PTR MINERALS LTD - Annual Report 2010

Petratherm Ltd ABN 17 106 806 884

Annual Financial Report

for the year ended 30 June 2010

Petratherm Ltd – Annual Report

Contents to Financial Report

Contents to Financial Report	Contents to Financial Report
Corporate Information .................................................................................................. 3
Directors’ report ............................................................................................................ 4
Auditor’s Independence declaration ......................................................................... 22
Corporate Governance Statement ............................................................................. 23
Statement of Comprehensive Income ....................................................................... 30
Statement of Financial Position ................................................................................. 31
Statement of Changes in Equity ................................................................................ 32
Statement of Cash Flows ........................................................................................... 33
Notes	to the Financial Statements ............................................................................ 34
1.	CORPORATE INFORMATION ......................................................................... 34
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ............................... 34
3.	OPERATING SEGMENTS ............................................................................... 50
4.	REVENUE AND EXPENSES............................................................................ 52
5.	INCOME TAX ................................................................................................... 54
6.	EARNINGS PER SHARE ................................................................................. 54
7.	CASH AND CASH EQUIVALENTS ................................................................. 55
8.	TRADE AND OTHER RECEIVABLES ............................................................. 56
9.	OTHER CURRENT ASSETS............................................................................ 57
10.	PROPERTY, PLANT AND EQUIPMENT ......................................................... 57
11.	EXPLORATION AND EVALUATION ASSETS ................................................ 57
12.	SHARE-BASED PAYMENTS ........................................................................... 58
13.	TRADE AND OTHER PAYABLES ................................................................... 61
14.	DEFERED INCOME ......................................................................................... 61
15.	BORROWINGS ................................................................................................ 61
16.	PROVISIONS ................................................................................................... 61
17.	OTHER NON-CURRENT LIABILITIES ............................................................ 62
18.	ISSUED CAPITAL ............................................................................................ 62
19.	RESERVES ...................................................................................................... 62
20.	RETAINED EARNINGS .................................................................................... 63
21.	MINORITY INTEREST ...................................................................................... 63
22.	COMMITMENTS FOR EXPENDITURE ............................................................ 64
23.	CONTINGENT ASSETS AND LIABILITIES ..................................................... 64
24.	AUDITOR’S REMUNERATION ........................................................................ 65
25.	SUBSIDIARIES ................................................................................................ 65
26.	FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES AND
	FINANCIAL INSTRUMENTS ............................................................................ 65
27.	RELATED PARTY DISCLOSURE AND KEY MANAGEMENT PERSONNEL
	REMUNERATION............................................................................................. 68
28.	SUBSEQUENT EVENTS .................................................................................. 73
29.	ADDITIONAL INFORMATION (JOINT VENTURES) ....................................... 73
30.	PARENT ENTITY INFORMATION ................................................................... 74
31.	GOING CONCERN BASIS OF ACCOUNTING ................................................ 74
Directors' Declaration ................................................................................................. 75
Independent Audit Report to the members of Petratherm Ltd ................................ 76

Petratherm Ltd – Annual Report

Corporate Information

This annual report covers both Petratherm Ltd (ABN 17 106 806 884) and its controlled entities (“Group”). The Group's functional and presentation currency is Australian Dollars.

A description of the Group's operations and of its principal activities is included in the review of operations and activities in the directors' report on page 4 to 21.

Directors

Derek Carter (Chairman) Terry Kallis (Managing Director) Richard Bonython Richard Hillis Simon O'Loughlin Lew Owens (appointed 1/04/2010)

Company Secretary

Donald Stephens

Registered Office

C/- HLB Mann Judd (SA) Pty Ltd 82 Fullarton Road NORWOOD SA 5067

Principal place of business

Level 1, 129 Greenhill Road UNLEY SA 5061

Share Registry

Comptuershare Investor Services Pty Ltd Level 5, 115 Grenfell Street ADELAIDE SA 5000

Legal Advisors

O'Loughlins Lawyers Level 2, 99 Frome Street ADELAIDE SA 5000

Bankers

National Australia Bank 22 – 28 King William Street ADELAIDE SA 5000

Auditors

Grant Thornton South Australian Partnership Chartered Accountants 67 Greenhill Road WAYVILLE SA 5034

Petratherm Ltd – Annual Report

Directors’ report

Your directors submit their report for the year ended 30 June 2010.

DIRECTORS

Derek Carter Chairman Terry Kallis Managing Director Richard Bonython Non-Executive Director Richard Hillis Non-Executive Director Simon O'Loughlin Non-Executive Director Lewis Owens Non-Executive Director (appointed 1/04/2010)

The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. The directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Derek Carter , MSc, FAusIMM (CP) (Chairman, Non- Executive Director)

Derek Carter has over 40 years experience in exploration and mine geology, including 17 years in management of ASX- listed exploration companies. He held senior positions in the Shell Group of Companies and Burmine Ltd before founding Minotaur in 1993. He was Managing Director of Minotaur from its inception until early 2010 when he became Chairman of that company. He is a Director of both Mithril Resources Ltd and Toro Energy Ltd, both of which are listed on the ASX.

He was Vice President and later, President, of the South Australian Chamber of Mines and Energy, was a Director of the Australian Gold Council and Chairman of the Minerals Exploration Advisory Group, a body advising the Federal Minister on issues affecting exploration within Australia. He is a member of the South Australian Resources Development Board, and the South Australian Minerals and Petroleum Experts Group.

He was awarded AMEC’s Prospector of the Year Award (jointly) in 2003, is a Centenary Medalist and was recently honored with the President’s Award from the AusIMM.

Terry Kallis , BE (Elec) MBA (Managing Director)

Terry holds degrees in Electrical Engineering and a Masters in Business Administration. He has a very successful and highly regarded career in the Australian Electricity Industry both as a consultant and senior executive. His role was primarily as chief financial officer and latterly as executive manager Network – ElectraNet SA. During his time at ETSA, he was intimately involved with major reforms implemented in the late 1990’s. Those reforms included commercialisation, corporatisation, involvement in the new National Electricity Market (NEM) and the ETSA sale.

Petratherm Ltd – Annual Report

Directors’ report

Richard Bonython , B Ag Sc (Non- Executive Director)

Richard Bonython was a director of Minotaur Gold Limited for six years, Minotaur Resources Limited for 5 years and retired as chairman of Hindmarsh Resources Limited following the take over of that company in early 2006. He retired as chairman of Diamin Resources NL in 1999 having been a director of that company for 15 years. He was executive director of Pioneer Property Group Limited for over 15 years and has experience of over 40 years in the building, rural and mineral industries. He is a director of Mithril Resources Limited (ASX Listed) and Minotaur Exploration Limited (ASX Listed), and is a member of the Company's audit committee.

Richard Hillis, BSc, ARSM, PhD (Non-Executive Director)

Richard Hillis is CEO of the Deep Exploration Technologies Cooperative Research Centre (DET CRC). The DET CRC is an industry- and government-funded company established to deliver research programs in mineral exploration technologies. Richard graduated BSc (Hons) from Imperial College (London, 1985), and PhD from the University of Edinburgh (1989) and was until recently State of South Australia Professor of Petroleum Geology and Head of the Australian School of Petroleum (University of Adelaide). He has published over 100 papers in the areas of petroleum geomechanics and basin tectonics and has consulted extensively to, and run short courses for, the petroleum industry on these topics. Richard is a non-executive director of the unlisted companies JRS Petroleum Research and AuScope.

Simon O’Loughlin, BA (Acc) (Non-Executive Director)

Simon O’Loughlin is the founding member of O’Loughlins Lawyers, an Adelaide based medium sized specialist commercial law firm. He has obtained extensive experience in the corporate and commercial law fields while practising in Sydney and Adelaide. More recently, he has been focusing on the resources sector. Simon also holds accounting qualifications. He is currently chairman of Bondi Mining Limited, Kagera Nickel Limited and Avenue Resources Limited and a director of Aura Energy Limited, Living Cell Technologies Limited, Strzelecki Metals Limited, Chesser Resources Limited, Probiomics Limited and WCP Resources Limited. He has comprehensive experience with companies in the small industrial and resources sectors.

Simon is a former Chairman of the Taxation Institute of Australia (SA Division) and Save the Children Fund (SA Division).

Lewis Owens, MSc,BE(Hons),BA (Non-Executive Director)

Lewis has 20 years' experience as a Chief Executive Officer in the public and private sectors. This includes roles as CEO and Director of the South Australian electricity distributor ETSA Utilities,and as Chairman of the Essential Services Commission of South Australia responsible for regulation the SA electricity and gas industries, intra-state and Darwin railways, ports and urban water pricing. He was previously the CEO for WorkCover Corporation and Funds SA during the 1990s before returning to the energy industry for the past decade.

Petratherm Ltd – Annual Report

Directors’ report

COMPANY SECRETARY

Donald Stephens , BA (Acc), FCA

Donald Stephens is a Chartered Accountant and corporate adviser with over 20 years experience in the accounting industry, including 14 years as a partner of HLB Mann Judd Stephens, a firm of Chartered Accountants. He is a non-executive director of Mithril Resources Limited and Papyrus Australia Limited and is company secretary to Toro Energy Limited, Mithril Resources Limited and Minotaur Resources Limited of which are listed on the ASX. He holds other directorships with private companies and provides corporate advisory services to a wide range of organisations. He is a member of the Company's audit committee.

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE

As at the date of this report, the interests of the directors in the shares and options of Petratherm Ltd were:

	Number of Ordinary	Number of Options over
	Shares	Ordinary Shares
Derek Cart er	1,328,750	600,000
Terry Kallis	150,480	2,400,000
Richard Bonyt hon	1,231,438	450,000
Richard Hillis	182,500	750,000
Sim on O'Loughlin	358,333	450,000
Lew is Ow ens	72,500	450,000

DIVIDENDS

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

PRINCIPAL ACTIVITIES

The principal activities of Group during the financial year were:

to test hot rocks, with high temperatures;
establishing an economically viable, emission free, renewable source for power generation.

There have been no significant changes in the nature of these activities during the year.

Petratherm Ltd – Annual Report

Directors’ report

OPERATING RESULTS

The consolidated loss of the Group for the financial year after providing for income tax amounted to $3,476,671 [2009: $3,147,579].

OPERATIONS OVERVIEW

Throughout the year, Petratherm has worked diligently to progress its interests in Australia and overseas with the Company achieving many successes.

The flagship Paralana geothermal energy project was again the major focus for the Company with expenditure continuing to advance the project toward production, including funding the completion of the Paralana 2 deep injector well.

There was a combination of joint venture funding, government grants and additional funds sourced from the equity markets that was used to progress the Company’s portfolio of projects. One of the major announcements involved the Federal Government recognizing the Paralana project by awarding the joint venture a $62.8 million grant, subject to proof of concept, under the $435 million Renewable Energy Demonstration Program (REDP). These funds will contribute toward the cost of building a 30MW commercial demonstration project at the Paralana site in South Australia.

Paralana has received significant recognition from government with the company, along with our joint venture partners Beach Energy and TRUenergy Geothemal, having been awarded $7 million under the Commonwealth Government’s Geothermal Drilling Program (GDP) during the previous financial year. Petratherm also received support through the South Australian State Government’s Plan for Accelerated Exploration (PACE) in its bid to produce emission-free, base-load energy at its Paralana site.

During the reporting period, the Company invested considerably on exploration and development of its projects. A total of $20,210,789 was spent on Paralana, of which $6,928,000 was funded by JV partners and $4,763,000 by government grants. A total of $4,592,000 was raised during the year from the equity markets and conversion of options resulting in the Company at year end with a cash position of $2,716,780.

Petratherm continued to prove itself a leader in the geothermal energy sector throughout the reporting period as it advances its projects and actively participates in the policy debate, increasing its profile in Australia and overseas.

Two board members were recognised for their achievements.

Petratherm board Chairman Derek Carter was presented the prestigious President’s Award in the annual Australasian Institute of Mining and Metallurgy awards for 2009. The annual AusIMM Awards recognize excellence in the minerals sector and Mr Carter was particularly recognized for his leading role in demonstrating the exceptional prospectivity of South Australia through the Minotaur group of companies.

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Directors’ report

Board member Richard Hillis was appointed Chief Executive Officer of the new national Cooperative Research Centre for Deep Exploration Technology, set up to undertake research in new techniques for mineral exploration at depth and under cover.

In another coup for the Company, a well-known name in the energy industry, Lewis Owens, joined the Petratherm board in April this year. Mr Owens brings a wealth of experience to the company. He is a former chief executive of ETSA Utilities and a former South Australian energy regulator. He has 20 years experience as a Chief Executive Officer in the public and private sectors, including Chairman of the Essential Services Commission of South Australia and former CEO for WorkCover Corporation and Funds SA.

In terms of policy debate on a national level, Petratherm’s Managing Director Terry Kallis was a key player in his role as Chairman of the Australian Geothermal Energy Association and as the association’s representative on the Australia Energy Market Commission’s Stakeholder Committee Review of Australia’s Energy Market.

A new independent report by leading energy economics firm McLennan Magasanik Associates was commissioned by AGEA. The report showed geothermal had the potential to be the cheapest form of renewable energy in Australia. It studied the cost benefit of connecting an electricity transmission line from Innamincka in northern SA via Olympic Dam near Moomba to Davenport near Port Augusta – taking in the geothermal energy projects of Geodynamics in the Cooper Basin and Petratherm in the Arrowie Basin in the northern Flinders Ranges.

The major finding of the MMA report was that it showed investing $172 million in transmission would create savings of $860 million for South Australian customers and $2,800 million for customers of the National Electricity Market from 2011 to 2030.

Earlier this year, Mr Kallis was appointed to the Centre for Energy Technology Advisory Board at Adelaide University, chaired by former South Australian Premier John Olsen. The CET was established within the University of Adelaide’s Environment Institute and the Institute for Mineral and Energy Resources to address the issue of greenhouse gas mitigation.

Mr Kallis continued in his role as a board member of the national Clean Energy Innovation Centre (CEIC) based in Newcastle, New South Wales, to help build collaboration between researchers and businesses, and help clean energy businesses access latest technologies and market specific information. Mr Kallis was also on the Council of the SA Chamber of Mines and Energy (SACOME) to represent Geothermal/Renewables. SACOME is the peak industry association for companies with business interests in the resources industry in South Australia.

The Company ensured it was also actively involved on an international scale and during the reporting period, Petratherm was represented at key events including the World Geothermal Congress in Bali and the Geothermal Resources Council 2009 Annual Conference in Reno, Nevada, a state where geothermal is progressing rapidly.

Geothermal energy is also gaining profile in Spain, and here, Petratherm’s Spanish Manager Raúl Hidalgo Fernández continued in his role as President of the Geothermal Division of the Spanish Renewable Energy Generators Association (Asociacion de Productores de Energías Renovables – APPA).

Petratherm Ltd – Annual Report

Directors’ report

RISK MANAGEMENT

The Group takes a proactive approach to risk management. The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group's objectives and activities are aligned with the risks and opportunities identified by the board.

The Group believes that it is crucial for all board members to be a part of this process, and as such the board has not established a separate risk management committee.

The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by the board. These include the following:

board approval of a strategic plan, which encompasses the Group's vision, mission and strategy statements, designed to meet stakeholders needs and manage business risk.
Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets, including the establishment and monitoring of performance indicators of both a financial and non financial nature.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The following significant changes in the state of affairs of the Group occurred during the financial year:

The flagship Paralana geothermal energy project was the major focus for the Company with expenditure continuing to advance the project toward production, including funding the completion of the Paralana 2 deep injector well.

The Federal Government awarded Petratherm, and our joint venture partners Beach Energy and TRUenergy Geothermal, a $62.8 million Renewable Energy Demonstration Program (REDP) grant.

Shareholders were able to purchase up to $15,000 worth of shares under the Companys share purchase plan(SPP) offer at $0.24, representing a discount to the closing price of the Company’s shares on ASX as at 9 March 2010 of $0.07 or 22 per cent. The SPP closed on 9 April 2010 and raised $3,431,500. In addition, the Company raised $0.7 million at $0.24 per share before costs from a Share Placement to clients of Taylor Collison Limited.

On the 28[th] July 2010 Petratherm announced to the ASX a renegotiation of the Beach Energy milestone 2 payment, bringing immediate contributions of $2.7m in replacement of the original agreement for $5m upon commencement of Paralana 3.

Petratherm Ltd – Annual Report

Directors’ report

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On the 6 July the Group issued 1,535,000 options to employees under the Petratherm ESOP plan. The fair value of these options were $0.071 per option.

On the 16 July Petratherm announced that the $62.8 million grant Funding Deed under the Commonwealth Goverment’s Renewable Energy Demonstration Program (REDP) has been executed.

Other than those matters noted there were no other material subsequent events.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Group intends to continue to undertake appropriate exploration and evaluation expenditure thereby enabling it to maintain good title to all its prospective geothermal

properties until proper decisions can be made to successfully develop and exploit, sell or abandon such properties. New projects will be sought and evaluated. Provision of any further information may result in unreasonable prejudice to the Group.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group is aware of its responsibility to impact as little as possible on the environment, and where there is any disturbance, to rehabilitate sites. During the period under review the majority of work carried out was in South Australia and the Group followed procedures and pursued objectives in line with guidelines published by the South Australian Government. These guidelines are quite detailed and encompass the impact on owners and land users, heritage, health and safety and proper restoration practices. The Group supports this approach and is confident that it properly monitors and adheres to these objectives, and any local conditions applicable, both in South Australia and elsewhere. The Companys Spanish operations follow regulations as outlined by Spanish Mining Law, and Petratherm’s internal Health Saftey and Environment management system, which is internationally compliant. The Company is in compliance with the state and/or commonwealth environmental laws for the jurisdictions in which it operates.

Petratherm Ltd – Annual Report

Directors’ report

Unissued Shares

At the date of this report, the following options to acquire ordinary shares in the Company were on issue.

Issue Dat e Expiry Dat e Exercise Price 27/07/2004 26/07/2009 $0.20 28/07/2004 27/07/2009 $0.20 01/01/2006 31/12/2010 $0.40 22/05/2006 21/05/2011 $0.32 22/05/2006 21/05/2011 $0.37 22/03/2007 21/03/2012 $0.91 30/06/2006 30/04/2012 $0.32 30/06/2006 30/04/2013 $0.37 01/01/2007 01/01/2012 $0.53 02/01/2007 01/01/2012 $0.53 04/03/2007 04/03/2012 $0.91 31/05/2007 31/05/2012 $0.90 31/05/2007 31/05/2013 $0.90 26/06/2007 25/06/2012 $0.97 07/01/2008 06/01/2013 $1.20 07/01/2008 06/01/2013 $1.20 07/01/2008 06/01/2013 $1.20 07/01/2008 06/01/2013 $1.20 06/07/2008 05/07/2013 $0.76 28/11/2008 27/11/2013 $0.42 01/09/2008 31/08/2013 $0.67 07/10/2008 06/10/2013 $0.56 30/06/2009 29/06/2014 $0.50 24/11/2009 23/11/2014 $0.50 24/12/2009 23/12/2014 $0.50 04/01/2010 03/01/2015 $0.53 05/06/2010 04/01/2015 $0.24 05/06/2010 04/01/2015 $0.29 20/04/2010 19/04/2015 $0.38	Balance at 1 July 2009 2,000,000 250,000 60,000 200,000 200,000 20,000 650,000 750,000 100,000 100,000 40,000 40,000 400,000 200,000 20,000 60,000 30,000 30,000 400,000 450,000 15,000 50,000 75,000 - - - 6,140,000	Net Issued/ (Exercised/ Ot her) Balance at 30 June 2010 (2,000,000) (1) - (250,000) (1) - (60,000) (2) - - 200,000 - 200,000 - 20,000 - 650,000 - 750,000 (100,000) (2) - - 100,000 - 40,000 - 40,000 - 400,000 - 200,000 (20,000) (2) - - 60,000 (30,000) (2) - - 30,000 (400,000) (2) - (100,000) (2) 350,000 - 15,000 - 50,000 - 75,000 60,000 60,000 1,000,000 1,000,000 300,000 300,000 3,100,000 3,100,000 500,000 500,000 75,000 75,000 2,075,000 8,215,000

(1) Relates to options exercised during the year.

(2) Relates to options lapsed during the year.

Petratherm Ltd – Annual Report

Directors’ report

SHARE OPTIONS

Shares issued as a result of the exercise of unlisted options

During the financial year 30,000 options were exercised under the Company ESOP at price of $0.32 cents raising $9,600. A further $450,000 was raised from 2,250,000 unrelated option holders at a price of $0.20.

Cancellation of Options

During the financial year 680,000 options lapsed due to not being exercised within the given exercise period.

New options issued

During the financial year 1,135,000 options were issued under the Company’s ESOP to various employees. A further 3,900,000 were issued to Directors and the Company Secretary. New options issued to Directors received shareholder approval in accordance with relevant legislation.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

To the extent permitted by law, the Company has indemnified (fully insured) each director and the secretary of the Company for a premium of $20,641. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings (that may be brought) against the officers in their capacity as officers of the Company or a related body, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company.

REMUNERATION REPORT - AUDITED

This report outlines the remuneration arrangements in place for directors and key management personnel of Petratherm Ltd.

Remuneration philosophy

The board is responsible for determining remuneration policies applicable to directors and senior executives of the Group. The broad policy is to ensure that remuneration properly reflects the individuals' duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people with appropriate skills and experience. At the time of determining remuneration consideration is given by the board to the Group’s financial performance.

Employment contracts

The employment conditions of the managing director, Mr Terry Kallis, are formalised in a contract of employment. Mr Kallis commenced employment on 1 May 2006 and his base salary, inclusive of superannuation, is $310,000 per annum. The Company may terminate the employment contract without cause by providing three (3) months written notice or making payment in lieu of notice, based on the annual salary component. Termination payments are generally not payable on resignation or

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Directors’ report

REMUNERATION REPORT - AUDITED (continued)

dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

The employment conditions of the Exploration Manager, Mr Peter Reid, are formalised in a contract of employment. Mr Reid commenced employment on 27 July 2004 and his base salary, inclusive of superannuation, is $181,000 per annum. The Company may terminate the employment contract by providing three (3) months written notice or making payment in lieu of notice, based on the annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

The employment conditions of the Business Development Manager, Mr Jonathan Teubner, are formalised in a contract of employment. Mr Teubner commenced employment on 1 June 2007 and his base salary, inclusive of superannuation, is $178,000 per annum. The Company may terminate the employment contract by providing three (3) months written notice or making payment in lieu of notice, based on the annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

Key management personnel remuneration and equity holdings

The board currently determines the nature and amount of remuneration for board members and senior executives of the Group. The policy is to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives.

The non-executive directors and other executives 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.

All remuneration paid to directors and executives is expensed as incurred. Executives are also entitled to participate in the Group share option scheme. Options are valued using the Black-Scholes methodology. The board policy is to remunerate non-executive directors at market rates based on comparable companies for time, commitment and responsibilities. The board determines payments to non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. No portion of remuneration paid or payable to any Key Management Personnel employed by Petratherm is performance based.

Petratherm Ltd – Annual Report

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 1: Directors’ remuneration for the year ended 30 June 2009 & 2010

	Short-term employee benefits	Post employment benefits Share based payments Total	Post employment benefits Share based payments Total	Post employment benefits Share based payments Total
	Salary & Fees	Superannuat ion	Opt ions
Derek Cart er 2010 2009	60,000 50,000	5,400 4,500	57,600 -	123,000 54,500

Terry Kallis 2010 2009	280,539 256,881	14,461 23,119	93,000 -	388,000 280,000

Richard Bonyt hon 2010 2009	45,780 47,688	- -	43,200 -	88,980 47,688

Sim on O'Loughlin 2010 2009	42,000 35,000	3,780 3,150	43,200 -	88,980 38,150

Lew is Ow ens 2010 2009	10,500 -	945 -	43,200 -	54,645 -

Richard Hillis 2010 2009	42,000 35,000	3,780 3,150	62,400 214,800	108,180 252,950

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Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 2: Remuneration of the named executives who receive the highest remuneration for the year ended 30 June 2009 & 2010

	Short-term employee benefits	Post employment benefits Share based payments Total	Post employment benefits Share based payments Total	Post employment benefits Share based payments Total
	Salary& Fees	Superannuat ion	Opt ions
Pet er Reid 2010 2009	163,889 161,193	14,461 14,507	32,400 19,500	210,750 195,200

Jonat han Teubner 2010 2009	160,301 157,065	14,298 14,135	64,800 19,500	239,399 190,700

John King 2010 2009	74,508 144,100	12,263 12,969	- 177,828	86,771 334,897

Donald St ephens 2010 2009	- -	- -	62,700 -	62,700 -

HLB Mann Judd (SA) Pty Limited has received professional fees for accounting, taxation and secretarial services provided during the year amounting to $160,875 (2009: $147,464). Donald Stephens, the company secretary, is a consultant with HLB Mann Judd (SA) Pty Limited. $42,618 remains outstanding at year end.

O’Loughlins lawyers of which Simon O’Loughlin is a partner received legal fees of $90,250 (2009:$90,581) during the year. $11,224 remains outstanding at year end.

Professor Richard Hillis has a consultancy agreement with the Company and received geological consulting fees of $24,525. $1,998 remains outstanding at year end.

Share-based payments remuneration relates to amortisation of the fair value of options granted during the 2010 financial year.

Petratherm Ltd – Annual Report

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 3: Options granted as part of remuneration

The options issued to directors and executives during the year were as follows:

	Grant date	Grant number	Vesting date	Exercise price	Value per option at grant date	Exercised number	Total Fair value	% of Remun- eration
Directors
Terry Kallis	05/01/10	500,000	05/01/10	0.29	0.09	-	45,000	11.59%
Terry Kallis	05/01/10	500,000	05/01/10	0.24	0.096	-	48,000	12.37%
Derek Cart er	05/01/10	600,000	05/01/10	0.24	0.096	-	57,600	46.83%
Richard Bonyt hon	05/01/10	450,000	05/01/10	0.24	0.096	-	43,200	48.55%
Lew is Ow ens	05/01/10	450,000	05/01/10	0.24	0.096	-	43,200	79.06%
Richard Hillis	05/01/10	650,000	05/01/10	0.24	0.096	-	62,400	57.68%
Sim on O'Loughlin	05/01/10	450,000	05/01/10	0.24	0.096	-	43,200	48.55%
Exectives
Donald St ephens	05/01/10	300,000	05/01/10	0.53	0.209	-	62,700	100%
Pet er Reid	24/12/09	150,000	24/12/09	0.50	0.216	-	32,400	15.37%
Jonat han Teubner	24/12/09	300,000	24/12/09	0.50	0.216	-	64,800	27.07%

No portion of remuneration paid or payable to any Key Management Personnel employed by Petratherm was performance based in 2009 or 2010.

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REMUNERATION REPORT - AUDITED (continued)

Table 4: Options holdings of Key Management Personnel

Directors
Terry Kallis
Terry Kallis
Terry Kallis
Derek Cart er
Richard Bonyt hon
Lewis Owens
Richard Hillis
Richard Hillis
Sim on O'Loughlin
Executives
Donald St ephens
Donald St ephens
Peter Reid
Peter Reid
Peter Reid
Peter Reid
John King
Jonat han Teubner
Jonat han Teubner
Jonat han Teubner
30 June 2010

Expiry date
First
exercise
date
Last
exercise
date
650,000
-
-
-
650,000
30/04/12
01/05/07
30/04/12
750,000
-
-
-
750,000
30/04/13
01/05/08
30/04/13
-
1,000,000
-
-
1,000,000
04/01/15
03/06/10
04/01/15
-
600,000
-
-
600,000
04/01/15
03/06/10
04/01/15
-
450,000
-
-
450,000
04/01/15
03/06/10
04/01/15
-
450,000
-
-
450,000
04/01/15
03/06/10
04/01/15
-
650,000
-
-
650,000
04/01/15
03/06/10
04/01/15
200,000
-
-
-
200,000
25/06/12
26/06/07
26/06/12
-
450,000
-
-
450,000
04/01/15
03/06/10
04/01/15
250,000
-
(250,000)
-
-
27/07/09
28/07/05
27/07/09
-
300,000
-
-
300,000
03/01/15
05/01/10
03/01/15
-
150,000
150,000
23/12/14
24/12/09
23/12/14
400,000
-
-
-
400,000
21/05/11
22/05/06
21/05/11
100,000
-
-
-
100,000
01/01/12
01/01/07
01/01/12
100,000
-
-
-
100,000
27/11/13
28/11/08
27/11/13
400,000
-
-
(400,000)
-
06/07/13
07/07/09
06/07/13
-
300,000
-
-
300,000
23/12/14
24/12/09
23/12/14
400,000
-
-
-
400,000
31/05/13
01/06/08
31/05/13
100,000
-
-
-
100,000
27/11/13
28/11/08
27/11/13
3,350,000
4,350,000
(250,000)
(400,000)
7,050,000
Options
Lapsed
Balance at
end of
period
Balance at
beginning of
period
Granted as
remuner-
ation
Options
exercised

Petratherm Ltd – Annual Report

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Directors
Terry Kallis
Terry Kallis
Derek Cart er
Richard Bonyt hon
Lloyd Taylor
Richard Hillis
Richard Hillis
Sim on O'Loughlin
Executives
Donald St ephens
Pet er Reid
Pet er Reid
Pet er Reid
Pet er Reid
Jonat han Teubner
Jonat han Teubner
John King
30 June 2009

Expiry date
First
exercise
date
Last
exercise
date
650,000
-
-
-
650,000
30/04/12
01/05/07
30/04/12
750,000
-
-
-
750,000
30/04/13
01/05/08
30/04/13
1,200,000
-
(1,200,000)
-
-
04/04/09
05/04/04
04/04/09
500,000
-
(500,000)
-
-
04/04/09
05/04/04
04/04/09
400,000
-
(400,000)
-
-
04/04/09
05/04/04
04/04/09
300,000
-
(300,000)
-
-
04/04/09
05/04/04
04/04/09
200,000
-
-
-
200,000
25/06/12
26/06/07
26/06/12
200,000
-
(200,000)
-
-
04/04/09
05/04/04
04/04/09
250,000
-
-
-
250,000
27/07/09
28/07/05
27/07/09
400,000
-
(400,000)
-
-
27/07/09
28/07/05
27/07/09
400,000
-
-
-
400,000
21/05/11
22/05/06
21/05/11
100,000
-
-
-
100,000
01/01/12
01/01/07
01/01/12
-
100,000
-
-
100,000
27/11/13
28/11/08
27/11/13
400,000
-
-
-
400,000
31/05/13
01/06/08
31/05/13
-
100,000
-
-
100,000
27/11/13
28/11/08
27/11/13
-
400,000
-
-
400,000
06/07/13
07/07/09
06/07/13
5,750,000
600,000
(3,000,000)
-
3,350,000
Balance at
beginning of
period
Granted as
remuner-
ation
Options
exercised
Options
Lapsed
Balance at
end of
period

Petratherm Ltd – Annual Report

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 5: Shareholdings of Key Management Personnel

		Balance at 1	On Exercise	Net Change	Balance 30
	30 June 2010	July 09	of Options	Other	June 10
Directors
Terry Kallis		119,230	-	31,250	150,480
Derek Cart er		1,266,250	-	62,500	1,328,750
Richard Bonyt hon		1,106,440	-	124,998	1,231,438
Lew is Ow ens		-	-	72,500	72,500
Richard Hillis		120,000	-	62,500	182,500
Sim on O'Lough lin		325,000	-	33,333	358,333
Executives
Pet er Reid		389,230	-	-	389,230
Jo nat h an Teub ner
		-	-	-	-
Donald St eph ens
		-	-	-	-
Jo hn Kin g
		-	-	-	-
		Balance at 1	On Exercise	Net Change	Balance 30
	30 June 2009	July 08	of Options	Other	June 09
Directors
Terry Kallis		100,000	-	19,230	119,230
Derek Cart er		66,250	1,200,000	-	1,266,250
Richard Bonyt hon		532,500	500,000	73,940	1,106,440
Lloyd Taylor		300,000	400,000	(700,000)	-
Richard Hillis		20,000	300,000	(200,000)	120,000
Sim on O'Loughlin		125,000	200,000	-	325,000
Executives
Pet er Reid		34,918	400,000	(45,688)	389,230
Jonat han Teubner
		-	-	-	-
Donald St ephens
		-	-	-	-
John King		-	-	-	-

Petratherm Ltd – Annual Report

Directors’ report

DIRECTORS’ MEETINGS

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

follows:
	Directors' Meetings	Audit
Number of meetings held	12	2
Number of meetings attended:
Derek Carter	11	-
Terry Kallis	12	-
Richard Bonython	12	2
Richard Hillis	12	-
Simon O'Loughlin	11	2
Lewis Owens*	5	-

Lewis Owens was appointed as a Director on the 1 April 2010 and was only eligible to attend five Directors meetings.

Members acting on the audit committee of the board are:	Members acting on the audit committee of the board are:
Richard Bonython	Non-executive director
Simon O’Loughlin	Non-executive director
Donald Stephens	Company secretary

Petratherm Ltd – Annual Report

Directors’ report

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings.

The Group was not a party to any such proceedings during the year.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Grant Thornton South Australian Partnership, in its capacity as auditor for Petratherm Limited, has not provided any non-audit services throughout the reporting period. Details of the auditor’s remuneration can be found in note 24 to the financial statements. The auditor’s independence declaration for the year ended 30 June 2010 as required under section 307C of the Corporations Act 2001 has been received and can be found on the following page.

Signed in accordance with a resolution of the board of directors.

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Mr Terry Kallis Managing Director

Dated this 30 day of September 2010

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Petratherm Ltd – Annual Report

Corporate Governance Statement

Introduction

The board of directors is responsible for the corporate governance of Petratherm Ltd (the Company) and its controlled entities (the Group). The Group operates in accordance with the corporate governance principles as set out by the ASX corporate governance council and required under ASX listing rules.

The Group details below the corporate governance practices in place at the end of the financial year, all of which comply with the principles and recommendations of the ASX corporate governance council unless otherwise stated. Some of the charters and policies that form the basis of the corporate governance practices of the Group may be located on the Group’s website, www.petratherm.com.au.

The ASX Corporate Governance Council has released amendments dated 30 June 2010 to the second edition Corporate Governance Principles and Recommendations (Principles and Recommendations) in relation to diversity, remuneration, trading policies and briefings. The Group has addressed the amended principles within this statement.

Principle 1: Lay solid foundations for management and oversight

Recommendation 1.1: Role of the Board and Management

The board is accountable to the Shareholders for the performance of the Group and has overall responsibility for its operations. Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives, are formally delegated by the board to the Managing Director and ultimately to senior executives.

The key functions reserved to the board include:

Approving the strategic direction and related objectives of the Group and monitoring management performance in the achievement of these objectives;
• Adopting budgets and monitoring the financial performance of the Group;
Reviewing annually the performance of the managing director and senior executives against the objectives and performance indicators established by the board. The annual review of senior executives was undertaken by the board during the year.
Overseeing the establishment and maintenance of adequate internal controls and effective monitoring systems.
Overseeing the implementation and management of effective safety and environmental performance systems.
Ensuring all major business risks are identified and effectively managed.
Ensuring that the Group meets its legal and statutory obligations.

For the purposes of the proper performance of their duties, the directors are entitled to seek independent professional advice at the Group’s expense, unless the board determines otherwise. The board schedules meetings on a regular basis and other meetings as and when required.The Group has not formally established the functions reserved to the board and those delegated to senior executives in accordance with recommendations 1.1 and 1.3 of the ASX Corporate Governance Council. Given the size of the Group, the board has not considered it necessary to formulate a board charter.

Petratherm Ltd – Annual Report

Corporate Governance Statement

Recommendation 1.2: Performance evaluation of Senior Management

The Managing Director and senior management participate in annual performance reviews. The performance of staff is measured against the objectives and performance indicators established by the board. A performance evaluation for senior management took place for the current reporting period in accordance with the Group’s documented process. The performance of senior management is reviewed by comparing performance against agreed measures, examining the effectiveness and results of their contribution and identifying area for potential improvement. In accordance with recommendations 1.2 and 1.3 of the ASX Corporate Governance Council the Group has not disclosed a description of the performance evaluation process in addition to the disclosure above.

Principle 2: Structure the board to add value

Size and composition of the Board

At the date of this statement the board consists of five non-executive directors and one executive. Directors are expected to bring independent views and judgement to the board’s deliberations.

•	Mr Derek Carter	Non-Executive Chairman
•	Terry Kallis	Managing Director, CEO
•	Mr Simon O’Loughlin	Non-Executive
•	Richard Bonython	Non-Executive
•	Mr Richard HillisSimon O'Loughlin	Non-Executive
•	Mr Lewis Owens	Non-Executive

The board considers this to be an appropriate composition given the size and development of the Group at the present time. A profile of each director including their skills, qualifications and experience is set out in the director’s report of this Annual Report.

Recommendation 2.1: Independence

The board is conscious of the need for independence and ensures that where a conflict of interest may arise, the relevant director(s) leave the meeting to ensure a full and frank discussion of the matter(s) under consideration by the rest of the board. Those directors who have interests in specific transactions or potential transactions do not receive board papers related to those transactions or potential transactions, do not participate in any part of a directors’ meeting which considers those transactions or potential transactions, are not involved in the decision making process in respect of those transactions or potential transactions, and are asked not to discuss those transactions or potential transactions with other directors. Each director is required by the Company to declare on an annual basis the details of any financial or other relevant interests that they may have in the Company.

At the date of this statement the board consists of five non-executive directors, Mr Carter, who is also chairman of the board, Mr O’Loughlin, Mr Bonython, Mr Hillis, Mr Owens and an executive director, Mr Kallis. Mr O’Loughlin, Mr Hillis and Mr Owens have no other material relationship with the Group or its subsidiary other than their directorships. Mr Carter and Mr Bonython are directors of Minotaur Exploration Ltd which is the beneficial holder of 18.35% of the issued capital of Petratherm Ltd. The Group therefore has three independent directors as that relationship is currently defined.

Petratherm Ltd – Annual Report

Corporate Governance Statement

The board does not consist of a majority of independent directors and therefore the Group has not complied with recommendation 2.1 of the Corporate Governance Council. The board defines ‘independence’ in accordance with ASX recommendations. The board considers the current structure to be an appropriate composition of the required skills and experience, given the experience of the individual directors and the size and development of the Group at the present time.

Recommendations 2.2, 2.3: Role of the Chairman

The role of the Chairman is to provide leadership to the board and facilitate the efficient organisation and conduct of the board’s functioning. Mr Derek Carter, the Chairman of the Group does not also perform the role of the Managing Director, in accordance with recommendation 2.3 of the Corporate Governance Council, however the Chairman is not considered ‘independent’ as defined by ASX Corporate Governance Principles and recommendation 2.2.

Recommendation 2.4: Nomination, retirement and appointment of Directors

The board has not established a nomination and remuneration committee in accordance with recommendation 2.4 of the Corporate Governance Council. The board takes ultimate responsibility for these matters and continues to monitor the composition of the board. Accordingly, the Group has not established a remuneration and nomination committee charter in accordance with recommendations 2.4 and 2.6 of the ASX Corporate Governance Council.

Recommendation 2.5: Evaluation of Board performance

The board continues to review performance against appropriate measures and identify ways to improve performance. A performance evaluation of the board, its Committees and individual directors took place for the current reporting period in accordance with the Group’s documented process. The board has not formally disclosed the process in accordance with recommendations 2.5 and 2.6 of the ASX Corporate Governance Council. The Board takes ultimate responsibility for these matters and does not consider the disclosure of the performance evaluation necessary at this stage.

Principle 3: Promote ethical and responsible decision making

Recommendation 3.1: Code of Conduct

The board recognises the need for directors and employees to observe the highest standards of behaviour and business ethics when engaging in corporate activity. The Group intends to maintain a reputation for integrity and is highly committed to demonstrating appropriate corporate practices and decision making. The Group’s officers and employees are required to act in accordance with the law and with the highest ethical standards. The board has not adopted and disclosed a formal code of conduct applying to the board and all Employees in accordance with recommendations 3.1 and 3.3 of the Corporate Governance Council. The Board takes ultimate responsibility for these matters and does not consider the disclosure of the code necessary at this stage.

Securities Trading Policy

Effective from the 1 January 2011, the Group is required to adopt and disclose a securities trading policy under ASX Listing Rules. A securities trading policy was previously a recommendation of the Corporate Governance Council, however the

Petratherm Ltd – Annual Report

Corporate Governance Statement

Group has chosen to early-adopt the amendments in accordance with the addition to the ASX Listing Rules. The Group has established a policy concerning trading in Group securities by directors, senior executives and employees, however the plan has not yet been publicly disclosed and therefore has not complied with recommendation 3.2 or 3.3 of the second edition of the Corporate Governance Council principles. The Board takes ultimate responsibility for these matters.

The Company’s constitution permits designated persons to acquire securities in the Company, however Group policy prohibits designated persons from dealing in the Company’s securities at any time whilst in possession of price sensitive information and for 24 hours after:

Any major announcements;
The release of the Group’s quarterly, half yearly and annual financial results to the Australian Securities Exchange; and
The Annual General Meeting.

Directors must advise the Chairman of the Board before buying or selling securities in the Group. All such transactions are reported to the Board. In accordance with the provisions of the Corporations Act and the Listing Rules of the Australian Securities Exchange, the Company advises ASX of any transaction conducted by directors in the securities of the Company.

Recommendations 3.2, 3.3, 3.4: Diversity

The ASX Corporate Governance Council has released amendments dated 30 June 2010 to the second edition Corporate Governance Principles and Recommendations (Principles and Recommendations) in relation to diversity. The Group is committed to supporting diversity, including consideration of gender, age, ethnicity and cultural background. The board is ultimately responsible for reviewing the achievement of this policy. The Group recognises that through consideration of diversity and the best available talent, it will assist in promoting a working environment to maximise achievement of the corporate goals of the organisation.

The Group continues to strive towards achieving objectives established towards increasing gender diversity. At the end of the reporting period, the Group employed ten staff, of which five were female and the board of directors consisted of six male members.

The Group is highly aware of the positive impacts that diversity may bring to an organisation. The Group continues to assess all staff and board appointments on their merits with consideration to diversity a driver in decision making. The Group has not yet developed or disclosed a formal diversity and policy and therefore has not complied with the recommendations 3.2 and 3.3 of the Corporate Governance Council effective from 1 January 2011.

Principle 4: Safeguard integrity in financial reporting

The Group has structured financial management to independently verify and safeguard the integrity of their financial reporting. The structure established by the Group includes:

Review and consideration of the financial statements by the audit committee;
A process to ensure the independence and competence of the Group’s external auditors.

Petratherm Ltd – Annual Report

Corporate Governance Statement

Recommendations 4.1, 4.2, 4.3: Audit Committee

The audit, risk and compliance committee comprises Mr O’Loughlin (Chairman) who is also a non-executive director, Mr Richard Bonython a non-executive director and Mr Donald Stephens the Company Secretary. Mr O’Loughlin and Mr Stephens are both considered independent thereby representing a majority. The board will annually confirm the membership of the committee.

The committee’s primary responsibilities are to:

oversee the existence and maintenance of internal controls and accounting systems;
oversee the management of risk within the Group;
oversee the financial reporting process;
review the annual and half-year financial reports and recommend them for approval by the board of directors;
nominate external auditors;
review the performance of the external auditors and existing audit arrangements; and
ensure compliance with laws, regulations and other statutory or professional requirements, and the Group’s governance policies.

The Group has complied with recommendation 4.2 of the Corporate Governance Council because the majority consist of independents. Given the skills and experience of the audit committee, the board believes the structure and process to be adequate. The board continues to monitor the composition of the committee and the roles and responsibilities of the members.

The board has not adopted and disclosed a formal committee charter in accordance with recommendations 4.3 and 4.4 of the Corporate Governance Council.

Principle 5: Make timely and balanced disclosure

The Group has a policy that all shareholders and investors have equal access to the Group's information. The board ensures that all price sensitive information is disclosed to the ASX in accordance with the continuous disclosure requirements of the Corporation's Act and ASX Listing Rules. The Company Secretary has primary responsibility for all communications with the ASX and is accountable to the board through the Chair for all governance matters.

Recommendations 5.1: Disclosure policy

The Group has not publicly disclosed a formal disclosure policy in accordance with recommendations 5.1 and 5.2 of the Corporate Governance Council. The board takes ultimate responsibility for these matters and does not consider disclosure of a disclosure policy to be appropriate at this stage.

Principle 6: Respect the rights of shareholders

The board strives to ensure that Shareholders are provided with sufficient information to assess the performance of the Group and its directors and to make well-informed investment decisions.

Petratherm Ltd – Annual Report

Corporate Governance Statement

Recommendations 6.1: Communications policy Information is communicated to Shareholders through:

annual, half-yearly and quarterly financial reports;
annual and other general meetings convened for Shareholder review and approval of board proposals;
continuous disclosure of material changes to ASX for open access to the public; and
the Group maintains a website where all ASX announcements, notices and financial reports are published as soon as possible after release to ASX.

All information disclosed to the ASX is posted on the Group's web site www.petratherm.com.au.

The auditor is invited to attend the annual general meeting of Shareholders. The Chairman will permit Shareholders to ask questions about the conduct of the audit and the preparation and content of the audit report.

The Group has not publicly disclosed a communications policy in accordance with recommendations 6.1 and 6.2 of the Corporate Governance Council. The board takes ultimate responsibility for these matters and does not consider disclosure of a communications policy to be appropriate at this stage.

Principle 7: Recognise and manage risk

The board has identified the significant areas of potential business and legal risk of the Group. In addition the board has developed the culture, processes and structures of the company to encourage a framework of risk management which indentifies, monitors and manages the material risks facing the organisation.

Recommendations 7.1, 7.2: Risk management policy

The identification, monitoring and, where appropriate, the reduction of significant risk to the Group is the responsibility of the Managing Director and the board. The board has also established the audit, risk and compliance committee which addresses the risks of the Group.

The board reviews and monitors the parameters under which such risks will be managed. Management accounts are prepared and reviewed with the Managing Director at subsequent board meetings. Budgets are prepared and compared against actual results.

Management and the board monitor the Group’s material business risks and reports are considered at regular meetings.

The Group has not publicly disclosed a policy for the oversight and management of material business risks in accordance with recommendations 7.1 and 7.4 of the Corporate Governance Council. The board takes ultimate responsibility for these matters and does not consider disclosure of a risk management policy to be appropriate at this stage.

Recommendations 7.3: Declaration from Managing Director and Company Secretary The Managing Director and the Company Secretary will be required to state in writing to the board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial condition and operational results are in

Petratherm Ltd – Annual Report

Corporate Governance Statement

accordance with relevant accounting standards. Included in this statement will be confirmation that the Group’s risk management and internal controls are operating efficiently and effectively.

Principle 8: Remunerate fairly and responsibly

The Chairman and the non-executive directors are entitled to draw director’s fees and receive reimbursement of reasonable expenses for attendance at meetings. The Group is required to disclose in its annual report details of remuneration to directors. The maximum aggregate annual remuneration which may be paid to non-executive directors is $300,000. This amount cannot be increased without the approval of the Group’s shareholders. Please refer to the remuneration report within the director’s report for details regarding the remuneration structure of the managing director and senior management.

Recommendation 8.1: Remuneration Committee

The board has not established a remuneration committee or disclosed a committee charter on the Company website and therefore has not complied with recommendations 8.1 and 8.3 of the Corporate Governance Council. The board takes ultimate responsibility for these matters and does not consider a remuneration committee to be appropriate at this stage.

Petratherm Ltd – Annual Report

Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2010

Note	Consolidated
	2010 2009 $ $
Revenue 4 (a) Im p airm ent of non-current asset s 4 (b) Em p loyee b enef it s exp ense 4 (c) Dep reciat ion exp ense 4 (b) Borrow ing cost s 4 (b) Ot her exp enses 4 (d) Loss before income tax expense Incom e t ax (exp ense)/b enef it 5 Loss from continuing operations Loss for the period Other comprehensive income Exchange d if f erences arising on t ranslat ion of f oreign op erat ions Total comprehensive income for the period Total comprehensive income attributable to: Non-cont rolling int erest 21 Total comprehensive income attributable to the parent entity Earnings per share: Basic earnings p er share 6 Dilut ed earnings p er share 6	276,503 185,296 (79,033) (1,053,078) (1,770,448) (1,219,667) (68,657) (61,905) (2,827) - (1,996,357) (1,362,069)
	(3,640,819) (3,511,423)
	164,148 363,844
	(3,476,671) (3,147,579)
	(3,476,671) (3,147,579)
	(378,115) (177,878)
	(3,854,786) (3,325,457)
	- -
	(3,854,786) (3,325,457)
	Cents Cents
	(3.57) (2.77) (3.57) (2.77)

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Statement of Financial Position AS AT 30 JUNE 2010

Note	Consolidated
	2010 2009 $ $
CURRENT ASSETS Cash and cash eq uivalent s 7 Trad e and ot her receivab les 8 Ot her current asset s 9 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Prop ert y, p lant and eq uip m ent 10 Exp lorat ion and evaluat ion asset s 11 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trad e and ot her p ayab les 13 Def erred Incom e 14 Borrow ings 15 Short t erm p rovisions 16 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrow ings 15 Long t erm p rovisions 16 Ot her 17 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued cap it al 18 Reserves 19 Ret ained earnings 20 Parent interests Non-controlling interests 21 TOTAL EQUITY	2,716,750 13,002,052 1,635,418 2,317,699 60,684 59,944
	4,412,852 15,379,695
	202,627 191,356 17,683,266 5,549,372
	17,885,893 5,740,728
	22,298,745 21,120,423
	2,271,158 4,522,141 - 683,611 6,585 6,032 118,461 88,840
	2,396,204 5,300,624
	26,898 33,783 88,461 74,133 2,898,000 -
	3,013,359 107,916
	5,409,563 5,408,540
	16,889,182 15,711,883
	27,434,757 23,048,738 653,767 628,851 (11,199,342) (7,965,706)
	16,889,182 15,711,883 - -
	16,889,182 15,711,883

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2010

Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2010
	Consolidated
	Foreign Issued Share Currency Capital Retained Option Translation Minority Ordinary Earnings Reserve Reserve Interest Total $ $ $ $ $ $
Balance at 1 July 2008 Tot al com p rehensive incom e f or t he year Issued p ursuant t o share p urchase p lan Shares issued via p lacem ent Issue of share op t ions Exercise of op t ions at various d at es Transact ion cost s Tax p ort ion of IPO cost s Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on cancellat ion of vest ed op t ions Foreign exchange t ranslat ions Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on exercise of vest ed op t ions Balance at 30 June 2009 Balance at 1 July 2009 Tot al com p rehensive incom e f or t he year Issued p ursuant t o share p urchase p lan Shares issued via p lacem ent Issue of share op t ions Exercise of op t ions at various d at es Transact ion cost s Tax p ort ion of IPO cost s Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on cancellat ion of vest ed op t ions Foreign exchange t ranslat ions Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on exercise of vest ed op t ions Balance at 30 June 2010	14,228,516 (4,877,186) 587,735 (7,420) - 9,931,646 - (3,147,579) - - - (3,147,579) 4,319,500 - - - - 4,319,500 3,083,600 - - - - 3,083,600 - - 327,453 - - 327,453 1,628,800 - - - - 1,628,800 (362,368) - - - - (362,368) 108,710 - - - - 108,710 - 59,060 (59,060) - - - - - - (177,878) - (177,878) 41,980 - (41,980) - - -
	23,048,738 (7,965,706) 814,149 (185,298) - 15,711,883

	23,048,738 (7,965,706) 814,149 (185,298) - 15,711,883 - (3,476,671) - - - (3,476,671) 3,361,000 - - - - 3,361,000 771,360 - - - - 771,360 - - 647,536 - - 647,536 459,600 - - - - 459,600 (296,302) - - - - (296,302) 88,891 - - - - 88,891 - 243,035 (243,035) - - - - - - (378,115) - (378,115) 1,470 - (1,470) - - -
	27,434,757 (11,199,342) 1,217,180 (563,413) - 16,889,182

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2010

Note	Consolidated
	2010 2009 $ $
CASH FLOWS FROM OPERATING ACTIVITIES Paym ent s t o suppliers and em ployees Finance Cost s Research & Developm ent Tax offset received Managem ent Fee Int erest received NET CASH USED IN OPERATING ACTIVITIES 7 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of propert y, plant and equipm ent REDI Grant proceeds Joint Vent ure receipt s Paym ent s for explorat ion act ivit ies Governm ent explorat ion relat ed grant s NET CASH PROVIDED/(USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds f rom issue of shares Transact ion cost s of issue of shares Repaym ent of borrow ings NET CASH PROVIDED BY FINANCING ACTIVITIES Net increase/(decrease) in cash and cash equivalent s Cash at t he beginning of t he year CASH AT THE END OF THE YEAR 7	(2,348,426) (2,105,484) (2,827) - 287,340 472,554 70,599 - 204,572 186,725
	(1,788,742) (1,446,205)
	(96,958) (117,836) 537,000 707,575 6,928,000 6,855,458 (24,916,715) (6,428,487) 4,763,000 175,000
	(12,785,673) 1,191,710
	4,592,000 9,031,900 (296,302) (362,368) (6,585) -
	4,289,113 8,669,532
	(10,285,302) 8,415,037
	13,002,052 4,587,015
	2,716,750 13,002,052

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

1. CORPORATE INFORMATION

The financial report of Petratherm Ltd (the Company) for the year ended 30 June 201010 was authorised for issue in accordance with a resolution of the directors on 29 September 2010. Petratherm Ltd is a Company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the consolidated financial statements and notes of Petratherm Limited and controlled entities (‘Group’).

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards board and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Third statement of financial position

Two comparative periods are presented for the statement of financial position when the Company:

i Applies an accounting policy retrospectively

ii Makes a retrospective restatement of items in its financial statements, or iii Reclassifies items in the financial statements.

We have determined that only one comparative period for the statement of financial position was required for the current reporting period as the application of the new accounting standards have had no material impact on the previously presented primary financial statements that were presented in the prior year financial statements.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

a. Principles of consolidation

The consolidated financial statements comprise the financial statements of Petratherm Ltd and its subsidiaries as at 30 June each year (the Group).

A controlled entity is any entity Petratherm Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of controlled entities is contained in Note 25 to the financial statements.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra Group transactions have been eliminated in full.

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

b.

Revenue recognition

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

Interest income

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Sale of Goods

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Provision of services

Revenue relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where the outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable. All revenue is stated net of goods and services tax.

c.

Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the statement of comprehensive income over the expected useful life of the relevant asset by equal annual instalments.

d. Finance costs

Finance costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as

the assets are substantially ready for their intended use of sale. Other costs are expensed as incurred.

e.

Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at bank and cash in hand and short term deposits with an original maturity of six months or less.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.

f. Trade and other receivables

Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

g. Financial instruments

Initial recognition and measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instrument classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Effective interest rate method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

Classification and subsequent measurement

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment of financial assets

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in the financial assets reserve in other comprehensive income.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed is recognised in profit or loss.

h. Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the reporting date.

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

Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

profit will be available against which the temporary difference can be utilised.

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

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax consolidation

Petratherm Limited and its wholly-owned Australian controlled entity have not yet decided to implement the tax consolidation legislation as of 1 July 2007. The Australian Taxation Office has not yet been notified of any decision.

If the Group were to implement the tax consolidation legislation in the current or future reporting period, the consequence would be that Petratherm Limited, as the head entity in the tax consolidated group, recognises current and deferred tax amounts relating to transactions, events and balances of the wholly-owned Australian controlled entity in the group as if those transactions, events and balances were its own, in addition to the current and deferred tax amounts arising in relation to its own transactions, events and balances. Amounts receivable or payable under an accounting tax sharing agreement with the tax consolidated entities are recognised separately as tax-related amounts receivable or payable. Expenses and revenues arising under the tax sharing agreement are recognised as a component of income tax expense (revenue). The deferred tax balances recognised by the parent entity in relation to wholly-owned entity joining the tax consolidated group are measured based on their carrying amounts at the level of the tax consolidated group before the implementation of the tax consolidation regime.

There will be no impact of the legislation on the Group's historical carrying amounts of its deferred tax assets, as these have not been recognised in the parent or Group’s financial statements.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

i. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.

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

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

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

j. Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.

Depreciation is calculated on a straight-line basis on all plant and equipment.

Major depreciation rates used for each class of depreciable asset are:

Plant and equipment 10 – 40% Motor vehicles – 22.5%

Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment 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 specific to the asset.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

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

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

k.

Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

l.

Exploration expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to the basis that the restoration will be completed within one year of abandoning the site.

m. Trade and other payables

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

n. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects the risks specific to the liability.

o.

Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Group as a lessee

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the statement of comprehensive income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term.

p. Employee benefits

Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in provisions in respect of employees'

services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Long service leave

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

Share-based payment transactions

The Group provides benefits to employees of the Group in the form of sharebased payments, whereby employees receive options incentives (equity-settled transactions).

There is currently one plan in place to provide these benefits, the Employee Share Option Plan (ESOP) which provides benefits to employees.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using the Black-Scholes option pricing model.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

The cost of equity-settled transactions is recognised as an expense in the statement of comprehensive income, together with a corresponding increase in the share option reserve, when the options are issued.

Upon the exercise of options, the balance of share based payments reserve relating to those options is transferred to share capital.

q. 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.

r. Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

In accordance with AASB 133 ‘Earnings per Share’, as potential ordinary shares may only result in a situation where their conversion results in an increase in loss per share or decrease in profit per share from continuing operations, no dilutive effect has been taken into account in 2009 and 2010.

s. Foreign Currency Translation

Functional and presentation currency

Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Petratherm Group’s functional and presentational currency.

Transactions and balances

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

Group companies

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

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position
income and expenses for each statement of comprehensive income are

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transactions); and

all resulting exchange differences are recognised as a separate component of equity.

t. Joint Venture

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled operation involves use of assets and other resources of the venturers rather than establishment of a separate entity. The Group recognises its interest in the jointly controlled operations by recognising the assets that it controls and the liabilities that it incurs. The Group also recognises the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the jointly controlled operation. The Group has entered into a number of Joint Ventures with various parties to explore certain tenements that the Group has beneficial interest in. A full list of these JV’s, as well as the parties involved, can be found in note 29.

u. Adoption of New and Revised Accounting Standards

During the current year the Consolidated group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations that became mandatory.

The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact that adoption of these standards and interpretations has had on the financial statements.

AASB 3: Business Combinations

In March 2008 the Australian Accounting Standards Board revised AASB 3 and as a result, some aspects of business combination accounting have changed. The changes only apply to business combinations first recognised after 1 July 2009.

Recognition and measurement impact

Recognition of acquisition costs - The revised standard requires that all acquisition costs are expensed in the period in which they occur. Previously these costs were capitalised as part of the cost of the business combination.

Measurement of contingent consideration - The revised standard requires that contingent consideration associated with a business combination be included as part of the cost of the business combination. They are recognised at the fair value of expected payment. Any subsequent changes in the fair value or probability of settlement are recognised in the statement of comprehensive income, except to the extent that they relate to conditions that existed at the date of acquisition and that are identified during any "Measurement period." In

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

this case the cost of acquisition is adjusted. The previous version of the standard allowed such changes to be recognised as a cost of the combination impacting goodwill.

AASB 8: Operating Segments

In February 2007, the Australian Accounting Standards Board issued AASB 8 which replaced AASB 114: Segment Reporting. Consequently, some of the required operating segment disclosures have changed. In addition, there is a possible impact on the impairment testing of goodwill allocated to cash generating units (CGUs) of the entity. Set out below is an overview of the key changes and the impact on the Consolidated group's financial statements.

Identification and measurement of segments - AASB 8 requires a "management approach" to the identification, measurement and disclosure of operating segments. This approach requires that segments are identified on the basis of internal reports that are regularly reviewed by management, for the purpose of allocating resources and assessing performance.

Unlike AASB 114 this could identify segments that primarily or exclusively sell to other internal operating segments. Under AASB 114, segments were identified by business and geographical areas, and only segments deriving revenue from external sources were considered. The adoption of the management approach to segment reporting has identified reportable segments largely consistent with the prior year.

AASB 101: Presentation of Financial Statements

In September 2007, the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. An overview of the key impacts on the Consolidated group's financial statements is set out below.

Terminology changes - The revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements and the change of the term "minority interests" to "noncontrolling interests."

Reporting changes in equity - The revised AASB 101 requires all changes in equity arising from transactions with owners, in their capacity as owners, to be recognised in the statement of changes in equity, with all other changes in equity to be recognised in a new statement of comprehensive income. Previously, all changes in equity were recognised in the statement of changes in equity.

Statement of comprehensive income - The revised standard requires that all income and expenses are presented in either a single statement of comprehensive income or in two statements, one being a separate income statement as well as a new statement of comprehensive income. Previously, only an income statement was required. The Consolidated group has adopted

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

the two statement approach and the financial statements now include a statement of comprehensive income as well as a separate income statement.

Other comprehensive income - The revised standard introduces the concept of "other comprehensive income" which comprises income and expenses that are not recognised in profit or loss as required by Australian Accounting Standards. Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities are required to disclose the income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.

v.

New accounting standards for application in future periods

The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Group follows:

AASB 9: Financial Instruments and AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] (applicable for annual reporting periods commencing on or after 1 January 2013).

These standards are applicable retrospectively and amend the classification and measurement of financial assets. The Group has not yet determined the potential impact on the financial statements.

The changes made to accounting requirements include:

simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
simplifying the requirements for embedded derivatives;
removing the tainting rules associated with held-to-maturity assets;
removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; and
reclassifying financial assets where there is a change in an entity’s business model as they are initially classified based on: a) the objective of the entity’s business model for managing the financial assets; and b) the characteristics of the contractual cash flows.

AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard removes the requirement for government related entities to disclose details of all transactions with the government and other government

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

related entities and clarifies the definition of a related party to remove inconsistencies and simplify the structure of the standard. No changes are expected to materially affect the Group.

AASB 2009–4: Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16] (applicable for annual reporting periods commencing from 1 July 2009) and AASB 2009-5: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139] (applicable for annual reporting periods commencing from 1 January 2010).

These standards detail numerous non-urgent but necessary changes to accounting standards arising from the IASB’s annual improvements project. No changes are expected to materially affect the Group.

AASB 2009–8: Amendments to Australian Accounting Standards — Group Cashsettled Share-based Payment Transactions [AASB 2] (applicable for annual reporting periods commencing on or after 1 January 2010).

These amendments clarify the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when the entity has no obligation to settle the share-based payment transaction. The amendments incorporate the requirements previously included in Interpretation 8 and Interpretation 11 and as a consequence, these two Interpretations are superseded by the amendments. These amendments are not expected to impact the Group.

AASB 2009–9: Amendments to Australian Accounting Standards — Additional Exemptions for First-time Adopters [AASB 1] (applicable for annual reporting periods commencing on or after 1 January 2010).

These amendments specify requirements for entities using the full cost method in place of the retrospective application of Australian Accounting Standards for oil and gas assets, and exempt entities with existing leasing contracts from reassessing the classification of those contracts in accordance with Interpretation 4 when the application of their previous accounting policies would have given the same outcome. These amendments are not expected to impact the Group.

AASB 2009–10: Amendments to Australian Accounting Standards — Classification of Rights Issues [AASB 132] (applicable for annual reporting periods commencing on or after 1 February 2010).

These amendments clarify that rights, options or warrants to acquire a fixed number of an entity’s own equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. These amendments are not expected to impact the Group.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of International Financial Reporting Standards by the IASB. The standard also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. These amendments are not expected to impact the Group.

AASB 2009–13: Amendments to Australian Accounting Standards arising from Interpretation 19 [AASB 1] (applicable for annual reporting periods commencing on or after 1 July 2010).

This standard makes amendments to AASB 1 arising from the issue of Interpretation 19. The amendments allow a first-time adopter to apply the transitional provisions in Interpretation 19. This standard is not expected to impact the Group.

AASB 2009–14: Amendments to Australian Interpretation — Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).

This standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan.

AASB Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments (applicable for annual reporting periods commencing on or after 1 July 2010).

This Interpretation deals with how a debtor would account for the extinguishment of a liability through the issue of equity instruments. The Interpretation states that the issue of equity should be treated as the consideration paid to extinguish the liability, and the equity instruments issued should be recognised at their fair value unless fair value cannot be measured reliably in which case they shall be measured at the fair value of the liability extinguished. The Interpretation deals with situations where either partial or full settlement of the liability has occurred. This Interpretation is not expected to impact the Group.

The Group does not anticipate the early adoption of any of the above Australian Accounting Standards.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

w. Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key Estimates — Exploration and evaluation

The Group’s policy for exploration and evaluation is discussed in note 2(l). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploration, then the relevant capitalised amount will be written off through the statement of comprehensive income. Refer to note 11 for further details and a reconciliation of the capitised expenditure written off during the year.

3. OPERATING SEGMENTS

The Group has adopted AASB 8 Operating Segments and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 8 with effect from 1 July 2009. AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess its performance. In contrast, the predecessor Standard (AASB 114 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risk rewards approach, with the entity’s ‘system of internal financial reporting to ‘key management personnel’ serving only as the starting point for the identification of such segments. As a result, following the adoption of AASB 8, the identification of the Group’s reportable segments has changed.

Segment information reported externally was analysed on the basis of the business segments encountered by Petratherm (namely Exploration in both Australia and Spain). However, information reported to the Company’s Managing Director for the purposes of resources allocation and assessment of performance is more specifically focused on the areas in which the Group is exploring in Australia and Spain, as well as the Company’s Paralana Project. The Group’s reportable segments under AASB 8 are therefore as follows:

Exploration activities - Paralana Project
Exploration activities - Australia (Other);and
Exploration activities – Spain.

Information regarding these segments is presented below. Amounts reported for the prior period have been restated to conform to the requirements of AASB 8. The accounting policies of the new reportable segments are the same as the Group’s accounting policies.

The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods under review.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

	Segment Revenue	Segment Result
	Year ended	Year ended
	2010 2009 $ $	2010 2009 $ $
Paralana Project Aust ralia (Ot her) Sp ain Ad m inist rat ion/Corp orat e Finance Cost s Dep reciat ion Consolid at ed revenue Prof it /(Loss) b ef ore incom e t ax Incom e t ax b enef it Prof it /(Loss) f or p eriod	70,599 - - - - -	- - (79,033) (1,053,078) - -
	70,599 -	(79,033) (1,053,078)
	205,905 185,296 - - -	(3,490,302) (2,396,440)
		(2,827)
		(68,657) (61,905)
	276,503 185,296
		(3,640,819) (3,511,423)
		164,148 363,844
		(3,476,671) (3,147,579)

The revenue reported above represents revenue generated from financial institutions and joint venture partners. There were no intersegment sales during the period.

Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of central administration costs, depreciation and income tax (expense)/benefit. This is the measure reported to the chief operating decision maker for the purposes of resources allocation and assessment of segment performance.

Segment Assets and Liabilities

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. The Group has not reported on segment liabilities as such amounts are not regularly provided to the chief operating decision marker. The following is an analysis of the Group’s assets by reportable operating segment.

	Opening Exploration Impairment Closing Balance Expenditure Balance $ $ $ $	Opening Exploration Impairment Closing Balance Expenditure Balance $ $ $ $
Paralan a Proje ct Au st r alia (Ot her ) Spain Tot al segm ent asset s Other Ad m inistr atio n/Cor po r at e (i)	3,300,742 11,708,194 - 15,008,936 123,965 80,823 (79,033) 125,755 2,124,665 423,910 - 2,548,575
	5,549,372 12,212,927 (79,033) 17,683,266
	15,571,051 21,120,423
		4,615,478
		22,298,744

(i) Adm inist rat ion asse ts large ly relat e t o unallocat ed cash asset s.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

	Opening Exploration Impairment Closing Balance Expenditure Balance 1/07/2008 30/06/2009 $ $ $ $	Opening Exploration Impairment Closing Balance Expenditure Balance 1/07/2008 30/06/2009 $ $ $ $
Aust ralia (Ot her) 1,072,111 104,932 (1,053,078) 123,965 Paralana Project 2,379,863 920,879 3,300,742 Sp ain 1,849,425 275,240 - 2,124,665 Tot al segm ent asset s 5,301,399 1,301,051 (1,053,078) 5,549,372 Ot her Ad m inist rat ion/Corp orat e (i) 5,052,487 15,571,051 10,353,886 21,120,423 (i) Ad m inist rat ion asset s largely relat e t o unallocat ed cash asset s.	1,072,111 104,932 (1,053,078) 123,965 2,379,863 920,879 3,300,742 1,849,425 275,240 - 2,124,665
	5,301,399 1,301,051 (1,053,078) 5,549,372

		15,571,051
		21,120,423

4. REVENUE AND EXPENSES (a) Revenue and other income Bank int erest received or receivab le Managem ent Fees (b) Expenses Impairment of non-current assets Cap it alised t enem ent cost s w rit t en of f Tot al im p airm ent of non-current asset s Depreciation of non-current assets Plant and eq uip m ent Tot al d ep reciat ion Borrowing Costs Hire-Purchase Int erest Tot al b orrow ing cost s	205,904 185,296 70,599 -
	276,503 185,296
	79,033 1,053,078
	79,033 1,053,078
	68,657 61,905
	68,657 61,905
	2,827 -
	2,827 -

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

	Consolidated
	2010 2009 $ $
(c) Employees benefits expense Wages, salaries, d irect ors f ees and ot her rem unerat ion exp enses Sup erannuat ion Transf er t o/(f rom ) annual leave p rovision Transf er t o/(f rom ) long service leave Share-b ased p aym ent s exp ense (d) Other expenses from ordinary activities Secret arial, p rof essional and consult ancy Travel exp enses Recruit m ent exp enses Prom ot ion and ad vert ising Occup ancy cost s Share regist er m aint enance Insurance cost s Payroll t ax Conf erence & sem inars Ent ert ainm ent AGM exp enses Aud it f ees List ing f ees Sub scrip t ions and p ub licat ions Legal f ees ASX Bank Charges Com m unicat ion & com p ut er exp enses Of f ice exp enses Ot her exp enses	993,517 754,906 101,388 113,718 15,914 12,562 14,327 11,028 645,302 327,453
	1,770,448 1,219,667
	301,172 205,334 178,991 141,293 77,545 28,351 100,723 134,754 114,956 75,471 44,195 46,766 37,917 48,237 42,444 46,766 27,484 14,952 28,163 31,179 57,954 30,560 42,173 28,000 24,049 19,420 89,891 62,383 35,335 32,670 9,386 7,249 6,024 6,210 70,814 29,018 115,098 113,588 592,043 259,868
	1,996,357 1,362,069

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

5. INCOME TAX

	Consolidated
	2010 2009 $ $
The major components of income tax expense are: Current income tax Current incom e t ax charge/(b enef it ) R&D Tax of f set Incom e t ax exp ense/(b enef it ) rep ort ed in t he incom e st at em ent A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group's applicable income tax rate is as follows: Account ing loss b ef ore incom e t ax At t he Group 's st at ut ory incom e t ax rat e of 30% (2009: 30%) Exp end it ure not allow ab le f or incom e t ax p urp oses Ot her d ed uct ib le it em s Tax losses not recognised d ue t o not m eet ing recognit ion crit eria Tax p ort ion of share issue cost s	88,891 108,710 (253,039) (472,554)
	(164,148) (363,844)
	(3,476,671) (3,147,579)
	(1,053,427) (944,274) 250,366 762,952 3,645,342 (477,101) (2,842,281) 658,423 88,891 108,710
	88,891 108,710

The Group may have tax losses arising in Australia of $23,144,657 (2009: $8,187,251) that are available for offset against future taxable profits of the companies in which the losses arose.

No DTA has been recognised because it’s not likely future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised.

Tax consolidation

Petratherm Limited and its wholly-owned Australian controlled entity (MNGI Pty Limited) have not yet decided to implement the tax consolidation legislation as of 1 July 2008. The Australian Taxation Office has not yet been notified of any decision. The accounting policy relating to the possible implementation of the tax consolidation legislation is set out in note 1(h), together with the impact on the income tax expense for the year.

6. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

The following reflects the net loss and share data used in the basic and diluted earnings per share computations:

Net loss f rom cont inued op erat ions Weight ed average num b er of ord inary shares ad just ed f or t he Weight ed average num b er of ord inary shares f or b asic earnings p er share Ef f ect of d ilut ion	Consolidated
	2010 2009 $ $
	(3,854,786) (3,147,579)
	2010 2010
	97,499,705 62,859,755 N/A N/A
	97,499,705 62,859,755

7. CASH AND CASH EQUIVALENTS

7. CASH AND CASH EQUIVALENTS
	Consolidated
	2010 2009 $ $
Cash at b ank and in hand Short -t erm d ep osit s	2,539,750 12,854,602 177,000 147,450
	2,716,750 13,002,052

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between one day and six months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

Reconciliation to Statement of Cash Flows

For t he p urp oses of t he St at em ent of Cash Flow s, cash and cash eq uivalent s com p rise t he f ollow ing at 30 June: Cash at b anks and in hand Short -t erm d ep osit s	2,539,750 12,854,602 177,000 147,450
	2,716,750 13,002,052

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

	Consolidated
	2010 2009 $ $
Reconciliation of net profit/(loss) after tax to net cash flows from operations Net loss Adjustments for non-cash items: Dep reciat ion Im p airm ent of non-current asset s Non cash incom e t ax exp ense Grant s classif ied as an invest ing act ivit y Share op t ions exp ensed Changes in assets and liabilities (Increase)/d ecrease in t rad e and ot her receivab les (Increase)/d ecrease in p rep aym ent s (Decrease)/increase in t rad e and ot her p ayab les (Decrease)/increase in em p loyee (Decrease)/increase in net good s and service t ax receiveb le Net cash f rom op erat ing act ivit ies 8. TRADE AND OTHER RECEIVABLES Trad e receivab les (i) Good s & Services Tax receivab le JV Cont rib ut ions receivab le	(3,476,671) (3,147,579) 68,657 61,905 79,033 1,053,078 (164,148) 108,710 - (175,000) 645,302 327,453 (682,281) (94,941) 740 (15,249) 338,326 (41,875) 550,781 32,445 851,519 444,848
	(1,788,742) (1,446,205)
	9,872 107,984 133,448 77,454 1,492,098 2,132,261
	1,635,418 2,317,699

i). Trade receivables are non-interest bearing and are generally on 30-90 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. No impairment was recognised in 2009 or 2010 and no receivables are past due at balance date.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

		Consolidated
		2010 2009 $ $
9. OTHER CURRENT ASSETS Prep aym ent s Accrued incom e		58,372 58,964 2,312 980 60,684 59,944

9. OTHER CURRENT ASSETS

10. PROPERTY, PLANT AND EQUIPMENT

Plant and equipment Cost Balance at 1 July Ad d it ions Balance at 30 June Accum ulat ed Dep reciat ion Balance at 1 July Dep reciat ion f or t he year Balance at 30 June Total net book value as at 30 June	305,235 187,399 79,928 117,836
	385,163 305,235
	113,879 51,974 68,657 61,905
	182,536 113,879

	202,627 191,356

Impairment of property, plant and equipment

No material impairment loss was recognised or reversed for the year ended 30 June 2009 and 2010 with respect to plant and equipment.

The depreciation rate of the assets was estimated as follows both for 2009 and 2010: Plant and equipment 10 – 40%.

11. EXPLORATION AND EVALUATION ASSETS

Exp lorat ion and evaluat ion cost s carried f orw ard in resp ect of Geot herm al areas of int erest Exp lorat ion and evaluat ion p hases	17,683,266 5,549,372
	17,683,266 5,549,372

The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective geothermal areas.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Consolidated entity

Consolidated entity Total Cap it alised t enem ent exp end it ure m ovem ent reconciliat ion Balance at t he b eginning of t he year 5,549,372 Ad d it ions t hrough exp end it ure cap it alised 12,212,927 Writ e of f of t enem ent s relinq uished (79,033) Balance at end of year 17,683,266

The impairment expense of $79,033 arose from a review of the Group’s capitalised costs and the relevant tenements to which the costs related. Costs written off related to tenements relinquished during the year.

12. SHARE-BASED PAYMENTS

Employee Share Option Plan

The Group has established the Petratherm Limited Employee Share Option Plan and a summary of the Rules of the Plan are set out below:

All employees (full and part time) will be eligible to participate in the Plan after a qualifying period of 12 months employment by a member of the Group, although the board may waive this requirement.
Options are granted under the Plan at the discretion of the board and if permitted by the board, may be issued to an employee's nominee.
Each option is to subscribe for one fully paid ordinary share in the Company and will expire 5 years from its date of issue. An option is exercisable at any time from its date of issue. Options will be issued free. The exercise price of options will be determined by the board, subject to a minimum price equal to the market value of the Company's shares at the time the board resolves to offer those options. The total number of shares, the subject of options issued under the Plan, when aggregated with issues during the previous 5 years pursuant to the Plan and any other employee share plan, must not exceed 5% of the Company's issued share capital.
If, prior to the expiry date of options, a person ceases to be an employee of a Group Company for any reason other than retirement at age 60 or more (or such earlier age as the board permits), permanent disability, redundancy or death, the options held by that person (or that person's nominee) automatically lapse on the first to occur of a) the expiry of the period of 6 months from the date of such occurrence, and b) the expiry date. If a person dies, the options held by that person will be exercisable by that person's legal personal representative.
Options cannot be transferred other than to the legal personal representative of a deceased option holder.
The Group will not apply for official quotation of any options.
Shares issued as a result of the exercise of options will rank equally with the Company's previously issued shares.
Option holders may only participate in new issues of securities by first exercising their options.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

The board may amend the Plan Rules subject to the requirements of the Australian Stock Exchange Listing Rules.

The expense recognised in the statement of comprehensive income in relation to sharebased payments is disclosed in note 4(c).

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) and movements in share options issued during the year:

	2010	2010	2009	2009
	No.	WAEP	No.	WAEP
Out st and ing at t he b eginning of t he year	2,290,000	0.63	1,800,000	0.60
Grant ed d uring t he year	1,135,000	0.50	1,150,000	0.62
Forf eit ed d uring t he year	(680,000)	0.69	(170,000)	0.44
Exercised d uring t he year	(30,000)	0.32	(490,000)	0.22
Out st and ing at t he end of t he year	2,715,000	0.56	2,290,000	0.63
Exercisab le at t he end of t he year	2,715,000	0.56	2,290,000	0.63

The outstanding balance as at 30 June 2010 is represented by:

A total of 200,000 options exercisable any time until 21 May 2011 with a strike price of $0.32
A total of 200,000 options exercisable any time until 21 May 2011 with a strike price of $0.37
A total of 100,000 options exercisable any time until 1 January 2012 with a strike price of $0.53
A total of 40,000 options exercisable any time until 4 March 2012 with a strike price of $0.91
A total of 20,000 options exercisable any time until 21 March 2012 with a strike price of $0.91
A total of 440,000 options exercisable any time until 31 May 2012 with a strike price of $0.90
A total of 90,000 options exercisable any time until 7 January 2013 with a strike price of $1.20
A total of 15,000 options exercisable any time until 31 August 2013 with a strike price of $0.67
A total of 50,000 options exercisable any time until 31 August 2013 with a strike price of $0.56
A total of 350,000 options exercisable any time until 27 November 2013 with a strike price of $1.20
A total of 75,000 options exercisable any time until 30 June 2014 with a strike price of $1.20
A total of 60,000 options exercisable any time until 23 November 2014 with a strike price of $0.50
A total of 1,000,000 options exercisable any time until 23 December 2014 with a strike price of $0.50

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

A total of 75,000 options exercisable any time until 19 April 2015 with a strike price of $0.38

Contractual life of options

The weighted average remaining contractual life for the share options outstanding as at 30 June 2010 is 3.21 (2009: 3.30 years).

Exercise price of options

The range of exercise prices for options outstanding at the end of the year was $0.32$1.20 (2009: $0.32-$1.20).

Fair value of options

The weighted average fair value of options granted during the year was $0.50 (2009: $0.57)

The fair value of the equity-settled share options granted under the option plan is estimated as at the date of grant using a Black-Scholes model taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the model used for the years ended 30 June 2009 and 30 June 2010:

	2010	2009
Hist orical volat ilit y (%)	73.38%	82.10%
Risk-f ree int erest rat e (%)	5.32%	5.21%
Exp ect ed lif e of op t ion (years)	5	5

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

Director Options

The Group issues options to directors in order to retain their services and provide incentive linked to the performance of the Company. Shareholder approval is sought for all options issued to directors in accordance with applicable legislation.

During the year, the Group issued a total of 3,600,000 options to directors and 300,000 to the company secretary. Full details of option holdings of directors and company secretary are disclosed in the remuneration report and note 27. The fair value of the equity-settled share options granted to directors is calculated using the method detailed above. The following table lists the inputs to the model used for the year ended 30 June 2010 (there were no director options issued and valued in the year ended 30 June 2009):

	2010
Hist orical volat ilit y (%)	76.63%
Risk-f ree int erest rat e (%)	5%
Exp ect ed lif e of op t ion (years)	5

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

13. TRADE AND OTHER PAYABLES

13. TRADE AND OTHER PAYABLES
	Consolidated
	2010 2009 $ $
Trad e p ayab les (i) Good s & Services Tax Payab le Ot her Payab les	817,793 295,397 18,552 - 1,434,813 4,226,744
	2,271,158 4,522,141

i. Trade payables are non-interest bearing and are normally settled on 60-day terms.

14. DEFERED INCOME

Incom e received in ad vance BORROWINGS Current Hire p urchase cont ract s Non-current Hire p urchase cont ract s PROVISIONS Current Annual leave p rovision Balance at 1 July Transf er t o/ (f rom ) p rovision Closing Balance 30 June Non-current Long Service Leave: Balance at 1 July Transf er t o/ (f rom ) p rovision Closing Balance 30 June	- 683,611
	- 683,611
	6,585 6,032
	6,585 6,032
	26,898 33,783
	26,898 33,783
	88,840 121,000 29,621 (32,160)
	118,461 88,840
	74,133 9,529 14,328 64,604
	88,461 74,133

15. BORROWINGS

16. PROVISIONS

Provision for Long-term Employee Benefits

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in Note 1(p) to this report.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Provision for Current Employee Benefits

A provision has been recognised for employee entitlements relating to annual leave. Annual leave is expected to be settled within 12 months of the reporting date

17. OTHER NON-CURRENT LIABILITIES

17. OTHER NON-CURRENT LIABILITIES
	Consolidated
	2010 2009 $ $
Def ered Governm ent Grant s	2,898,000 -
	2,898,000 -

18. ISSUED CAPITAL

Issued capital

111,711,583 f ully p aid ord inary shares (2009: 92,213,673)

27,434,757	23,048,738
27,434,757	23,048,738

Balance at beginning of financial year Issued pursuant t o share purchase plan @ 24 cent s per share Shares issued via placem ent @ 24 cent s per share Issue of shares for cash on exercise of share opt ions @ various prices Transact ion cost s on share issue Tax port ion of capit al raising cost s Transfer from share opt ion reserve Balance at end of financial year	2010 2009
	Number $ Number $
	92,213,673 23,048,738 57,874,626 14,228,516
	14,003,910 3,361,000 16,612,797 4,319,500 3,214,000 771,360 9,636,250 3,083,600 2,280,000 459,600 8,090,000 1,628,800 - (296,302) - (362,368) - 88,891 - 108,710 - 1,470 - 41,980
	111,711,583 27,434,757 92,213,673 23,048,738

Fully paid ordinary shares carry one vote per share and carry the right to dividends (in the event such a dividend was declared).

19. RESERVES

Share option reserve

The share option reserve records items recognised as expenses on valuation of employee share options and other equity settled transactions.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as discussed in note 1(s).

	Consolidated
	2010 2009 $ $
Reserves Foreign currency t ranslat ion Share op t ion reserve Foreign currency translation Balance at b eginning of f inancial year Foreign exchange t ranslat ions Balance at end of f inancial year Share option reserve Balance at b eginning of f inancial year Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on cancellat ion of vest ed op t ions Issue of Share Op t ions Transf er t o share cap it al up on conversion of op t ions Balance at end of f inancial year 20. RETAINED EARNINGS Balance at b eginning of f inancial year Net p rof it at t rib ut ab le t o m em b ers of t he p arent ent it y Transf er f rom em p loyee eq uit y-set t led b enef it s reserve up on cancellat ion of vest ed op t ions Balance at end of f inancial year 21. MINORITY INTEREST Cont rib ut ed cap it al Ret ained losses Balance at end of f inancial year	(563,413) (185,298) 1,217,180 814,149
	653,767 628,851
	(185,298) (7,419) (378,115) (177,879)
	(563,413) (185,298)
	814,149 587,735 (243,035) (59,060) 647,536 327,454 (1,470) (41,980)
	1,217,180 814,149
	(7,965,706) (4,877,186) (3,476,671) (3,147,579) 243,035 59,060
	(11,199,342) (7,965,706)
	344 344 (344) (344)
	- -

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

22. COMMITMENTS FOR EXPENDITURE

Op erat ing leases

Not longer t han 1 year Longer t han 1 year and not longer t han 5 years Longer t han 5 years Hire p urchase com m it m ent s Not longer t han 1 year Longer t han 1 year and not longer t han 5 years Longer t han 5 years	123,060 112,548 390,265 493,925 - -
	513,325 606,473
	6,585 9,159 26,898 27,477 - -
	33,483 36,636

Terms of lease arrangements

The Group has operating leases in place for plant and equipment and its principal place of business. The plant and equipment lease has 4 year lease and the principal place of business having a 5 year lease. Both leases have terms of renewal and the lease for the Group’s principal place of residence has an escalation clause linked to CPI.

Hire purchase arrangements

Future minimum lease payments under hire purchase contracts together with the present value of the net minimum payments are listed above in the above table.

Exploration leases

In order to maintain current rights of tenure to exploration tenements the Group will be required to outlay $5,780,00 in respect of tenement lease rentals and to meet minimum expenditure requirements.

23. CONTINGENT ASSETS AND LIABILITIES

At the date of signing this report, the Group is not aware of any contingent asset or liability that should be disclosed in accordance with AASB 137. It is however noted that the Company has entered into various bank guarantees with a number of State Governments in Australia, totalling $177,543 at 30 June 2010. These guarantees are designed to act as collateral over the tenements which Petratherm explores on and can be used by the relevant Government authorities in the event that Petratherm does not sufficiently rehabilitate the land it explores. It is noted that the bank guarantees have as at the date of signing this report have not been utilised by any State Government.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

24. AUDITOR’S REMUNERATION

	Consolidated
	2010 2009 $ $
Aud it or review of f inancial rep ort	42,173 28,000
	42,173 28,000

No other services have been provided

25. SUBSIDIARIES

	2010 2009 Name of entity % % Country of incorporation Ownership interest**
	Parent ent it y Pet rat herm Lt d Sub sid iary MNGI Pt y Lt d 100 100 Sub sid iary Heliot herm Lt d 100 - Sub sid iary PTR Hold ings BV 100 100 Sub sid iary Pet rat herm Esp ana SL 93 93 Sp ain Aust ralia Aust ralia Aust ralia Net herland s

Percent age of vot ing p ow er is in p rop ort ion t o ow nership

26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES AND FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 18, 19 and 20 respectively.

Proceeds from share issues are used to maintain and expand the Group’s exploration activities and fund operating costs.

There are no externally imposed capital requirements.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Categories of financial instruments

	Consolidated
	2010 2009 $ $
Financial Assets Cash and cash eq uivalent s Trad e and ot her receivab les Financial Liabilities Trad e and ot her p ayab les
	2,716,750 13,002,052 1,635,418 2,317,699

	2,271,158 4,522,141

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from activities.

The Group does not have any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves.

Liquidity and interest risk tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Non-interest bearing financial liabilities are generally settled on 60-day terms.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

	< 1year > 1 - <5 years Non-Interest Bearing Total $ $ $ $
FINANCIAL LIABILITIES Fixed rate Trade and Other Payables Weighted average effective interest rate Year ended 30 June 2010	- - 2,271,158 2,271,158
	- - - -
FINANCIAL LIABILITIES Fixed rate Trade and Other Payables Weighted average effective interest rate Year ended 30 June 2009	- - 4,522,141 4,522,141
	- - - -

The table below has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Company/Group anticipates that the cash flow will occur in a different period. Non-interest bearing financial assets are generally issued on 30-90 day terms

	< 1year > 1 - <5 years Non-Interest Bearing Total $ $ $ $
FINANCIAL ASSETS Fixed rate Cash assets Receivables Weighted average effective interest rate Floating rate Cash assets Weighted average effective interest rate Year ended 30 June 2010	177,000 - - 177,000 - - 1,635,418 1,635,418
	4.24% - - - 2,539,750 - - 2,539,750
	4.50% - - -
FINANCIAL ASSETS Fixed rate Term Deposits Receivables Weighted average effective interest rate Floating rate Cash assets Weighted average effective interest rate Year ended 30 June 2009	147,450 - - 147,450 - - 2,317,699 2,317,699
	5.94% - - - 12,854,602 - - 12,854,602
	4.25% - - -

At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s:

net loss would increase or decrease by $135,838 which is mainly attributable to the

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Group’s exposure to interest rates on its variable bank deposits.

27. RELATED PARTY DISCLOSURE AND KEY MANAGEMENT PERSONNEL REMUNERATION

Payments to related parties

O’Loughlins lawyers of which Simon O’Loughlin is a partner received legal fees of $90,250 (2009:$90,581) during the year. $11,224 remains outstanding at year end.

Professor Richard Hillis has a consultancy agreement with the Company and received geological consulting fees of $24,525. $1,998 remains outstanding at year end.

Throughout the year, Petratherm Limited was invoiced by a director related entity Minotaur Exploration Limited, for the provision of technical staff and equipment, as well as reimbursements for expenditure jointly incurred. Mr Carter & Mr Bonython are directors of Minotaur. These transactions were undertaken on arms length basis and in aggregate for the year ended 30 June 2010 totalled $2,349 (2009:$43,778) $1,633 remains outstanding at year end.

All related party transactions are conducted as commercial rates on all arms length basis.

Key management personnel remuneration and equity holdings

All remuneration paid to directors and executives is expensed as incurred. Executives are also entitled to participate in the Company share option scheme. Options are valued using the Black-Scholes methodology.The board policy is to remunerate non-executive directors at market rates based on comparable companies for time, commitment and responsibilities. The board determines payments to non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

The following individuals are classified as key management personnel in accordance with AASB 124 ‘Related Party Disclosures’:

Derek Carter (Chairman) Terry Kallis (Managing Director) Richard Bonython (Non-Executive Director) Richard Hillis (Non-Executive Director) Simon O'Loughlin (Non-Executive Director) Lewis Owens (Non-Executive Director) Donald Stephens (Company Secretary) Peter Reid (Exploration Manager) Jonathan Teubner (Business Development Manager) John King (Paralana Project Manager)

The remuneration details of the above personnel can be found in the body of the directors’ report. The totals of remuneration paid to key management personnel of the Group during the year are as follows :

Consolidated group Short -t erm em p loyee b enef it s Post em p loym ent b enef it s Share-b ased p aym ent s	2010 2009 $ $

	879,517 886,927 69,388 75,530 502,500 431,628
	1,451,405 1,394,085

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Option holdings of Key Management Personnel

Directors
Terry Kallis
Terry Kallis
Terry Kallis
Derek Cart er
Richard Bonyt hon
Lew is Ow ens
Richard Hillis
Richard Hillis
Sim on O'Loughlin
Executives
Donald St ephens
Donald St ephens
Pet er Reid
Pet er Reid
Pet er Reid
Pet er Reid
John King
Jonat han Teubner
Jonat han Teubner
Jonat han Teubner
30 June 2010

A total 2,600,000 unlisted options issued to the Directors of the Board (excluding the Managing Director), with the terms being 5 year options exercisable at any time until 4 January 2015 with a exercise price of $0.24. In addition to this, 1,000,000 unlisted options were issued to the Managing Director in two tranches of 500,000. The first tranche has terms being 5 year options exercisable at any time until 4 January 2015, with an exercise

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

price of $0.24. The second tranche has terms being 5 year options exercisable at any time until 4 January 2015, with an exercise price of $0.29. The company secretary received 300,000 unlisted options being 5 year options exercisable at any time until 3 January 2015 with a exercise price of $0.53. Key Management Personnel received 450,000 unlisted options being 5 year options exercisable at any time until 23 December 2014 with a exercise price of $0.50.

** $50,000 was raised through directors and consultants exercising 250,000 options at $0.20 cents during the financial year ending June 2010.

*** The reduction in options held by KMP relates to the expiry or lapse of unexercised options.

Expiry date
First
exercise
date
Last
exercise
date
650,000
-
-
-
650,000
30/04/12
01/05/07
30/04/12
750,000
-
-
-
750,000
30/04/13
01/05/08
30/04/13
1,200,000
-
(1,200,000)
-
-
04/04/09
05/04/04
04/04/09
500,000
-
(500,000)
-
-
04/04/09
05/04/04
04/04/09
400,000
-
(400,000)
-
-
04/04/09
05/04/04
04/04/09
300,000
-
(300,000)
-
-
04/04/09
05/04/04
04/04/09
200,000
-
-
-
200,000
25/06/12
26/06/07
26/06/12
200,000
-
(200,000)
-
-
04/04/09
05/04/04
04/04/09
250,000
-
-
-
250,000
27/07/09
28/07/05
27/07/09
400,000
-
(400,000)
-
-
27/07/09
28/07/05
27/07/09
400,000
-
-
-
400,000
21/05/11
22/05/06
21/05/11
100,000
-
-
-
100,000
01/01/12
01/01/07
01/01/12
-
100,000
-
-
100,000
27/11/13
28/11/08
27/11/13
400,000
-
-
-
400,000
31/05/13
01/06/08
31/05/13
-
100,000
-
-
100,000
27/11/13
28/11/08
27/11/13
-
400,000
-
-
400,000
06/07/13
07/07/09
06/07/13
5,750,000
600,000
(3,000,000)
-
3,350,000
Balance at
beginning of
period
Granted as
remuner-
ation
Options
exercised
Options
Lapsed
Balance at
end of
period

* A total of 3,000,000 unlisted options were exercised by directors at $0.20 per unlisted option raising $600,000

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Share holdings of Key Management Personnel

	Balance at 1	On Exercise	Net Change	Balance 30
30 June 2010	July 09	of Options	Other	June 10
Directors
Terry Kallis	119,230	-	31,250	150,480
Derek Cart er	1,266,250	-	62,500	1,328,750
Richard Bonyt hon	1,106,440	-	124,998	1,231,438
Lew is Ow ens	-	-	72,500	72,500
Richard Hillis	120,000	-	62,500	182,500
Sim on O'Loughlin	325,000	-	33,333	358,333
Executives
Pet er Reid	389,230	-	-	389,230
Jonat han Teubner
	-	-	-	-
Donald St ephens
	-	-	-	-
John King
	-	-	-	-
	Balance at 1	On Exercise	Net Change	Balance 30
30 June 2009	July 08	of Options	Other	June 09
Directors
Terry Kallis	100,000	-	19,230	119,230
Derek Cart er	66,250	1,200,000	-	1,266,250
Richard Bonyt hon	532,500	500,000	73,940	1,106,440
Lloyd Taylor	300,000	400,000	(700,000)	-
Richard Hillis	20,000	300,000	(200,000)	120,000
Sim on O'Loughlin	125,000	200,000	-	325,000
Executives
Pet er Reid	34,918	400,000	(45,688)	389,230
Jonat han Teubner
	-	-	-	-
Donald St ephens
	-	-	-	-
John King	-	-	-	-

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

Wholly owned Group transactions

Loans

The wholly owned Group consists of Petratherm Limited and its wholly owned controlled entity MNGI Pty Limited, Heliotherm Limited, PTR Holdings BV and majority owned Petratherm Espana SL. Ownership interests in the controlled entity are set out in note 25. Transactions between Petratherm Limited and its subsidiary’s during the year consisted of loans advanced by Petratherm Limited to fund exploration and investment activities. The closing value of the loan to its wholly owned subsidiary is contained within the statement of financial position under current assets. Intercompany and cash movements throughout the year are detailed within the body of the statement of cash flows under ‘Loans to whollyowned subsidiary’.

28. SUBSEQUENT EVENTS

On the 6 July the Group issued 1,535,000 options to employees under the Petratherm ESOP plan.

On the 16 July Petratherm announced that the $62.8 million grant Funding Deed under the Commonwealth Goverment’s Renewable Energy Demonstration Program (REDP) has been executed.

29. ADDITIONAL INFORMATION (JOINT VENTURES)

Beach Energy Limited is an oil & gas company that farmed-in to the Paralana Project in January 2007. Beach can earn up to 36% of the project for $30 million plus their equity share of project costs.
TRUenergy Geothermal farmed-in to the Paralana Project in August 2008. TRUenergy Geothermal can earn up to 30% of the project for $57 million plus their equity share of project costs.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2010

30. PARENT ENTITY INFORMATION

30. PARENT ENTITY INFORMATION
	Parent
	2010 2009 $ $
Financial Position Assets Current Asset s Non-current Asset s Liabilities Current Liab ilit ies Non-current Liab ilit ies Equity Issued Cap it al Reserves Ret ained Earnings Financial Position (Loss) f or t he year Ot her com p rehensive incom e	16,820,053 15,702,875 527,062 480,027
	17,347,115 16,182,902

	342,574 363,103 115,359 10,796
	457,933 373,899
	27,434,757 23,048,738 1,217,180 814,148 (11,762,755) (8,151,003)
	16,889,182 15,711,883
	(3,852,556) (3,325,458) - -
	(3,852,556) (3,325,458)

Contingent Liabilities

Contingent liabilities of the parent entity have been incorporated into the Group information in note 23. The contingent liabilities of the parent are consistent with that of the Group.

Contractual Commitments

Contractual Commitments of the parent entity relating to operating and hire purchase have been incorporated into the Group information in note 22. The parent entity does not have exploration lease commitments.

31. GOING CONCERN BASIS OF ACCOUNTING

The financial report has been prepared on the basis of a going concern.

The cash flow projections of the Group indicate that Group is reliant on the completion of a capital raising for continued operations. The Group will be seeking to raise equity to fund operations, including exploration and working capital.

If additional capital is not obtained, the going concern basis may not be appropriate, with the result that the Group may have to realise its assets and extinguish its liabilities, other than in the ordinary course of business and at amounts different from those stated in the financial report. No allowance for such circumstances has been made in the annual financial report.

The accompanying notes form part of these financial statements

Petratherm Ltd – Annual Report

Directors' Declaration

The directors of the Company declare that:

the financial statements and notes, as set out on pages 20 to 74, are in accordance with the Corporations Act 2001 and:
a. comply with Australian Accounting Standards; and
b. give a true and fair view of the financial position as at 30 June 2010 and the performance for the year ended on that date of the Company and consolidated Group;
c. comply with International Financial Report Standards as disclosed in Note 2
the Managing Director and Company Secretary have each declared that:

a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;

b. the financial statements and notes for the financial year comply with the Accounting Standards; and

c. the financial statements and notes for the financial year give a true and fair view;

in the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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

==> picture [136 x 62] intentionally omitted <==

Terry Kallis Managing Director

Dated 30 September 2010

The accompanying notes form part of these financial statements

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AI assistant

PTR MINERALS LTD — Annual Report 2010

65621_rns_2010-09-29_9a1d725b-6967-455f-8788-223042824e1d.pdf

Petratherm Ltd ABN 17 106 806 884

Contents to Financial Report

Corporate Information

Directors

Company Secretary

Registered Office

Principal place of business

Share Registry

Legal Advisors

Bankers

Auditors

Directors’ report

DIRECTORS

Names, qualifications, experience and special responsibilities

Terry Kallis , BE (Elec) MBA (Managing Director)

Directors’ report

Richard Bonython , B Ag Sc (Non- Executive Director)

Richard Hillis, BSc, ARSM, PhD (Non-Executive Director)

Simon O’Loughlin, BA (Acc) (Non-Executive Director)

Lewis Owens, MSc,BE(Hons),BA (Non-Executive Director)

Directors’ report

COMPANY SECRETARY

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE

DIVIDENDS

PRINCIPAL ACTIVITIES

Directors’ report

OPERATING RESULTS

OPERATIONS OVERVIEW

Directors’ report

Directors’ report

RISK MANAGEMENT

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Directors’ report

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

ENVIRONMENTAL REGULATION AND PERFORMANCE

Directors’ report

Unissued Shares

Directors’ report

SHARE OPTIONS

Shares issued as a result of the exercise of unlisted options

Cancellation of Options

New options issued

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

REMUNERATION REPORT - AUDITED

Remuneration philosophy

Employment contracts

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Key management personnel remuneration and equity holdings

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 1: Directors’ remuneration for the year ended 30 June 2009 & 2010

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 2: Remuneration of the named executives who receive the highest remuneration for the year ended 30 June 2009 & 2010

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 3: Options granted as part of remuneration

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 4: Options holdings of Key Management Personnel

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Directors’ report

REMUNERATION REPORT - AUDITED (continued)

Table 5: Shareholdings of Key Management Personnel

Directors’ report

DIRECTORS’ MEETINGS

Directors’ report

PROCEEDINGS ON BEHALF OF THE COMPANY

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

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Corporate Governance Statement

Introduction

Principle 1: Lay solid foundations for management and oversight

Corporate Governance Statement

PTR MINERALS LTD Annual Report 2010

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