issue costs NET CASH INFLOW FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the period CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5	(346,053) 4,741
	(341,312)
	(12,456) (518,094)
	(530,550)
	901,500 100,000 (94,511)
	906,989
	35,127 -
	35,127

Notes to the Financial Statements are included on pages 14 to 33

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Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

Ethan Minerals Limited - Annual Report

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 14 September 2009.

Basis of preparation

The financial statements have been prepared from 9 March 2007 to 30 June 2008 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 2008, the entity had incurred losses of $1,091,833 for the period then ended and has a working capital deficiency of $47,529 (which includes $100,000 of unallocated share funds). At the date of signing of this report the company had a cash balance of $136,405.

These conditions indicate a material uncertainty that may cast significant doubt about the entity’s ability to continue as a going concern. The ability of the entity to continue as going concern is principally dependent upon:

• 1) The successful listing of the Company in the Australian Securities Exchange to raise a minimum of $2.5M to a maximum of $4M.

• 2) The Directors successfully managing the existing cash resources in accordance with planned expenditure forecast.

• 3) The Directors successfully conducting operating and exploration activities in a manner which ensures sufficient working capital is maintained to continue normal operating activities.

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 and receive the funds in around October 2009.

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 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.

Should the entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the entity be unable to continue as a going concern.

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

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Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

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 2008 reporting periods. The Company’s assessment of these new standards and interpretations is set out below:

Reference	Title	Details	Applicat- ion date of standard	Impact on the Company	Applicatio n date for Company
AASB 8 and AASB 2007-3	Operating Segments and consequential amendments to other Australian Accounting Standards	New standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting.	1 January 2009	AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Company's financial statements, although it may have an impact on the Company’s segment disclosures.	1 July 2009
AASB 123 (revised) and AASB 2007-6	Borrowing Costs and consequential amendments to other Australian Accounting Standards	The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.	1 January 2009	These amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised. The Company has no borrowing costs associated with qualifying assets and as such the amendments are not expected to have any impact on the Company'sfinancial report.	1 July 2009
AASB 101 (revised) and AASB 2007-8	Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards	Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.	1 January 2009	These amendments are only expected to affect the presentation of the Company’s financial report and will not have a direct impact on the measurement and recognition of amounts disclosed in the financial report. The Company has not determined at this stage whether to present a single statement of comprehensive income or two separate statements.	1 July 2009
AASB 2008-1	Amendments to Australian Accounting Standard – Share- based Payments: Vesting Conditions and Cancellations	The amendments clarify the definition of 'vesting conditions', introducing the term 'non-vesting conditions' for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non- vesting condition isnot satisfied.	1 January 2009	The Company has share-based payment arrangements that may be affected by these amendments. However, the Company has not yet determined the extent of the impact, if any.	1 July 2009
AASB 2008-2	Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation	The amendments provide a limited exception to the definition of a liability so as to allow an entity that issues puttable financial instruments with certain specified features, to classify those instruments as equity rather than financial liabilities.	1 January 2009	These amendments are not expected to have any impact on the Company’s financial report as the Company does not have on issue or expect to issue any puttable financial instruments as defined bythe amendments.	1 July 2009
AASB 3 (revised)	Business Combinations	The revised standard introduces a number of changes to the accounting for business combinations, the most significant of which allows entities a choice for each business combination entered into – to measure a non- controlling interest (formerly a minority interest) in the acquiree either at its fair value or at itsproportionate interest in the	1 July 2009	The Company has no current plans to enter into any business combinations during the next financial year. The Company has not yet assessed the impact of early adoption, including which accounting policy to adopt.	1 July 2009

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Notes to the Financial Statements (continued)

30 JUNE 2008

0 JUNE 2008
		acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.
AASB 127 (revised)	Consolidated and Separate Financial Statements	Under the revised standard, a change in the ownership interest of a subsidiary (that does not result in loss of control) will be accounted for as an equity transaction.	1 July 2009	If the Company changes its ownership interest in existing subsidiaries in the future, the change will be accounted for as an equity transaction. This will not give rise to a gain or a loss in the Company’s income statement.	1 July 2009
AASB 2008-3	Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127	Amending standard issued as a consequence of revisions to AASB 3 and AASB 127.	1 July 2009	Refer to AASB 3 (revised) and AASB 127 (revised) above.	1 July 2009
AASB 2008 - 5	Amendments to Australian Accounting Standards arising from the Annual Improvements Process	Makes amendments to 25 different Standards and is equivalent to the IASB Standard_Improvements to IFRSs_ issued in May 2008. The IASB’s annual improvements project provides a vehicle for making non-urgent but necessary amendments to Standards. The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.	1 January 2009	These amendments are not expected to have a material impact on the Company’s financial report.	1 July 2009
AASB 2008-6	Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process	Makes amendments to Australian Accounting Standards AASB 1_First-time_ Adoption of Australian Equivalents to International Financial Reporting Standards_and AASB 5_Non-current Assets Held for Sale and Discontinued Operations. These amendments are additional to those in AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project.	1 January 2009	These amendments are not expected to have a material impact on the Company’s financial report.	1 July 2009

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Notes to the Financial Statements (continued)

30 JUNE 2008

AASB 2008 - 7	Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate	This Amending Standard: • amends AASB 127_Consolidated and_ Separate Financial Statements_to remove the definition of the 'cost method' and to require the separate financial statements of a new parent formed as the result of a specific type of reorganisation to measure the cost of its investment in the previous parent at the carrying amount of its share of the equity items of the previous parent at the date of the reorganisation • removes from AASB 118_Revenue_the requirement to deduct dividends declared out of pre-acquisition profits from the cost of an investment in a subsidiary, jointly controlled entity or associate. Therefore, all dividends from a subsidiary, jointly controlled entity or associate are recognised by the investor as income • implements consequential amendments to AASB 136_Impairment of Assets, introducing a new indicator of impairment for investments in subsidiaries, jointly controlled entities and associates where a dividend has been recognised • allow first-time adopters to use a deemed cost of either fair value or the carrying amount under previous GAAP to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.	1 January 2009	These amendments are not expected to have a material impact on the Company’s financial report.	1 July 2009
Amendments to International Financial Reporting Standards	Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate	The main amendments of relevance to Australian entities are those made to IAS 27 deleting the ‘cost method’ and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity's separate financial statements (i.e., parent company accounts). The distinction between pre- and post- acquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value.	1 January 2009	Recognising all dividends received from subsidiaries, jointly controlled entities and associates as income will likely give rise to greater income being recognised by the Company after adoption of these amendments. In addition, if the Company enters into any Company reorganisation establishing new parent entities, an assessment will need to be made to determine if the reorganisation meets the conditions imposed to be effectively accounted for on a ‘carry-over basis’ rather than at fair value.	1 July 2009

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Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

Amendments to International Financial Reporting Standards	Improvements to IFRSs	The improvements project is an annual project that provides a mechanism for making non- urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact.	1 January 2009 except for amend- ments to IFRS 5, which are effective from 1 July 2009.	The Company has not yet determined the extent of the impact of the amendments, if any.	1 July 2009
IFRIC 15	Agreements for the Construction of Real Estate	This interpretation proposes that when the real estate developer is providing construction services to the buyer's specifications, revenue can be recorded only as construction progresses. Otherwise, revenue should be recognised on completion of the relevant real estate unit.	1 January 2009	The Company does not enter into agreements to provide construction services to the buyer's specifications and as such this interpretation is not expected to have any impact on the Company’sfinancial report.	1 July 2009
IFRIC 16	Hedges of a Net Investment in a Foreign Operation	This interpretation proposes that the hedged risk in a hedge of a net investment in a foreign operation is the foreign currency risk arising between the functional currency of the net investment and the functional currency of any Company. This also applies to foreign operations in the form of joint ventures, associates orbranches.	1 January 2009	The Interpretation is unlikely to have any impact on the Company since it does not significantly restrict the hedged risk or where the hedging instrument can be held.	1 July 2009

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

18

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

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.

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Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

(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.

(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.

20

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

(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.

21

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

	2008 $
5. CASH Cash and cash equivalents 6. REVENUE Interest revenue 7. OTHER INCOME AND EXPENSES (a) Loss before income tax includes the following specific expenses: Depreciation Rental of premises Consulting fees Share based payments	35,127
	9,089
	3,771 19,977 184,399 246,000

22

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2008

		2008 $
8. INCOME TAX (a) Income tax expense/(benefit) Deferred tax benefit on origination and reversal of temporary differences Total income tax benefit per income statement (b) Numerical reconciliation of income tax benefit to prima facie tax payable Loss from continuing operations before income tax benefit Prima facie tax benefit at the Australian tax rate of 30% Add tax effect of: Non-deductible expenses Effect of current year tax losses not recognised Effect of reversal of temporary differences Less tax effect of: Tax deductible equity raising costs 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	Assets Liabilities 2008 2008 $ $	-
		-
		(1,091,833) (327,550) 86,213 241,027 2,551
		329,790 (2,240)
		(2,240)
		-
		-
		-
		Net 2008 $
Accruals & provisions Other items	- - - -	- -
	- -	-

23

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements continued

30 JUNE 2008

7. INCOME TAX (cont’d)

(e) Movement in temporary differences recognised during the period

	Balance at beginning period Recognised in income Recognised in equity Balance at 30 June 2008 $ $ $ $
Accruals & provisions Other items Net tax assets/(liabilities)	- - - - - - - -
	- - - -

(f) Unrecognised deferred tax assets

	2008 $
Deferred tax assets at 30% have not been recognised in respect of the following: Deductible temporary differences Tax losses	11,361 241,027
	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 virtual 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.

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

	2008 $
10. OTHER ASSETS Preliminary cost of capital raising	57,173
	57,173

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Ethan Minerals Limited - Annual Report

Notes to the Financial Statements continued

30 JUNE 2008

11. PROPERTY, PLANT AND EQUIPMENT

	Computer Software & Equipment Plant & Equipment Total $ $ $	2008 $ 4,210 108,000
Gross carrying amount Balance at beginning period Additions Balance at 30 June 2008 Accumulated depreciation, amortisation and impairment Balance at beginning period Depreciation charge Balance at 30 June 2008 Net book value As at 30 June 2008 12. TRADE AND OTHER PAYABLES Trade payables Other payables* and accruals	- - - 8,956 3,500 12,456
	8,956 3,500 12,456
	- - - (2,983) (788) (3,771)
	(2,983) (788) (3,771)
	5,973 2,712 8,685
		112,210

*Other payables of $100,000 relates to money received for further capital raising at $0.10 each in which the shares were subsequently issued on the 4 August 2008.

13. ISSUED CAPITAL

(a) Share capital

13. ISSUED CAPITAL (a) Share capital
	2008 Number of shares $
Ordinary shares fully paid (b) Movements in ordinary share capital	20,206,250 864,162
	2008 Number of shares $
Beginning of the financial period Issued during the period: − Issue of shares at $0.001 each − Issue of shares at $0.075 each − Issue of shares at $0.08 each − Issue of shares at $0.10 each Less transaction costs End of the financial period	- - 9,000,000 9,000 5,400,000 405,000 4,656,250 372,500 1,150,000 115,000 - (37,338)
	20,206,250 864,162

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.

25

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Notes to the Financial Statements continued

30 JUNE 2008

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 2008
Unlisted − Exercisable at 20 cents, on or before 18 October 2012 Total options on issue at end of period Share options carry no rights to dividends and no voting rights.	10,000,000
	10,000,000
	2008 $
14. RESERVES AND ACCUMULATED LOSSES (a) Reserves Share-based payments reserve Balance at beginning period Employee share options Balance at end period (b) Accumulated losses Balance at beginning period Net loss for the period Balance at end period	- 246,000
	246,000
	- (1,091,833)
	(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.

15. LOSS PER SHARE

15. LOSS PER SHARE
	2008 $
(a) Reconciliation of earnings used in calculating loss per share Loss attributable to the ordinary equity holders of the company used in calculating basic and diluted loss per share	1,091,833
	Number of shares
(b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share	14,188,174

(c) Information on the classification of options

As the Company has made a loss for the period ended 30 June 2008, 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.

16. DIVIDENDS

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

26

Ethan Minerals Limited - Annual Report

Notes to the Financial Statements continued

30 JUNE 2008

	2008 $
17. COMMITMENTS (a) Exploration commitments Within one year	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.

18. CONTINGENCIES

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

19. CASH FLOW STATEMENT

19. CASH FLOW STATEMENT
	2008 $
(a) Reconciliation of cash and cash equivalents Cash and cash equivalents as shown in the balance sheets and the statements of cash flows (b) Reconciliation of loss for the period to net cash outflow from operating activities Loss for the period Non-Cash Items: Depreciation of non-current assets Share based payments Non-Operating activities Exploration expenditure (Increase)/decrease in assets: (Increase)/decrease in other receivables Increase/(decrease) in liabilities: (Decrease)/increase in trade and other payables Net cash outflow from operating activities	35,127
	(1,091,833) 3,771 246,000 518,094 (29,554) 12,210
	(341,312)

27

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Notes to the Financial Statements continued

30 JUNE 2008

20. 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

Financial assets Cash and cash equivalents Other receivables Financial liabilities Trade and other payables	2008 35,126 29,554
	64,680
	112,210
	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 period.

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 period 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.

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Notes to the Financial Statements continued

30 JUNE 2008

(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.

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

(d) 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.

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Notes to the Financial Statements continued

30 JUNE 2008

21. 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	Exercise	Weighted average fair
					Price	value at grant date
					cents	cents
Oct	07 at 20 cents	10,000,000	18 Oct 07	18 Oct 12	20	1.37

The weighted average fair value of options granted during the period was $0.0246. 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

Inputs into the model
Option series	Oct 07 at
	20 cents
Grant date share price	18 Oct 07
Exercise price (cents)	20
Expected volatility (%)	50
Option life (years)	5
Dividend yield	-
Risk-free interest rate (%)	6.5

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

	2008 Number of options Weighted average exercise price cents
Outstanding at the beginning of the year Granted Outstanding at end period Exercisable at end period	- - 10,000,000 20
	10,000,000 20
	10,000,000 20

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30 JUNE 2008

22. KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Details of key management personnel

(i) Directors

The following persons were directors of Ethan Minerals Limited during the period ended 30 June 2008:

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 period ended 30 June 2008:

Leonard Math Company Secretary

(b) Key management personnel compensation

	2008 $
Consultancy fees (i) Professional fees (ii) Share-based payments	150,000 30,030 233,700
	413,730

• (i) During the period ended 30 June 2008, the Company paid $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 period ended 30 June 2008, the Company paid $30,030 to GDA Corporate for accounting and company secretarial to the Company. Graham Anderson is a Director of GDA Corporate and Leonard Math is an employee of GDA Corporate.

(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 period.

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30 JUNE 2008

23. RELATED PARTY TRANSACTIONS

(e) Key management personnel equity holdings

• (i) Fully paid ordinary shares of Ethan Minerals Limited

	Balance at start	Granted as	Received on	Net other change	Balance at end
	of period	compensation	exercise of		of period or date
			options		of 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 period by each director of Ethan Minerals Limited and other key management personnel of the Company, including their personally related parties, are set out below:

Balance at start of period Granted as compen- sation Exer- cised Net other change No No No No 2008 Directors Graham Anderson - 1,500,000 - - Kenneth Fitzgerald - 3,000,000 - - Julie Glanville - 3,000,000 - - Nigel Ferguson - 1,500,000 - - Executives Leonard Math - 500,000 - -	At end of period Balance at year end or resignation date Balance vested Vested but not exercise- able Vested and exercise- able Options vested during period No No No No No 1,500,000 1,500,000 - 1,500,000 - 3,000,000 3,000,000 - 3,000,000 - 3,000,000 3,000,000 - 3,000,000 - 1,500,000 1,500,000 - 1,500,000 - 500,000 500,000 - 500,000 -

Transactions with other related parties

Ethan Park Contractor

The company paid $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 period. The amount paid and payable for the period was $30,030.

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 period. The amount paid and payable for the period was $7,674.

32

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Notes to the Financial Statements continued

30 JUNE 2008

	2008 $
24. REMUNERATION OF AUDITORS During the period the following fees were payable for services provided by the auditor of the Company, its related practices and non-related audit firms: Audit services Audit or review of financial reports	8,000
	8,000

25. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Subsequent to 30 June 2008, the Company has issued 8,225,000 ordinary shares at $0.10 each raising $822,500. Total number of ordinary shares in the Company at date of signing of this report is 28,431,250.

The Company issued 1,500,000 unlisted options to a consultant. The details of the options are:

Issuing entity	Number of shares under	Class of shares	Exercise price of option	Expiry date of
	option			options
Ethan Minerals Limited	1,500,000	Ordinary	20 cents	5 Nov 2013

On the 29 December 2008, the Company has signed an agreement to purchase 100% of the Mary Springs Project for a consideration of $100,000.

At date of signing of this report, the Company has fully purchased 100% of the Mary Springs Project.

The Company is currently seeking towards listing in the Australian Securities Exchange.

No other matter or circumstance has arisen since 30 June 2008, 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.

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Ethan Minerals Limited - Annual Report

Directors' Declaration

In the directors’ opinion:

• (a) the financial statements and notes set out on pages 10 to 33 are in accordance with the Corporations Act 2001 , including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the company’s and the consolidated entity’s financial position as at 30 June 2008 and of their performance for the period ended on that date; and

• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• (c) the audited remuneration disclosures set out on page 6 of the directors’ report comply with Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001 .

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

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Graham Anderson Chairman

Perth, 14 September 2009

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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 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of Ethan Minerals Limited 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 Statement, that compliance with Australian Equivalents to International Financial Reporting Standards ensures that the financial report comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

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

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

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

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Liability limited by a scheme approved under Professional Standards Legislation.

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Independence

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

Auditor’s 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 company’s financial position as at 30 June 2008 and of its performance for the period 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

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 2 in the financial report which indicates that the entity incurred a net loss of $1,091,833 during the period ended 30 June 2008 and, as of that date, the entity’s had a working capital deficiency of $47,529. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.

Report on the Remuneration Report

We have audited the Remuneration Report commencing on page 6 of the directors’ report for the period ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Ethan Minerals Limited for the period ended 30 June 2008, complies with section 300A of the Corporations Acts 2001 .

PKF

Chartered Accountants

Chris Nicoloff Partner

Dated in Perth, Western Australia on this 14[th] day of September 2009.

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