PROSPECT RESOURCES LIMITED — Interim / Quarterly Report 2012

Jul 1, 2012

Prospect Resources Limited (formerly Ethan Minerals Limited)

Half-Year Financial Report 31 December 2010

Table of Contents

	Page
Directors' Report	3
Auditors Independence Declaration	5
Condensed Consolidated Statement of Comprehensive Income	6
Condensed Consolidated Statement of Financial Position	7
Condensed Consolidated Statement of Cash Flows	8
Consolidated Statement of Changes in Equity	9
Notes to the Condensed Consolidated Financial Statements	10
Directors Declaration	17
Independent Auditor's Review Report	18

DIRECTORS' REPORT

The directors of Prospect Resources Limited (formerly Ethan Minerals Limited) ("the Company") submit herewith the financial report of the Company and its subsidiaries ("the Group") for the half vear ended 31 December 2010.

DIRECTORS

The names of the company's directors in office during the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Jonathan Pager appointed 3 January 2012 Michael Pollak appointed 3 January 2012 Hugh Warner appointed 3 January 2012

Douglas William O'Neill (appointed 13 October 2010 & resigned 1 July 2011) Kenneth Fitzgerald resigned 3 January 2012 Julie Glanville resigned 3 January 2012 Graham Anderson resigned 13 October 2010 Nigel Ferguson resigned 12 July 2010

REVIEW OF OPERATIONS

The Group's principal activities were the exploration for mineral resources.

Appointment of Administrators

The Company was suspended from trading on the ASX on 21 February 2011 at its request. This was to allow the Company to conclude on a possible acquisition that did not eventuate. The suspension then continued as the Company did not lodge its interim financial report within the specified deadlines. On 1 July 2011, Bradley Tonks and John Vouris of Lawler Partners were appointed as Administrators ("the Administrators") of the Company and assumed control of the Company and its business, property and affairs.

Because of these events, assets have been written down to their realisable values in the condensed statement of financial position and liabilities have been recorded at the amounts for which proofs of debt have been received by the Administrators.

Furthermore, as a condition of the DOCA, the shares in the Company's subsidiaries were transferred into the Creditors Trust at the point of effectuating the DOCA.

Australia

Northampton, Western Australia (including Mary Springs)

As at the date of signing this half-year financial report, the Company has 100% of one exploration licence ("the Mary Springs project"), an 80% interest in a further 3 exploration licences and 5 Mining Access Agreements to 6 Queen Victoria Crown Grants as well as two mining applications pending.

The Company's lead prospect is the historical Mary Springs project. As announced to the market on 25 October 2010, the Mary Springs project hosts a JORC compliant Indicated and Inferred Mineral Resource of 394,419 tonnes @ 6.5% Pb for approximately 25,637 tonnes of contained lead metal. The resource is open in all directions...

Zambia

Alleara Mining Zambia Limited

In a prior period, the Company established a wholly owned subsidiary Allegra Mining Zambia Limited to enter into joint venture agreements in Zambia.

Indonesia

PT Ethan Mining Celebes

In a prior period, the Company established a wholly owned Indonesian subsidiary, PT Ethan Mining Celebes, to identify and source advanced mining opportunities in Indonesia.

INCOMPLETE RECORDS

The management and affairs of the Company were not under the control of the Directors of the Company since it entered voluntary administration on 1 July 2011 until the date that the Deed of Company Arrangement ("DOCA") was effectuated, being 28 March 2012.

The financial report was prepared by the Company's current Directors, who were not in office at the time the Company entered voluntary administration or for the periods presented in this report. The Directors who prepared this financial report were appointed on 3 January 2012.

To prepare the financial report, the Directors have reconstructed the financial records of the Company using:

• data extracted from the Company's accounting system for the period 1 July 2010 to the date the Company entered administration; and
• the record of receipts and payments made available by the Administrators for the period from their appointment on 1 July 2011.

It has not been possible for the Directors to obtain all the books and records:

• of the Company for the period prior to the appointment of the Administrators;
• of the Company maintained by the Administrators since their appointment on 1 July $2011:$ and
• of the subsidiaries of the Company...

Consequently, although the Directors have prepared this financial report to the best of their knowledge based on the information made available to them, they are of the opinion that it is not possible to state that this financial report has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001, nor is it possible to state that this financial report gives a true and fair view of the company's financial position.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company's 2010 annual financial report for the financial year ended 30 June 2010. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards

RESULTS OF OPERATIONS

The Company incurred an after tax operating loss for the half-year ended 31 December 2010 of \$5,740,977 (2009: Loss \$1,855,619).

AUDITOR'S INDEPENDENCE DECLARATION

The auditor's independence declaration is included on page 5 of this report.

Signed in accordance with a resolution of the directors made pursuant to s.306(3) of the Corporations Act 2001

$010$

Hugh Warner Director

28 June 2012

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX: 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

The Board of Directors Prospect Resources Limited Suite 6, 245 Churchill Ave Subiaco, WA 6008

28 June 2012

Dear Board Members

Prospect Resources Limited (formerly Ethan Minerals Limited)

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Prospect Resources Limited (formerly Ethan Minerals Limited).

As lead audit partner for the review of the financial statements of Prospect Resources Limited (formerly Ethan Minerals Limited) for the half year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

(ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner Chartered Accountants

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

	Notes	Consolidated
		31 December 2010	31 December 2009
		\$	\$
Interest received	$\mathbf{2}$	36,195	6,585
Other income	$\overline{2}$	340,294
Share based payments expense		(313,000)	(282,000)
Depreciation and amortisation expense		(27, 251)	(5,376)
Exploration expenditure		(3,967,529)	(793, 383)
Impairment of property, plant and equipment		(130, 861)
Impairment of receivables		(50, 275)
Impairment of exploration and evaluation expenditure		(276, 849)
Corporate expenses		(387, 210)	(53, 561)
Occupancy expenses		(42, 715)	(17, 699)
Marketing expenses		(41,067)	(14.231)
Employee & consultant expenses		(341, 533)	(50, 475)
Other expenses		(539, 176)	(645, 479)
Loss before income tax		(5,740,977)	(1,855,619)
Income tax expense
Loss after tax		(5,740,977)	(1,855,619)
Other comprehensive loss		(44, 563)
Total comprehensive loss for the period		(5,785,540)	(1,855,619)
Earnings per share (cents per share)
- basic loss for the half-year		(7.81)	(4.665)
- diluted loss for the half-year		(7.81)	(4.665)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

	Notes
		31 December 2010	30 June 2010
		\$	\$
ASSETS
Current Assets
Cash and cash equivalents	4	865,410	2,982,968
Trade and other receivables		78,098	174,143
Other financial assets			38,550
Total Current Assets		943,508	3,195,661
Non-Current Assets
Property, plant and equipment		130,439	215,554
Exploration and evaluation expenditure		1,300,000	1,576,849
Total Non-Current assets		1,430,439	1,792,403
TOTAL ASSETS		2,373,947	4,988,064
LIABILITIES Current liabilities Trade and other payables	5	912,652	674,434
Total Current Liabilities		912,652	674,434
TOTAL LIABILITIES		912,652	674,434
NET ASSETS		1,461,295	4,313,630
EQUITY
Contributed equity	7	12,757,392	10,137,187
Accumulated losses		(12, 194, 247)	(6,453,270)
Reserves	8	898 150	629,713
TOTAL EQUITY		1,461,295	4,313,630

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2010

	Notes
		31 December	31 December
		2010	2009
		\$	\$
Cash flows from operating activities
Payments to suppliers and employees		(905,089)	(521, 284)
Payments for exploration expenditure		(3, 475, 872)	(2, 238, 984)
Net cash flows from/(used in) operating activities		(4,380,961)	(2,760,268)
Cash flows from investing activities
Interest received		36,195	10,169
Purchase of property, plant and equipment		(72,997)	(170,037)
Net cash flows from/(used in) investing activities		(36,802)	(159, 868)
Cash flows from financing activities
Proceeds from issue of shares		2,405,242	6,930,000
Capital raising costs		(105, 037)	(308, 937)
Net cash flows from/(used in) financing activities		2,300,205	6,621,063
Net increase/(decrease) in cash and cash equivalents		(2, 117, 558)	3,700,927
Cash and cash equivalents at beginning of period		2,982,968	31,997
Cash and cash equivalents at end of period	4	865,410	3,732,924

PROSPECT RESOURCES LIMITED (formerly Ethan Minerals Limited) HALF YEAR REPORT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED	Issued shares	Option reserve	Foreign Currency Reserve	Accumulated losses	Total equity
At 1 July 2010	10,137,187	585,150	44,563	(6,453,270)	4,313,630
Loss for the period				(5,740,977)	(5,740,977)
Other comprehensive income			(44,563)		(44, 563)
Total comprehensive income for the period			(44, 563)	(5,740,977)	(5,785,540)
Issue of shares	2,725,242	$\overline{\phantom{a}}$			2,725,242
Share transaction costs	(105, 037)				(105,037)
Share-based payments		313,000	$\qquad \qquad =$		313,000
At 31 December 2010	12,757,392	898,150	$\blacksquare$	(12, 194, 247)	1,461,295

Issued shares	Option reserve	Foreign currency reserve	Accumulated losses	Total Equity
1,314,162	303,150		(1, 545, 341)	71,971
-			(1,855,619)	(1,855,619)
-	$\overline{\phantom{a}}$		(1,855,619)	(1,855,619)
6,970,000	۰			6,970,000
	282,000			282,000
(391,672)	٠		$\overline{\phantom{a}}$	(391,672)
7,892,490	585.150		(3,400,960)	5,076,680
				$\blacksquare$ $\sim$ $\blacksquare$

1. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 134 Interim Financial Reporting. The half-year report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.

$(a)$ Basis of Preparation

Incomplete records

The management and affairs of the Company were not under the control of the Directors of the Company since it entered voluntary administration on 1 July 2011 until the date that the Deed of Company Arrangement ("DOCA") was effectuated, being 28 March 2012.

The financial report was prepared by the Company's current Directors who were not in office at the time the Company entered voluntary administration or for the periods presented in this report. The Directors who prepared this financial report were appointed on 3 January 2012.

To prepare the financial report, the Directors have reconstructed the financial records of the Company using:

• data extracted from the Company's accounting system for the period 1 July 2010 to the date the Company entered administration; and
• the record of receipts and payments made available by the Administrators for the period from their appointment on 1 July 2011.

It has not been possible for the Directors to obtain all the books and records:

• of the Company for the period prior to the appointment of the Administrators;
• of the Company maintained by the Administrators since their appointment on 1 July 2011: and
• of the subsidiaries of the Company;

Consequently, although the Directors have prepared this financial report to the best of their knowledge based on the information made available to them, they are of the opinion that it is not possible to state that this financial report has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001, nor is it possible to state that this financial report gives a true and fair view of the company's financial position.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company's 2010 annual financial report for the financial year ended 30 June 2010. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

$\mathbf{1}$ SIGNIFICANT ACCOUNTING POLICIES

$(b)$ Changes in accounting policies

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period which include:

Amendments to AASB 5, 8, 101, 107, 117, 118, 136 and 139 as a consequence of AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

AASB 2009-5 introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards. A number of the amendments are largely technical, clarifying particular terms, or eliminating unintended consequences. Other changes are more substantial, such as the current/non-current classification of convertible instruments, the classification of expenditures on unrecognised assets in the statement of cash flows and the classification of leases of land and buildings. The adoption of these amendments has not resulted in any changes to the Group's accounting policies and has no effect on the amounts reported for the current or prior periods.

Significant accounting policies $(c)$

The half-year financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2010, except for the adoption of amending standards mandatory for annual periods beginning on or after 1 July 2010, as described above in Note 2(b).

$(d)$ Going concern

The consolidated entity incurred a net loss of \$5,740,977 (2009: Loss \$1,855,619) and experienced total cash outflows from operating activities of \$4,380,961 (2009: outflows of \$2,760,268) for the period ended 31 December 2010 and, as at that date, had net current assets of \$30,856 (30 June 2010: \$2,521,227).

Subsequent to the end of the period the following events took place:

• On 21 February 2011, the Company was suspended from trading on the ASX at its request. On 1 July 2011, Bradley Tonks and John Vouris of Lawler Partners were appointed Administrators of the Company and assumed control of the Company and its business, property and affairs.
• A syndicate headed by Pager Partners (the Syndicate), were successful in winning a bid to recapitalise the Company, which was accepted at a meeting of the Company's creditors on 4 November 2011. The Deed of Company Arrangement (DOCA) was signed on 25 November 2011.
• Under the Proposal, it was agreed that \$950,000 would be paid to the Deed Administrators for distribution under the DoCA via the Creditors' Trust. These funds were loaned to the Company by the Syndicate and the DoCA was fully effectuated on the 28 March 2012 and has therefore been terminated. A Creditors' Trust Deed has been established pursuant to the DoCA to pay the Deed Administrator's fees and costs, the Administrator's fees and costs and the Trustees' fees and costs, with the balance to be distributed to creditors as full and final payment of the Company's outstanding debts. All trade and other payables at 31 December 2010 have been transferred to the Creditors' Trust.
• On 14 May 2012, the Company issued 100,000,000 ordinary shares and 60,000,000 options exercisable at \$0.01, raising \$251,500 before costs. On the 24 May 2012, the Company issued 190,000,000 ordinary shares raising \$1,900,000 before costs. The Company used part of these funds to repay the \$950,000 loan from the Syndicate, by either offsetting against securities applied for on 14 May 2012 and 24 May 2012, or via a cash payment on 5 June 2012.

$(d)$ Going concern (continued)

The cash flow forecast indicates that based on the completion of the DoCA and the equity raising described above, the consolidated entity will have sufficient cash flows to meet all commitments and working capital requirements for a period of at least 12 months from the date of signing the half-year financial report. Accordingly, the directors are satisfied that the going concern basis of preparation is appropriate.

The half-year financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

2. REVENUE

Revenue from Continuing Operations $(a)$

	December 2010 S	December 2009
Revenue
Interest revenue	36,195	6,585
Other income
Foreign exchange gain realised	340,294
	376,489	6,585

3. SEGMENT INFORMATION

The Company's operations consist of mineral exploration in Australia, Zambia and Indonesia.

AASB 8 Operating Segments requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes.

As at 31 December 2010, the Company had not progressed any of its interests beyond exploration, and therefore it was appropriate that the Company report by geographic segment in line with its internal reporting.

31 December 2010

Segment revenue Segment (loss)	Australia 36,195 (2, 292, 124)	Indonesia (819, 180)	Zambia (2,629,673)	Elimination	Consolidated 36,195 (5,740,977)
31 December 2009
Segment revenue Segment loss	Australia 6,585 (1,855,619)	Indonesia	Zambia	Elimination	Consolidated 6,585 (1,855,619)
31 December 2010
Segment assets Segment liabilities Segment	2,373,947 634,771		277,881		2,373,947 912,652
depreciation	24,237		3.014		27,251
30 June 2010
Segment assets Segment liabilities Segment	4.804,435 470,469	164,609 64,505	19,020 139,460		4,988,064 674,434
depreciation	29,377		1,450		30,827

4. CASH AND CASH EQUIVALENTS

For the purposes of the half-year cash flow statement, cash and cash equivalents are comprised of the following:

	December 2010	June 2010 \$
Cash at bank and in hand	865.410	2,982,968
	865.410 _________	2.982.968

5. TRADE AND OTHER PAYABLES

	December 2010 S	June 2010 \$
Trade creditors	481,526	674,434
Other creditors	431,126
	912.652	674.434

A Creditors' Trust Deed has been established pursuant to the DOCA which will be used to pay the Deed Administrator's fees and costs, the Administrator's fees and costs and the Trustees' fees and costs, with the balance distributed to creditors as full and final payment of the Company's outstanding debts. Refer to note 11.

6. COMMITMENTS AND CONTINGENCIES

Exploration Commitments

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.

Outstanding exploration commitments are as follows (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):

	December 2010	June 2010 \$
Not longer than 1 year	366,000	261,000
Longer than 1 year and not longer than 5 years Longer than 5 years
	366,000	261,000

7. CONTRIBUTED EQUITY

	December 2010
	No.	S
(i) Ordinary shares	82,593,287	12.757.392
Movement in ordinary shares on issue At 1 July 2010	69.260.250	10.137.187
Issue of 10,773,037 shares (net) Issue of 1,600,000 shares in settlement of debt Exercise of 20 cent options expiring 5/11/2013 Issue of 750,000 shares for consultancy services At 31 December 2010	10.773.037 1,600,000 210,000 750,000 82,593,287	1,995,705 320 000 42,000 262,500 12,757,392

PROSPECT RESOURCES LIMITED (formerly Ethan Minerals Limited) HALF YEAR REPORT

RESERVES 8.	December 2010 \$	June 2010 S
Share-based payments reserve Foreign exchange translation reserve	898,150 898,150	585,150 44,563 629,713
Share-based payments reserve At 1 July 2010 Employee share options At 31 December 2010	585,150 313,000 898,150	303,150 282,000 585,150
Foreign exchange translation reserve At 1 July 2010 Movement during period At 31 December 2010	44,563 (44,563)	44,563 44,563

9. SHARE BASED PAYMENTS

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

Option Series	Number	Grant Date	Expiry Date	Exercise Price	Fair Grar
Issued 18 Oct 2007(i)	9,701,500	18/10/2007	18/10/2012	\$0.20
Issued 5 Nov 2008 (ii)	647 500	5/11/2008	5/11/2013	\$0.20
Issued 2 Dec 2009 (iii)	1,000,000	2/12/2009	3/12/2011	\$0.23
Issued 9 Dec 2009 (iv)	1,402,000	9/12/2009	8/12/2011	\$0.23
Issued 30 July 2010 (iv)	2,000,000	30/07/2010	30/07/2012	\$0.23

(i) Options issued during financial year ended 30 June 2008, these options vest at grant date. 9,000,000 options were escrowed under the ASX Listing Rule. These 9,000,000 options will be released from escrow on the 3 December 2011.

(ii) Options issued during the financial year ended 30 June 2009 vest at the date of their issue.

(iii) Options issued on the 2 December 2009 will vest 3 December 2011.

(iv) Options issued on 9 December 2009 and 30 July 2010 vest at the date of their issue.

Types of share-based payment plans

As provided for in the Prospectus, the Company entered into an agreement to grant 1,000,000 unlisted share options to Precinct Eight in exchange for the provision of exclusive financial advisory and other services. On 9 December 2009, an additional 2,000,000 share options were issued to Precinct Eight as part of a new Corporate Services Agreement dated 5 December 2009.

The exercise price of the options is \$0.23. The options will become exercisable immediately and expire on 3 December 2011 and 8 December 2011 respectively. The fair value of the options granted is estimated as at the date of grant using a BlackScholes calculation model, taking into account the terms and conditions upon which the options were granted. The estimated total fair value of the options granted is \$282,000.

9. SHARE BASED PAYMENTS (continued)

The following table lists the inputs to the model used for the half year ended 31 December 2010 and 31 December 2009:

No. of options	2,000,000	1.000.000	2,000,000
Grant date	10 July 2010	2 December 2009	9 December 2009
Share price	\$0,2700	\$0.2000	\$0.1950
Exercise price	\$0.23	\$0.23	\$0.23
Interest rate	4.5%	3.25%	3.25%
Expiry date	9/7/2012	3/12/2011	8/12/2011
Volatility	100%	100%	100%
Value per option	0.1565	0.0962	0.0929

10. KEY MANAGEMENT PERSONNEL

Remuneration arrangements of key management personnel are disclosed in the annual financial report. In addition, during the interim period, a cash payment of \$120,000 was paid to former director Nigel Ferguson in consideration of him resigning as a director and the termination of the consultancy agreement between Ridgeback Holdings Pty Ltd and the Company.

11. EVENTS AFTER BALANCE DATE

The Company was suspended from trading on the ASX on 21 February 2011 at its request. On 1 July 2011, Bradley Tonks and John Vouris of Lawler Partners were appointed Administrators of the Company and assumed control of the Company and its business, property and affairs.

The Administrators subsequently advertised, sought and negotiated proposals to reconstruct the Company with interested parties. A syndicate headed by Pager Partners (the Syndicate) put forward a recapitalisation proposal which was accepted at a meeting of the Company's creditors on 4 November 2011. The DoCA was signed on 25 November 2011.

Under the Proposal, it was agreed that \$950,000 would be paid to the Deed Administrators for distribution under the DoCA via the Creditors' Trust. These funds were loaned to the Company by the Syndicate and the DoCA was fully effectuated on the 28 March 2012 and has therefore been terminated. A Creditors' Trust Deed has been established pursuant to the DoCA to pay the Deed Administrator's fees and costs, the Administrator's fees and costs and the Trustees' fees and costs, with the balance to be distributed to creditors as full and final payment of the Company's outstanding debts. All trade and other payables at 31 December 2010 have been transferred to the Creditors' Trust.

On 14 May 2012, the Company issued 100,000,000 ordinary shares and 60,000,000 options exercisable at \$0.01, raising \$251,500 before costs. On 24 May 2012, the Company issued 190,000,000 ordinary shares raising \$1,900,000 before costs. The Company used part of these funds to repay the \$950,000 loan from the Syndicate, by either offsetting against securities applied for on 14 May 2012 and 24 May 2012, or via a cash payment on 5 June 2012.

The Directors are currently working towards the restructure and recapitalisation of the Company and liaising with the ASX in relation to the reinstatement of Prospect Resources Limited's (formerly Ethan Minerals Limited) securities for trading on the ASX.

On the 7 March 2012, the Company received a letter from the Department of Mines and Petroleum regarding the non compliance with the expenditure condition for tenements E66/53, E66/64 and E66/73. They advised that the department would impose penalties/fines totaling \$13,351 as an alternative to the forfeiture of the above licenses. The Company has paid this amount.

DIRECTORS' DECLARATION

• 1) In the opinion of the Directors of Prospect Resources Limited (formerly Ethan Minerals Limited) ("the Company"),
• a) as set out in note 1 and other parts of this report, although the Directors have prepared the financial statements and notes thereto to the best of their knowledge based on the information made available to them, they are of the opinion that it is not possible to state that the financial statements and notes thereto, are in accordance with the Corporations Act 2001, including:
  • i) giving a true and fair view of the Company's financial position as at 31 December 2010 and of its performance for the half year ended on that date; and
  • ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.
• 2) As set out in note 1(d), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Hugh Warner Director

Perth, 28 June 2012

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au

Independent Auditor's Review Report to the members of Prospect Resources Limited (formerly Ethan Minerals Limited)

We were engaged to review the accompanying half-year financial report of Prospect Resources Limited (formerly Ethan Minerals Limited), which comprises the condensed statement of financial position as at 31 December 2010, and the condensed statement of comprehensive income, the condensed statement of cash flows and the condensed statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the end of the halfyear or from time to time during the half-year as set out on pages 6 to 17.

Directors' Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on conducting our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity. Because of the matters described in the Basis for Disclaimer of Conclusion paragraph, however, we were not able to obtain sufficient appropriate evidence to provide a basis for a conclusion.

Auditor's Independence Declaration

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Prospect Resources Limited, would be in the same terms if given to the directors as at the time of this auditor's review report.

Basis for Disclaimer of Conclusion

As stated in Note 1(a) to the half-year financial report, Prospect Resources Limited went into voluntary administration on 1 July 2011. The directors state that they have not been able to obtain all the books and records of the consolidated entity for the period prior to their appointment and have prepared the half-year financial report based on the information made available to them at the time of preparation of the financial report. As the remaining accounting and statutory records are not adequate to permit the application of necessary review procedures, we are unable to obtain all the information and explanations we require in order to form a conclusion on the half-year financial report.

\Liability limited by a scheme approved under Professional Standards Legislation.

Page 2 29 June 2012

Disclaimer of Auditor's Conclusion

Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraph, we have been not been able to obtain sufficient appropriate evidence to provide a basis for a review conclusion. Accordingly, we do not express a conclusion on the half-year financial report.

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner Chartered Accountants Perth, 28 June 2012