RAREX LIMITED — Annual Report 2007

Apr 22, 2008

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2007 ANNUAL REPORT

Clancy Exploration Limited ACN 105 578 756

Corporate DireCtory

Directors

Dr James Macdonald Non-Executive Chairman

Mr Mark stewart Managing Director

Dr Nick Archibald Non-Executive Director (Technical)

Mr Mark Lester Non-Executive Director (Finance)

shAre registry

computershare investor services pty Ltd

Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000

Telephone: +61 8 9323 2000 Facsimile: +61 8 9323 2033

AuDitor

ernst & young

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Chartered Accountants and Business Advisors 11 Mounts Bay Road Perth WA 6000

coMpANy secretAry

Mr Rowan Caren

priNcipAL pLAce of BusiNess

LAwyers

57 Havelock Street West Perth WA 6005

pullinger readhead Lucas

50 Kings Park Road West Perth WA 6005

Telephone: +61 8 9481 8241 Facsimile: +61 8 9226 1299 www.clancyexploration.com

AsX trADiNg syMBoL: cLy

INDEX

Chairman’s Address ................................................................................................................................................................. 1

Operations Report

Company and Targeting Overview ........................................................................................................................................... 2 Project Overview ..................................................................................................................................................................... 3 List of Mineral Tenements ..................................................................................................................................................... 18

financial report

Directors’ Report ................................................................................................................................................................... 19 Auditor’s Independence Declaration ..................................................................................................................................... 27 Income Statement ................................................................................................................................................................. 28 Balance Sheet ........................................................................................................................................................................ 29 Statement of Recognised Income and Expenditure .............................................................................................................. 30 Cash Flow Statement ............................................................................................................................................................. 31 Notes to the Financial Statements ........................................................................................................................................ 32 Directors’ Declaration ............................................................................................................................................................ 69 Independent Auditor’s Report............................................................................................................................................... 70 ASX Additional Information ................................................................................................................................................... 72 Corporate Governance Statement ........................................................................................................................................ 74

CHAIRMAN’S ADDRESS

Dear Fellow Shareholders,

On behalf of the Board of Directors, it is my very great pleasure to present to you the 2007 Annual Report for Clancy Exploration Limited and to review the significant progress made by Clancy in 2007.

Clancy listed on the ASX on July 11, 2007, raising $5 million by issuing 25 million shares at $0.20 per share. Following this milestone event, Clancy accelerated its exploration program in the Lachlan Fold Belt of New South Wales focussing on a property portfolio of 12 high quality project areas, targeted and acquired over the last five years for their copper and gold potential. The Clancy projects are located in the Macquarie Arc, which is host to Rio Tinto’s Northparkes and Newcrest’s Cadia-Ridgeway copper-gold mines as well as Barrick’s Cowal gold mine. Area selection in NSW utilised the technical expertise and proprietary probabilistic targeting techniques developed over several years by Clancy’s former parent Geoinformatics Exploration Inc, which continues to hold 47.7% of Clancy .

Clancy’s exploration program in NSW in 2008 will include over 30,000 metres of drilling to commence testing 17 targets. This is a significant programme by any measure for a relatively newly listed junior explorer and is underpinned by the involvement of Gold Fields Limited which has been involved with Clancy’s projects in the Lachlan Fold Belt since 2004.

In NSW Clancy manages the exploration portfolio, including three projects (Gobondery, Cowal East and Wellington North) under joint venture to Gold Fields. Diamond drilling commenced at Gobondery in late 2007 to test two significant and intriguing Induced Polarisation (IP) targets. Results are awaited but it is clear that the targeting process used by Clancy in the region to identify porphyry systems under cover is working. Aircore drilling also commenced at Cowal East and the visual evidence of strong phyllic-style alteration coupled with abundant pyrite and favourable intrusive rocks confirms that Cowal East is a highly promising target. These are significant results on the first two projects that Clancy has worked on since listing. Work is also due to commence on the advanced Fairholme and Myall projects in mid-2008, both of which are unequivocal Ordovician porphyry copper-gold systems with identified mineralisation.

Clancy also has a significant number of base metal exploration targets located in western Tasmania within the prolific Mount Read Volcanic Belt. Clancy’s subsidiary Geoinformatics Exploration Tasmania Pty Ltd acquired 12 exploration licences over these targets which were joint ventured to Bass Metals. Bass Metals manages and operates the joint venture and is earning a 75% interest by completing a pre-feasibility study.

Prior to the listing in mid-2007, Clancy and its partners had spent over $3.5 million on the projects in NSW and Tasmania. Approximately $7.5 million is to be spent on exploration of our projects by Clancy and its partners over the 24 months following listing.

Much has been achieved on the exploration front since listing, as emphasised in the overview contained in this Annual Report. Clancy has recently expanded its talented exploration team, based mainly in Orange, NSW and now has the resources and capacity to pursue the aggressive exploration programme that is planned for 2008. I would personally like to thank my fellow directors, Clancy’s employees and contractors for their efforts during 2007

In closing, I wish to thank Clancy’s shareholders, both institutional and retail, for their continued support and I look forward to reporting to you next year on Clancy’s exploration successes, corporate activities and resulting enhancement of shareholder value in 2008.

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A. JAmeS mAcDonAlD Chairman 10 April, 2008

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Clancy Exploration Limited – Annual Report 2007

1

OPERATIONS REPORT

COMPANY AND TARGETING OVERVIEW

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Clancy Exploration Limited (Clancy) is an innovative copper, gold and base metals explorer focused on world-class mineral provinces in Australia. Clancy is the product of five years of strategic planning and optimised exploration targeting and ground acquisition in the Lachlan Fold Belt of New South Wales and the Mount Read Volcanic Belt in Tasmania.

Clancy’s mission is to improve the odds of exploration success through the deployment of cutting-edge targeting techniques and risk managed exploration.

Clancy’s objective is to advance the targets on its properties to a stage of commercial development by applying faster, less expensive and more reliable analytical methods to resource exploration. Our aim is the discovery of worldclass mineral deposits.

The Geoinformatics Process

Clancy deploys a unique and innovative targeting methodology that is based on the Geoinformatics Process. The methodology was developed by Geoinformatics Exploration Incorporated (Geoinformatics), the original parent company of Clancy and which now holds 47.7% of Clancy. The targeting methodology uses a probabilistic approach that incorporates risk and uncertainty in target definition. Targets are therefore prioritised and ranked by probability of success. Clancy focuses on the highest ranked targets, which significantly improves the odds of exploration success.

The Target Bank – a portfolio approach to exploration

Clancy’s Target Bank has evolved over the last five years. It contains a number of highly prospective targets. Clancy continues to have the right of access to the technical expertise within Geoinformatics, including the Geoinformatics Process, which in turn provides exposure to, and participation in, future targeting innovations. Clancy has a pipeline of quality targets to evaluate now, and the pipeline will continue to expand through ongoing targeting work.

The exploration strategy adopted by Clancy is based on a portfolio approach to target evaluation and the Target Bank is the key to this. Each target is prioritised and ranked by probability of success. If 15-20 of these targets can be tested per annum over a 3-4 year period, then the odds of significant discovery improve drastically.

The development of the Target Bank was assisted by Gold Fields Limited (Gold Fields) which provided $1.5m of seed funding over three years prior to Clancy listing on the ASX. Gold Fields entered into three joint ventures with Clancy at the time of listing, undertaking to spend $5m over three years to earn an 80% interest in those projects. Clancy, in conjunction with its joint venture partners, is planning to spend a total of $7.5m on target exploration over the two years from the date of listing on the ASX, which was 11 July 2007. Included in that is over 5,500m of drilling completed since listing and a further 30,000m of drilling to the end of 2008.

Highlights:

• Five years of strategic planning and optimised exploration targeting

• Cutting-edge targeting techniques

• Rigorously defined and robust targets

• Pipeline of highly-ranked targets

• Portfolio approach to target evaluation

• Improving the odds of exploration success

• $7.5m exploration spend over two years

• 35,000m drilling program underway

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Map showing Clancy’s tenement portfolio in the Macquarie Arc of the Lachlan Fold Belt in NSW and the Mount Read Volcanic Belt in Tasmania

2 Clancy Exploration Limited – Annual Report 2007

PROJECT OVERVIEW

Lachlan Fold Belt Projects – NSW

Clancy’s tenement portfolio in the Lachlan Fold Belt of NSW consists of 17 exploration licences covering 1,875 km[2] of the Ordovician Macquarie Arc which hosts several large porphyry copper-gold deposits. Clancy’s targeting indicates that the geological environment within each tenement is prospective for these porphyry copper-gold deposits.

Porphyry copper-gold mineralisation in the Macquarie Arc

Porphyry copper-gold mineralisation in the Lachlan Fold Belt is associated with the Macquarie Arc which is a volcanic arc that formed along the eastern margin of Australia between 480 and 438 million years ago. After formation, the Macquarie Arc was dismembered resulting in the four volcanic belts existing today. The two main belts are the Junee-Narromine Volcanic Belt and the Molong Volcanic Belt, both of which host economic porphyry copper-gold mineralisation. Two major mines are currently in production in these belts: the Cadia mine in the Molong Volcanic Belt and the Northparkes mine in the Junee-Narromine Volcanic Belt. There are several other early- or pre-resource porphyry projects under evaluation by other parties including Copper Hill and Cargo in the Molong Volcanic Belt and Silverstone, Estoril, Marsden and Monza in the Junee-Narromine Volcanic Belt. The Monza prospect was discovered late in 2007 with an intercept in the first diamond hole of 150m @ 1.02% Cu and 0.75gpt Au, including a higher grade interval of 12.7m @ 8.88% Cu and 6.15gpt Au.

A number of satellite deposits are mined at Northparkes and Cadia. The porphyry deposits at Cadia, which include the high-grade gold-rich Ridgeway deposit, are world-class, with a combined endowment of >35 million ounces of gold and >4.5 million tonnes of copper. Furthermore, Ridgeway is Australia’s most profitable gold mine, with negative production cash costs at current commodity prices. The other major deposit in the region is the Cowal mine in the JuneeNarromine Volcanic Belt. Cowal has an endowment of >4.5 million ounces of gold. The Cadia, Northparkes and Cowal mines, along with the recently discovered Monza prospect described above, clearly demonstrate the potential of the Macquarie Arc for the discovery of significant copper-gold deposits. Clancy, with its innovative targeting methodology and compelling ground holding in the Macquarie Arc, is positioning itself to make that discovery.

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Map showing the location of Clancy projects in the Junee-Narromine and Molong Volcanic Belts of the Macquarie Arc. Inset – the location of the map within NSW.

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Cadia open-cut copper-gold mine July 2004

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Junee-Narromine Volcanic Belt Projects

Gobondery EL6534

(Gold Fields earning 80%)

Gobondery is located 47km west of the Northparkes coppergold mine (Rio Tinto). Aircore drilling completed by Clancy in 2006 identified fractionated Ordovician intrusive rocks and associated porphyry-style alteration and mineralisation beneath a cover sequence of between 30 and 75 metres in the Allandale area. A 3D induced polarisation (IP) survey was completed at Allandale. The purpose of the IP survey is to detect sulphide minerals (pyrite and chalcopyrite) that may be associated with porphyry systems. Sulphide minerals will charge when an electrical current is applied to the ground. As the charge decays, it is measured by the IP survey (in milliseconds). A discrete cigar-shaped +8 millisecond chargeable anomaly over a strike length of 750m with a diameter of 150m was detected at Allandale at a depth of approximately 100m. The chargeable anomaly is coincident with the porphyry-style alteration and mineralisation identified by the aircore drilling.

One diamond hole (ALRCD001) was drilled into the Allandale chargeable anomaly to a depth of 378m. The host rocks are mostly andesite flow units with intercalated breccia. The breccia is locally clast-supported and appears to be depositional in nature. Some breccia clasts are redbrown porphyritic monzonite. Much of the core exhibits weak to pervasive propylitic alteration (epidote-chlorite), with the more intense alteration preferentially affecting the breccia. Epidote veinlets with K-feldspar selvages are also more abundant in the breccia. Calcite veins occur throughout, but very few quartz veins were observed. Fine-grained disseminated pyrite (locally up to 2%) was intersected in discrete intervals, but only rare amounts of chalcopyrite was noted on vein margins. Minor specular- to massive-hematite occurs as veinlets, fracture coatings and as disseminated grains in epidote-chlorite altered breccia. Results are awaited from this hole.

The Forest View prospect is located 5km south of Allandale. Clancy identified K-feldspar-magnetite-epidote alteration in hornblende monzodiorite at Forest View in 2006. A quartzchalcopyrite-bornite vein assayed by Clancy returned 1.14% copper and 0.17g/t gold. A gradient array IP survey was completed which identified a prominent +15 millisecond chargeable zone over an area of 1100m x 600m. Followup pole-dipole IP lines confirmed that there is a significant chargeable anomaly at Forest View over an area of 400m x 650m with chargeability’s of 15 to +45 milliseconds. The top of the anomaly is between 60m to 150m deep and is open at depth.

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Gobondery EL6534 showing the IP surveys and diamond drill holes completed in 2007.

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Allandale prospect ALRCD001 drill site, October 2007.

Clancy Exploration Limited – Annual Report 2007

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Two diamond drill holes were drilled into the Forest View chargeable anomaly. FVD001 was completed at 303.5m and FVD002, which was collared 300m to the east was drilled to 396m. The dominant host rock in FVD001 is fineto medium-grained volcanic sandstone with intercalated depositional breccia. FVD002 is mostly composed of fineto medium-grained volcanic sandstone. Minor fine-grained monzodiorite dykes were also intersected in FVD002. There is pervasive epidote and chlorite alteration in both holes, and the alteration appears to be magnetite destructive in FVD001. Calcite veins, garnet and pyrite are more common in FVD002 whereas specular hematite is more common in FVD001. Epidote veinlets with local K-feldspar selvages are common in both holes. There are no quartz veins and only trace pyrite and very rare chalcopyrite (associated with hematite and calcite) in the system. Assays have been received for FVD001 and are disappointing with no significant intersections recorded. Results for FVD002 are awaited.

The diamond drilling completed at Gobondery in 2007 identified altered porphyry systems at the Allandale and Forest View prospects, confirming the original targeting premise. From a targeting perspective, the results are encouraging as the aim was to identify blind (i.e. covered) porphyry systems, which is what has been defined at both prospects. However, assays for one hole have been received and are disappointing.

The alteration appears to be higher temperature at Forest View (presence of garnet), however volcanic facies suggest Allandale is more proximal to a volcanic centre. Both systems lack quartz veins and sulphide minerals. A more thorough assessment will be made after all the results have been received, including whether or not the IP chargeable anomalies at the prospects have been adequately explained.

Gobondery Highlights:

• Blind porphyry systems identified at Allandale and Forest View

• IP chargeable anomalies defined at both prospects

• Three diamond holes completed, 1078m

• Targeting premise confirmed

• Full results awaited

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Forest View IP results showing gradient array IP data as a surface and inverted 2D pole-dipole IP sections with the two diamond holes (black) on the southern section. The warmer colours are higher chargeability’s. The distance between FVD001 (left) and FVD002 (right) is 300m. Oblique 3D view looking NNW.

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NQ drill core from hole FVD001 part of the interval between 156m and 162.5m. Note the intense epidote alteration (green) near the bottom of the photo.

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NQ drill core from hole ALRCD001 part of the interval between 51m and 54.5m showing K-feldspar (pink) and epidote alteration (pale green).

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Cowal East EL6553 and EL6554

(Gold Fields earning 80%)

EL6553 and EL6554 are located in the Cowal Igneous Complex, east of the Cowal gold mine and north west and south west of the Marsden copper-gold prospect. The Cowal gold deposit is a low-sulphidation carbonate-base metal gold system with an endowment of >4.5M oz of gold which is being mined by Barrick. Marsden is a porphyry copper-gold prospect that is currently being drilled out to resource status by Newcrest Mining. Marsden currently has an inferred resource of 800,000 oz of gold and 380,000 tonnes of copper and has yielded recent drilling intercepts such as 171m @ 0.82g/t gold and 0.7% copper. The Cowal East project is prospective for both porphyry-style (such as Marsden) and Cowal-style deposits.

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Geology of the Cowal Igneous Complex showing Clancy’s tenements EL6553 and EL6554 and significant mineralised systems.

Significant gold, copper and zinc anomalism has been identified by previous aircore drilling, associated with basement Ordovician intrusive and volcanic rocks. A large 2.7km long gold-copper-zinc trend on the edge of a large intrusive complex was identified in the south of EL6554. The composition of the intrusive complex ranges from diorite, quartz-diorite and quartz-monzodiorite, through to granodiorite, tonalite and feldspar porphyry. Significant hydrothermal alteration was also noted, including albitesericite-pyrite, sericite-carbonate-silica and biotite hornfels, as well as widespread epidote-chlorite assemblages.

These observations have been confirmed by Clancy’s aircore drilling which commenced in January 2008. A total of 21 holes for 1841m was completed before drilling had to be suspended due to heavy rainfall. Results from the drilling completed to date are expected shortly. However, the visual evidence of strong phyllic-style alteration coupled with abundant pyrite and favourable intrusive rocks confirms that Cowal East is a very promising target. Aircore drilling will resume after crops are harvested in October-November 2008 which will be followed up with deeper RC and diamond drilling.

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EL6554 Wyrra previous aircore drilling results showing significant basement drill intercepts.

cowal east Highlights:

• Significant gold, copper and zinc anomalies in basement rocks

• Favourable intrusive complexes identified with strong hydrothermal alteration

• Visual evidence of sulphide mineralisation

• Untested basement geochemical anomalies to follow-up – drilling late 2008

• Aircore Drilling results awaited

6 Clancy Exploration Limited – Annual Report 2007

Fairholme EL6552 and EL6915

(Clancy 100%)

Fairholme is located 20km north of the Cowal gold mine and is covered by 15m to 100m of transported sediments. Several highly-ranked targets in the Fairholme Igneous Complex were secured by the grant of EL6552 in 2006 and EL6915 in 2007. Previous exploration in the Fairholme Igneous Complex focused on three prospects: Boundary, Gateway and Dungarvan, all of which are within EL6552.

Lithogeochemistry and petrology studies indicate that the composition of the igneous rocks in the Fairholme Igneous Complex have close affinity to the alkaline igneous rocks of the Northparkes Igneous Complex, which hosts the Northparkes copper-gold mine. Despite the similarities, the Fairholme Igneous Complex is under explored, especially outside of EL6552.

Previous drilling defined significant widths of unequivocal porphyry-style copper and gold mineralisation and related alteration at Boundary and Dungarvan. The best intersection was 48m @ 0.60g/t Au, 0.16% Cu at Boundary. Previous aircore drilling in other parts of the tenement identified several basement copper-gold anomalies that were never followed up. All prospects are associated with large basement geochemical anomalies. The size of the anomalies at +500ppm copper are 2.2 x 1.1km at Dungarvan, 1.2 x 1km at Gateway and 1.6 x 0.6km at Boundary. Both Boundary and Gateway have similar size anomalies at +100ppb gold. All three prospects also have anomalous molybdenum (>20ppm), with some zones at Boundary and Dungarvan having >50ppm. Gateway also has elevated zinc (>1000ppm) associated with it.

Modeling work completed by Clancy in 2006 showed that the causative intrusion of the porphyry mineralisation and alteration had not been intersected yet. Inversion modeling on ground magnetic data defined a magnetic body, 5070m below surface, extending down to ~450m depth over an inferred strike length of ~850m. The magnetic body transgresses stratigraphy and corresponds with zones of elevated disseminated magnetite in the more porous units in drill core, particularly the vesicular andesitic lava. This strongly suggests that magnetite is hydrothermal in origin. It is therefore possible that the source of the hydrothermal mineralisation could be an intrusion that is deeper than 450m vertical.

Work completed since July 2007 included spectral studies on drill core and trial IP surveys. Spectral logging was completed with a Terraspec spectrometer at a spacing of approximately one per metre. A total of 4,879 spectra were collected from the Fairholme core.

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Geology of the Fairholme Igneous Complex showing Clancy’s tenements EL6552 and EL6915 and the prospects mentioned in the text.

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Oblique 3D view of the Boundary geological model looking west showing the magnetic inversion model (pink).

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The objective of the spectral logging is to map the Fairholme alteration system in 3D to provide vectors for deep drill targeting. Most alteration minerals associated with porphyry deposits have unique and identifiable spectral signatures. The Terraspec can objectively identify these signatures, as well as provide insight into the thermal environment of deposit formation. Interpretation of the spectral data is currently in progress.

A 2.9km long trial 2D pole-dipole IP line was also completed at Fairholme with the aim of determining the effectiveness of IP. Current channelling in conductive overburden prevented clear signal reaching basement, indicating that IP is not an effective exploration technique at Fairholme.

Clancy will conduct further 3D modeling of the spectra and geology to assist with drill targeting at Boundary, Dungarvan and Gateway. Deep diamond drilling is planned for later in 2008 with Boundary the initial focus, followed by Dungarvan and Gateway. First-pass aircore drilling on targets within EL6915 and follow-up drilling on the untested aircore anomalies within EL6552 will also be undertaken.

Fairholme Highlights:

• Igneous rocks have similar composition to the well mineralised Northparkes igneous rocks

• Unequivocal mineralised Ordovician porphyry copper-gold system identified with prominent basement copper-gold anomalism

• Significant widths of mineralisation intersected in previous drilling; e.g. 48m @ 0.6g/t Au and 0.16% Cu

• Causative intrusion at Boundary yet to be identified

• Some basement copper-gold anomalies never followed up with deeper drilling

• Diamond drilling to commence in 2008

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Aircore basement geochemical anomalies and significant drilling intercepts at the Fairholme prospects Boundary, Dungarvan and Gateway.

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Spectral logging of the Fairholme drill core.

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Myall EL6913

(Clancy 100%)

Myall consists of a single exploration licence 25km southwest of Narromine. The licence is situated within the Narromine Igneous Complex, one of the many arc fragments that constitute the Junee-Narromine Volcanic Belt. The igneous rocks at Myall have a calc-alkaline to alkaline affinity and are similar to igneous rocks in the Cowal and Northparkes Igneous Complexes, the latter of which is located 52km to the south.

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Geology of the Narromine Igneous Complex showing Clancy’s Myall tenement EL6913 and the prospects mentioned in the text.

A substantial amount of drilling was completed by previous explorers, most of which was on three prospects: Kingswood, Monaro and Sandman. Clancy identified two highly-ranked targets, one of which covers the three prospects and the other is located immediately to the north. Both targets are within EL6913.

Clancy has compiled the extensive previous exploration data. All three prospects are associated with widespread basement copper anomalies (>500ppm copper) that flank,

and partially overlap, an annular magnetic low within a broad gravity low. The zone of elevated copper comprises a northwest-trending chain of discrete anomalies that extends over a strike length of 13.5km with a maximum width of 3km at +500ppm copper. Large areas within discrete anomalies are +1000ppm copper, typified by Kingswood where the +1000ppm copper zone extends over 2.5 x 1.5km.

At Northparkes the main deposits are situated on the margin of magnetic highs within an annular low. There are numerous similar targets within the annular low at Myall, most of which remain untested. The size and scale of the geophysical and geochemical anomalies at Myall are significant and are on a par with those from the Northparkes mining centre.

Highlights from the previous drilling at Kingswood include a 37.5m drilled width of sheeted quartz-magnetite veining with associated chalcopyrite and bornite with peak values of 1.7g/t Au, 0.5% Cu. Follow-up drilling of this zone and nearby magnetic highs intersected porphyry related quartzmagnetite-chalcopyrite-bornite veins, quartz-pyrite veins and intense silica-sericite-pyrite alteration.

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Basement copper geochemistry at the Kingswood prospect as defined by previous aircore and diamond drilling.

The basement rocks at Myall include a fractionated suite of intrusive rocks ranging from gabbro and mafic diorite through to quartz diorite, diorite porphyry, monzodiorite and dacite porphyry. The more fractionated phases occupy areas of weaker magnetic response. Large widths of coppergold mineralisation were also intersected in the previous drilling; e.g. 107m @ 0.11g/t Au and 0.43% Cu, including 18m @ 0.29g/t Au and 0.93% Cu.

The drill intercepts combined with the presence of extensive porphyry-style alteration and veining, the fractionated intrusive suite, the bornite and chalcopyrite abundance and the large geochemical dispersion halos, suggests that a substantial porphyry system may exist at Myall. Furthermore, the scale and geometry of these features at Myall is comparable to Northparkes, an observation that is reinforced by the geophysical similarity between the two areas.

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Since listing, Clancy has re-logged most of the Myall drill core and aircore chips. Spectral logging has also been completed on the previous drill samples, with 6,949 spectra collected at a sample density of approximately one per metre. These data are currently being processed.

The re-logging indicates that coincident zones of elevated basement copper-gold and magnetic lows exist, which may represent magnetite destructive alteration. These areas have been targeted for follow-up aircore drilling which will be undertaken later in 2008. Deep diamond drilling of targets defined by 3D modelling is also planned.

myall Highlights:

• Unequivocal Ordovician porphyry copper-gold system

• Widespread geochemical dispersion halos, extensive hydrothermal alteration and significant drill widths of copper-gold mineralisation

• Significant widths of mineralisation intersected in previous drilling; e.g. 107m @ 0.11g/t Au and 0.43% cu

• Strong geophysical and geochemical resemblance to northparkes

• Re-logging of previous drill core and spectral logging completed

• 3D modelling of alteration and geology in progress

• Aircore and diamond drilling planned for third quarter 2008

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Myall annular magnetic anomaly (white hatching) over the 200-1000m residual RTP magnetic image (upper) and 0-1000m residual Bouguer gravity image (lower) .

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Goobang EL6537

(Clancy 100%)

Goobang is located approximately 20km south of the Northparkes copper-gold mine. Outcrop is minimal with surface geology dominated by Quaternary and Tertiary clay, alluvium and gravel up to 75m thick.

Relatively little work has been completed at Goobang, which is surprising given its location. Clancy generated several targets in the area, including one highly-ranked target. The highest-ranked target is in the north of the tenement where intrusive complexes in the core of the Forbes Anticline were predicted beneath Quaternary cover units. Clancy carried out aircore drilling in 2006, which covered approximately 60% of the target area.

The main basement rock type is magnetite-hematiteepidote ± K-feldspar altered volcaniclastic sandstone. Other basement features of interest include fractionated and epidote-altered monzonite, minor disseminated pyrite and rare chalcopyrite, sericite-pyrite-quartz alteration and rare molybdenite. These results are encouraging given that the predicted Ordovician intrusive has been confirmed in the best part of the target area, and it is associated with sulphide, veining and favourable alteration.

Two zones of elevated copper anomalism were defined: one around the fractionated monzonite, where seven adjacent holes have copper ranging from 326 to 496ppm. This zone is open to the northwest and covers an area of approximately 2 x 1.3km. Another anomalous zone is situated in the southeast of the drilled grid, and is open in that direction, where three adjacent holes have maximum copper of 324, 448 and 542ppm. Most anomalous holes are situated within magnetic lows on the flanks of magnetic highs.

A trial IP survey was recently completed. The overburden is highly conductive although some signal penetrated to the basement to a maximum depth of 100m below the surface. However, there is very little signal beyond this, indicating that IP is not a suitable exploration tool at Goobang.

Further aircore drilling was carried out during February 2008 to close off the southeast anomaly. Visual highlights include widespread moderate to strong epidote-chlorite alteration, pyrite-rich volcanic sandstone and vesicular basalt with pyrite. The encouraging visible alteration and sulphide mineralisation prompted a closer spaced drill pattern than originally planned. A total of 39 holes for 2367m were completed and results are awaited.

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Geology of Goobang EL6537 showing the location of the Clancy aircore holes from 2006 and 2008 and basement copper anomalies.

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A typical paddock in the central part of EL6537.

Goobang Highlights:

• Fractionated monzonite identified with encouraging alteration in surrounding rocks

• Moderate to strong sulphide mineralisation identified in latest drilling

• Two open copper anomalies

• Aircore drilling completed, results awaited

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Currumburrama EL6784

(Clancy 100%)

Currumburrama EL6784 is located 40km east of West Wyalong and 7.5km north of Goldminco’s SilverstoneImola porphyry copper-gold project. Drilling at the latter has identified a fractionated and highly altered alkaline monzodiorite to monzonite intrusive complex with significant mineralisation; e.g. 96m @ 0.7g/t Au and 74m @ 0.15% Cu. Clancy is targeting this style of mineralisation at Currumburrama, in an area with hardly any previous drilling. There is no outcrop at Currumburrama. Aircore drilling is planned for the third quarter of 2008.

Billabong Creek EL6802

(Clancy 100%)

Billabong Creek EL6802 is located 40km east of Wagga Wagga and is situated within a thickened section of the arc alongside the regionally extensive Gilmore Fault. Outcrop is confined to scattered small exposures on low hills with most of the area covered by Quaternary alluvium and clay. Clancy believes that the arc thickening is due to Ordovician intrusive activity. Magnetic residual imaging shows a bulge in the arc at depth and shallower intrusive signatures adjacent to the regionally extensive Gilmore Fault. This setting is similar to the Temora area to the northwest, where Goldminco has recently released highly significant results at its Monza prospect; e.g. 150m @ 1.02% Cu, 0.75g/t Au from 65m, including an interval of 12.7m @ 8.88% Cu, 6.15g/t Au from 127m.

Previous exploration at Billabong Creek identified copper mineralisation in monzonite with rock-chip sampling returning up to 2% copper in weathered monzonite. Previous scout drilling in the south of the licence by North Ltd intersected 2m @ 0.15% Cu, 0.04g/t Au and 80ppm Mo in monzonite. Interestingly, Goldminco’s Monza prospect near Temora also has elevated molybdenum, with large intervals at +80ppm Mo in drill core. The small amount of work completed to date has confirmed the targeting premise and suggests that Billabong Creek remains highly prospective for porphyry copper-gold mineralisation. Aircore drilling is planned for the third quarter of 2008.

Currumburrama and Billabong Creek Highlights:

• Little previous exploration

• Favourable magnetic signatures

• Mineralised monzonite identified at Billabong Creek

• Aircore drilling third quarter 2008

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Billabong Creek EL6802 500-5000m residual RTP magnetic image (upper) showing the arc bulge at depth adjacent to the Gilmore Fault and 0-500m residual RTP image (lower) showing potential intrusive signatures.

12 Clancy Exploration Limited – Annual Report 2007

Illabunda EL6535

(Clancy 100%)

Illabunda is located 45km north of Nyngan, where the Macquarie Arc extends at depth beneath the Mesozoic Sydney and Surat Basins. The basin is prohibitively deep in most areas, however depth to basement modeling completed by Clancy identified several basement highs where the Macquarie Arc is predicted to be within 200m of the surface. The targeting identified which of the basement highs are prospective for porphyry-style mineralisation and Illabunda is one of these. There has been no previous work at Illabunda.

One drill hole was completed at Illabunda in February 2008 which was terminated at 250m (153m aircore precollar with 97m NQ diamond core tail) without reaching Ordovician basement. The hole consisted of transported sand and clay to 153m followed by massive Jurassic sandstone to end of hole. The strategy was to validate the depth to Ordovician basement with the first hole and follow this up with one or two more holes depending on how the host rocks and alteration looked. The modeled depth to Ordovician basement from magnetic data was <250m. As there were no signs of Ordovician basement at 250m, the hole was terminated. The depth to basement modeling will be reviewed before a decision on the future of EL6535 is made.

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Aircore drilling, Cowal East, February 2008

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Memorial to Banjo Paterson who was born near Templers Mill on the outskirts of Clancy’s Orange East project. Clancy took its name from his famous poem “Clancy of the Overflow”.

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Clancy Exploration Limited – Annual Report 2007

13

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Molong Volcanic Belt Projects

Wellington North: EL6178, EL6328 and EL6662 (Gold Fields earning 80%)

The three licenses at Wellington North cover 35km of strike length of the Molong Volcanic Belt north of Wellington. Clancy has identified four highly-ranked targets at Wellington North. The northernmost section of arc within the project area extends beneath the Mesozoic Sydney and Surat Basins. Previous drilling identified Ordovician potassicaltered andesite and epiclastic rocks, and hornblendequartz monzodiorite within a large magnetic complex, which forms the basement of the Mesozoic Basin. Minor copper and anomalous gold mineralisation, is associated with this complex and previous exploration did not define the lateral or depth extents to this system.

There are numerous copper and gold mineral occurrences within the arc south of the Mesozoic Basin. The most significant are Kaiser, Comobella and Rose Hill which are porphyry systems associated with Ordovician monzonite to monzodiorite complexes, and Bodangora which is a low-sulphidation epithermal vein system. Only Rose Hill is within the Wellington North tenements. Historically, smallscale copper mining has been undertaken at Kaiser and Rose Hill and a more substantial gold mining operation was established at Bodangora / Mitchells Creek. Other prospects include Roselawn, Petleys and Dunbell which are all located within EL6178.

Rose Hill produced an unknown amount of copper in 18881889, but the lode was reported to be 0.76m wide with assays ranging from 18 to 30% copper. Mapping completed by Clancy around Rose Hill identified monzonite that locally contains primary sulphides. Pyrite and chalcopyrite is accompanied by strong magnetite and K-feldspar alteration and chlorite alteration after hydrothermal biotite. It is therefore surprising that there has been no previous drilling at Rose Hill.

The presence of intrusive rocks with porphyry-style alteration and mineralisation across the project area, combined with the lack of previous drilling, indicates that Wellington North remains highly prospective for porphyry copper-gold systems.

An extensive program of gradient array IP and 2D IP surveys were completed at Wellington North in 2007 and 2008. Gradient array IP and 2D pole-dipole IP surveys were undertaken over several target areas. A total of 25 line km’s of 2D pole-dipole IP surveys and 61km[2] of gradient array IP surveys have been completed to date. The IP data are currently being processed. RC drilling at Rose Hill will commence in April 2008, followed by RC and diamond drilling into defined IP chargeable anomalies later in the year.

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Wellington North project showing the prospects mentioned in the text and gradient array and pole-dipole IP surveys completed in 2007 and 2008.

Wellington North Highlights:

• Basement magnetic intrusive complex with porphyry-style alteration and mineralisation identified – lateral and depth extents open

• Extensive evidence of near-surface porphyry-style alteration and copper-gold anomalism south of Mesozoic Basin

• Monzonite with primary sulphide and potassic alteration identified by mapping

• Extensive IP surveys completed – data processing now

• RC and diamond drilling commencing in April 2008

14 Clancy Exploration Limited – Annual Report 2007

Orange East EL6181

(Clancy 100%)

The Orange East project consists of a single exploration licence, EL6181, on the eastern outskirts of the City of Orange. The main arc unit of interest within EL6181 is the Upper Blayney Volcanics which consist of shoshonitic lavas and coarse lava breccias.

Clancy identified one highly-ranked target which covers a large (6km x 2km) Late Ordovician monzonite complex in the central part of the tenement near the Suma Park Reservoir. The complex has compositions ranging from syenite to monzonite, through to monzodiorite and monzogabbro. Modeling completed by Clancy suggests the monzonite complex is at least twice the size of its exposed portion, and the available lithogeochemistry confirm that it is shoshonitic. The multiphase composition of the complex is encouraging as it suggests that it was associated with a long lived and fractionating magmatic system. At a quarry 1km north of Wellwood, pink monzonite is bleached by narrow sheeted quartz veins with some accompanying pyrite. This style of alteration is reminiscent of the host monzonite at the Cadia copper-gold mine.

Only a minor amount of drilling has been completed within EL6181, which is surprising given the favourable Ordovician intrusive rocks exposed in outcrop. Previous explorers drilled shallow aircore holes across the Godolphin Fault north of Carangera, and shallow RC holes into the monzonite complex east of Suma Park Reservoir. The deepest hole from this work was 57m with most hole depths less than 10m. The very shallow depth of the previous drilling is not an effective test of the area. The best result from these drilling programs was 6m @ 1.02% Cu from the aircore drilling.

Recent work by Alkane Resources Limited at the McPhillamy’s prospect about 15km south of EL6181, identified significant gold mineralisation from surface in Silurian rocks with intercepts such as 123m at 1.96gpt Au from surface, including higher-grade intervals of 28m at 3.83g/t Au and 10m at 4.93g/t Au. The mineralisation at McPhillamy’s is structurally controlled gold, possibly a sheared VHMS system within the Silurian Anson Formation. The Anson Formation consists of pyritic volcanic and volcaniclastic rocks adjacent to the Godolphin Fault. The Godolphin Fault extends north of McPhillamy’s and bisects the southern part of the Orange East tenement, where the Anson Formation is also present in a thrust wedge between the Lucknow and Godolphin Faults. The structural settings are similar, suggesting that there may be some potential for this style of mineralisation within EL6181.

Soil sampling over the Silurian gold target in the southern part of the lease was completed with 746 samples collected. Two anomalies have been identified to date. The first is a 1.4km long north-trending zone of elevated arsenic and zinc that encloses two single point gold values of 0.95g/t and 0.19g/t. This anomaly is open to the north where values up to 609ppm zinc occur. The second anomaly is a coincident arsenic-copper-zinc anomaly with maxima of 1265ppm arsenic, 8440ppm copper and 584ppm zinc on the southwest edge of the grid, which is open to the south. A single point gold value of 0.62g/t in the eastern part of the grid is also open to the north. The area sampled covers one property

and extension soil sampling along strike will be undertaken once access to neighbouring properties has been granted. RC drilling is scheduled for the fourth quarter of 2008.

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Orange East EL6181 geology and structure showing area soil sampled in 2007 and location of soil anomalies.

orange east Highlights:

• Large Ordovician intrusive complex with Cadia-style sheeted quartz veins

• Very little previous exploration

• Open gold-arsenic-zinc and arsenic-copper-zinc soil anomalies in the south

• Extension soil sampling and RC drilling later in 2008

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Clancy Exploration Limited – Annual Report 2007

15

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Cundumbul: EL6661 and EL6912

(Clancy 100%)

The Cundumbul Project consists of two exploration licences covering 22km strike length of the Molong Volcanic Belt between Molong and Wellington. The project is situated 22km north of Golden Cross’ Copper Hill porphyry coppergold project. The dominant arc units in this area are the Fairbridge Volcanics and Oakdale Formation, both of which contain andesitic and shoshonitic lavas with high-level intrusives.

Clancy identified two targets in the project area, one highlyranked in the north and another lower-ranked target in the south. Interpretation of aeromagnetic data suggests that numerous intrusive complexes are present in the north of the project area, despite the absence of intrusives on the published geology maps. The intrusive complexes have been confirmed by mapping and rock-chip sampling by Clancy and previous workers at the Mehruda, Owens, Bakers Swamp, Finches Flat, Lyons and Bellevue prospects. All of these prospects have some copper and/or gold associated with them, and most are associated with monzonite or monzonite porphyry. At Bellevue, weakly porphyritic quartz monzodiorite to granodiorite dykes and intermediate feldspar-porphyry dykes are the main intrusive phases.

Evidence of porphyry-related processes from previous rock-chip sampling include porphyritic intrusives, extensive stockwork veining and brecciation, silica, carbonate (siderite) and epidote alteration, copper secondaries (malachite and azurite) in surface rocks and boxwork textures after sulphides. The highlight of the rock-chip sampling was a 40g/t gold result in a brecciated quartz vein with chalcopyrite at Lyons. A Clancy check sample from the same vein returned 3.79g/t Au and 0.92% Cu.

Clancy plans to focus on the highly-ranked northern target, where relatively little work has been completed in the past. An extensive program of gradient array IP surveys has commenced which will be followed by RC and/or diamond drilling later in 2008.

Spring Creek EL6536

(Clancy 100%)

The Spring Creek project is located 45km northeast of Dubbo. The licence covers about 10km of strike length on the northern end of the Molong Volcanic Belt where it extends beneath the Mesozoic Sydney and Surat Basins. There is no outcrop within the tenement and there has been no previous mineral exploration in the area. Clancy identified one highly-ranked target associated with a predicted basement high. The basement high is inferred to bring arc-related stratigraphy to within 150m of surface. Clancy proposes to drill an RC/diamond hole in the first half of 2008 to validate depth to basement, and if the results are sufficiently encouraging, follow-up diamond drilling will be undertaken.

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Cundumbul EL6661 showing target areas, prospects and proposed IP surveys.

Cundumbul and Spring Creek Highlights:

• Intrusive complexes with porphyry-style alteration and mineralisation confirmed within target area at Cundumbul

• IP surveys in progress

• RC and/or diamond drilling in 2008

16 Clancy Exploration Limited – Annual Report 2007

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Mount Read Volcanic Belt Projects - Tasmania

overview

Clancy’s targeting work in the Mount Read Volcanic Belt commenced in late 2003, leading to tenement acquisition in 2004. The tenement portfolio consists of 12 exploration licences covering an area of 732km[2] across seven project areas. These are the North Rosebery, Leven River - Loyetea, Lynchford, Highclere, Waratah, Oonah and Whyte River projects. The projects have been joint ventured to Bass Metals Limited (Bass) who can earn a 75% interest by sole funding exploration to pre-feasibility status.

The Mount Read Volcanic Belt is prolifically mineralised, hosting several significant VHMS base metal deposits including Mt Lyell, Rosebery, Que River and Hellyer, intrusiverelated tin deposits including, Renison and Mt Bischoff, the recently discovered Avebury intrusive-related nickel sulphide deposit, and the Henty gold deposit. Clancy has targeted all of these deposit styles in its tenement portfolio which are currently being explored by Bass. Clancy’s continuing relationship with Bass has the potential to provide a pipeline of new opportunities and projects for both companies.

Bass commenced testing of the Clancy targets in 2007, however limited progress has been made due to Bass’ other project commitments in the area, including trial mining at the Que River project. Bass forecasts exploration expenditure of approximately $1m on the Clancy tenements from December 2007 to June 2008 and Clancy is looking forward to positive results from this work in the latter part of 2008.

Location of Clancy and Bass tenements in the Mount Read Volcanic Belt. Inset – the location in western Tasmania.

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Investments in Bass Metals Securities

Clancy holds 1,161,250 fully paid ordinary shares in Bass (ASX Code “BSM”). Additionally Clancy holds 56,250 listed options to each acquire one Bass Metals share at any time up to 30 April 2010 by paying an exercise price of 40 cents (ASX Code “BSMOA”).

In addition Clancy has the right to receive up to a maximum of 5 million performance shares in Bass based on the achievement of discovery milestones based on gold or gold equivalent ounces delineated by Bass within a defined area. This area includes the Clancy and Bass tenements, as well as the Bass tenements around Hellyer, and other tenements held by third parties with which Bass has completed joint ventures.

Bass recently announced promising intersections in the Fossey zone, south of the Hellyer mine including 19m at 17.2% zinc, 3.5% lead, 65g/t silver and 2.1g/t gold. Bass believes that these intersections have the potential to increase the tonnage of the Hellyer Mine Project mineral resource inventory. If this is indeed the case, some of the discovery milestones will be achieved which will trigger the right for Clancy to receive additional shares in Bass.

Discovery hole Hellyer zinc mine.

The information in this document that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Gordon Barnes who is a Member of the Australian Institute of Geoscientists. Mr Barnes is a full-time employee of Clancy Exploration Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Gordon Barnes consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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Clancy Exploration Limited – Annual Report 2007

17

LIST Of MINERAL TENEMENTS

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New South Wales
Project Area Tenement Clancy Interest
Wellington North EL 6178 100% [1]
Wellington North EL 6328 100% [1]
Wellington North EL 6662 100% [1]
Cowal East EL 6553 100% [2]
Cowal East EL 6554 100% [2]
Gobondery EL 6534 100% [3]
Cundumbul EL 6661 100%
Cundumbul EL 6912 100%
Orange East EL 6181 100%
Spring Creek EL 6536 100%
Illabunda EL 6535 100%
Goobang EL 6537 100%
Fairholme EL 6552 100%
Fairholme EL 6915 100%
Currumburrama EL 6784 100%
Billabong Creek EL 6802 100%
Myall EL 6913 100%
Tasmania
Project Area Tenement Clancy Interest
North Rosebery EL 03/2005 25% [4]
North Rosebery EL 54/2004 25% [4]
North Rosebery EL 16/2006 25% [4]
Leven River Loyetea EL 51/2004 25% [4]
Leven River Loyetea EL 52/2004 25% [4]
Leven River Loyetea EL 53/2004 25% [4]
Leven River Loyetea EL 38/2005 25% [4]
Lynchford EL 02/2005 25% [4]
Highclere EL 04/2005 25% [4]
Waratah EL 64/2004 25% [4]
Oonah EL 63/2004 25% [4]
Whyte EL 36/2005 25% [4]
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1 Gold Fields spending $2 ,000,000 to earn an 80% interest.

2 Gold Fields spending $1,000,000 to earn an 80% interest.

3 Gold Fields spending $2,000,000 to earn an 80% interest.

4 Bass Metals will retain a 75% interest by sole funding exploration until completion of a pre-feasibility study on any one of the joint venture tenements

18 Clancy Exploration Limited – Annual Report 2007

DIRECTORS' REPORT

The Board of Directors has pleasure in presenting its report on the consolidated entity consisting of Clancy Exploration Limited and the entity it controlled at the end of, or during, the year ended 31 December 2007.

1. Directors

(i) Names, Qualifications and Experience

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

Dr James Macdonald BA (Hon), MSc, PhD, PGeo, FSEG

(Non-Executive Chairman)

53 Years

Dr Macdonald is a geoscientist. During the past three years he has operated a Brisbane-based consultancy business which has provided professional geoscientific services to exploration and mining companies. Dr Macdonald has over 30 years experience in the global exploration and mining industries. He was Chief Geologist for AGIP Resources focused on exploration in Canada and Europe in the late 1980’s. Dr Macdonald managed Andean gold exploration for Homestake Mining Company from 1994 to 1998. In 1998, Dr Macdonald joined Billiton International Metals as Chief Geoscientist, based in the Netherlands. Following the merger with BHP in 2001, he relocated to Brisbane, Australia, in a similar capacity as Global Geoscience Leader. In 2006, Dr Macdonald became a non-executive director of Mantle Diamonds Limited. He has not held a directorship in any other listed entity in the past three years.

Dr Macdonald completed a Bachelor of Arts with Honours at Oxford University, majoring in Geology. He subsequently completed an MSc and a PhD in Economic Geology at the University of Toronto. He is a Member of the Association of Professional Engineers and Geoscientists of British Columbia and a Fellow of the Society of Economic Geologists and a Member of the Australian Institute of Company Directors.

mr mark Stewart BJourn, LLB, HDip Co. Law, HDip Tax Law

(Managing Director)

50 Years

Mr Stewart is a lawyer by profession and is admitted as a barrister and solicitor in Western Australia and is an admitted attorney in South Africa. Mr Stewart has over 16 years experience in the mining and junior exploration sectors having joined Clancy’s former parent company, Geoinformatics, in September 2003 where as a Vice President he was responsible for corporate and business development. He has been a director of the Company since 16 March 2005. He also has extensive public company experience having been a director of Uranex NL from 18 July 2005 until 28 February 2006, Goldstream Mining NL from 31 August 2004 until 28 February 2006, and Indo Mines Limited from 8 September 2003 until 12 December 2006. He has not held a directorship in any other listed entities in the past three years. He was also formerly Regional Manager of Anglo American for Asia and Australia and was based in Singapore and then in Perth. Prior to that position he was a senior executive of Anglo American in Johannesburg.

Mr Stewart holds a Bachelor of Journalism majoring in Journalism and Law from Rhodes University and a Bachelor of Laws from the University of Cape Town. He also holds post-graduate diplomas in both Company Law and Tax from the University of Witwatersrand.

Dr Nick Archibald BSc (Hon), PhD, FTSE, FAusIMM, CP(Geo), FSEG, FAIG (Non-Executive Director, Technical ) 56 Years

Dr Archibald is recognised as one of Australia’s leading structural geology consultants, and has extensive experience in applying geological expertise to solve problems in exploration and mining. Dr Archibald was a joint founder and remains Executive Vice Chairman and CEO of Clancy’s former parent company, TSX-listed Geoinformatics Exploration Inc. He devised its strategic business model and in the 1990s devoted considerable time to developing strategic collaborations with CSIRO’s Divisions of Exploration and Mining and Mathematical and Information Sciences. Dr Archibald remains, however, actively involved in the core business of Geoinformatics and is a director of each its various controlled entities Dr Archibald is also a director of Sanatana Diamonds Inc. which is listed on the TSX Venture Exchange (TSX-V: STA) and the London Alternate Investment Market (“AIM”). He has not held a directorship in any other listed entity in the past three years.

Dr Archibald is an Honours Graduate in Geology from James Cook University of North Queensland. He completed his PhD at the University of Western Australia.

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Clancy Exploration Limited – Annual Report 2007

19

DIRECTORS' REPORT

mark lester B.Com, CA

(Non-Executive Director, Financial )

54 Years

Mr Lester is a Chartered Accountant in public practice. He is currently a partner in a Chartered Accounting practice based in Subiaco, Western Australia. He is also a Registered Auditor and a director of a Registered Tax Agent and is involved in advising a wide range of clients including public companies, large private groups, not for profit organisations and trustee entities. Previously, Mr Lester was company secretary of Melbourne-based biotech company Meditech Research Limited for six years until its recent acquisition by Alchemia Limited. During that period of time Mr Lester acted as chief financial officer and was responsible for all ASIC and ASX compliance matters. Following his graduation, he joined a major international accounting firm where he worked for six years. In 1982, Mr Lester left public accounting to work in commerce gaining experience in the financial services and manufacturing sectors. In 1988 he returned to public practice. He has not held a directorship in any listed entity in the past three years.

Mr Lester graduated from the University of Western Australia with a Bachelor of Commerce.

(ii) Interests in the Shares and Options of the Company

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Number of Shares Number of Unlisted Options Expiring 30 April 2010
Held at Acquired Held at Held at Granted Held at End
Beginning of During the End of Year Beginning of During the of Year
Year Year Year Year
M Stewart Nil 301,000 301,000 Nil 1,000,000 1,000,000
J Macdonald Nil 250,000 250,000 Nil 250,000 250,000
N Archibald [1] Nil 25,000 25,000 Nil 200,000 200,000
M Lester Nil 50,000 50,000 Nil 200,000 200,000
Nil 626,000 626,000 Nil 1,650,000 1,650,000
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The ordinary shares acquired by the directors and executives during the year were from on-market trades and/or a Prospectus Offer of shares (at 20 cents per share) to the public. The shares acquired through the Prospectus Offer were subject to the same terms as the other shares issued pursuant to that Prospectus. The options were granted on 23 April 2007.

1 Dr Archibald is a director of Geoinformatics Exploration Australia Pty Ltd which holds 22,805,506 shares in Clancy. Dr Archibald is also a director and shareholder of Geoinformatics Exploration Inc. which ultimately holds 100% of the shares in Geoinformatics Exploration Australia.

2. Company Secretary

Rowan caren B.Com, CA

(Company Secretary)

41 Years

Mr Caren is a Chartered Accountant with over 16 years commercial experience. He has been directly involved in the minerals exploration industry for 11 years. In 2004 he created a specialist company secretarial and advisory consultancy, Dabinett Corporate Pty Ltd. He has provided financial and corporate services to several listed and unlisted companies involved in the resources sector. Prior to that he was an executive and company secretary with Indo Mines Ltd. He qualified with Price Waterhouse Coopers and worked for them in Australia and overseas for six years.

Mr Caren graduated with a Bachelor of Commerce (Accounting) from the University of Western Australia and is a member of the Institute of Chartered Accountants in Australia.

3. Principal Activities

The principal activities during the year of the entities within the consolidated entity are mineral exploration and development.

4. Operating Results for the Year

The net consolidated loss for the year after income tax amounted to $840,265 (2006: $109,363).

5. Dividends

No dividend has been declared or paid by the company since the end of the previous financial year and the directors do not at present recommend a dividend.

Clancy Exploration Limited – Annual Report 2007

20

DIRECTORS' REPORT

6. Review of Operations

The review of operations of the consolidated entity, and the results of those operations are incorporated in the Operations Report.

7. Likely Developments and Expected Results

The Company will continue the evaluation of its mineral projects and undertake generative work to identify and acquire new resource projects. Other than as referred to in this report, due to the nature of the business, further information as to likely developments in the operations of the Company and likely results of those operations in future financial years would, in the opinion of the directors, be speculative.

8. Significant Changes in the State of Affairs

The Company issued a prospectus dated 22 May 2007 offering 25,000,000 shares for subscription at 20 cents per share. The offering was successfully completed, raising a total of $5,000,000 before costs of the issue, and the Company’s shares were officially listed on the Australian Stock Exchange on 11 July 2007.

The Company commenced exploration activities in its own right in April 2007. Prior to that, all exploration activities had been carried out and funded by its then parent entity Geoinformatics Exploration Australia Pty Ltd, in its capacity as manager, and additionally, in relation to joint venture projects, in association with Gold Fields Australasia Pty Ltd.

9. Significant Events After Balance Date

Since the end of the financial year no matters or circumstances have occurred that have or may significantly affect the operations or the state of affairs of the Company and the consolidated entity in subsequent financial years.

10. Review of Financial Condition

At 31 December 2007 the consolidated entity had cash reserves of $3,767,671 after paying suppliers and employees $1,654,746, of which $1,197,208 was expended on direct exploration activities. A further $166,196 was spent on capital expenditure and strategic investments. The consolidated entity raised $5,000,000 from a capital raising, of which $725, 821 was applied to the costs of the share issue. A further $1,008,100 was received from a joint venture partner as well as $131,228 in interest. Of the current year loans of $500,607 received from the former parent entity, an amount of $323,365 was repaid, with the balance plus an amount of $112,758 owing at 31 December 2006 settled by the issue of ordinary shares in the Company. This comprised the issue on 7 March 2007 of 2,600,000 shares at 5 cents each amounting to $130,000, and on 8 May 2007, 800,000 shares at 20 cents each amounting to $160,000.

11. Remuneration Report - Audited

This report details the nature and amount of remuneration for each director of Clancy Exploration Limited and the Group, and for the executives receiving the highest remuneration in accordance with the requirements of the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party Disclosures, which have been transferred to the Remuneration Report in accordance with Corporations Regulation 2M.6.04. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the three executives in the Parent and the Group receiving the highest remuneration.

For the purposes of this report, the term “executive” encompasses the Managing Director, senior executives and the secretary of the Parent and the Group.

Remuneration Policy

The remuneration policy of Clancy Exploration Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives. The board of Clancy Exploration Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated group, as well as create goal congruence between directors, executives and shareholders.

Options to acquire ordinary shares have been granted to all directors and key management personnel. The Board believes that options are an effective remuneration tool which preserve the cash reserves of the company whilst providing valuable remuneration. The options may not be exercised for two years from the date of grant and may be cancelled at any time during the option term should the grantee voluntarily terminate his employment or the company terminate his employment for reasons of serious misconduct.

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Clancy Exploration Limited – Annual Report 2007

21

DIRECTORS' REPORT

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the consolidated group is as follows:

• The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed and approved by the board after seeking professional advice from independent external consultants.

• All executives receive a base salary (which is based on factors such as length of service and experience) and options granted to acquire ordinary shares.

• The board reviews executive packages annually by reference to the consolidated group’s performance, executive performance and comparable information from industry sectors.

All remuneration paid to directors and executives is valued at the cost to the company and expensed. Options are valued using the Binomial Tree methodology. Option valuations are not discounted for escrow. All options have been escrowed for two years.

Non-Executives Directors

The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

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The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Currently there is a maximum aggregate sum of $200,000 per annum, which is to be divided between the Non-Executive Directors in the proportions agreed between them or, failing agreement, equally. Directors are encouraged to hold shares in the company and are granted options.

Remuneration Sub-Committee

The Board has established a sub-committee to consider remuneration of the Board and key management personnel. The Remuneration Sub-Committee will seek independent professional advice to formulate remuneration policy recommendations which are then submitted to the Board for approval. It is anticipated that the Remuneration Sub-Committee will meet at least annually. The Remuneration Sub-Committee is comprised of the Chairman, the independent non-executive director and the Company Secretary.

Company performance, shareholder wealth and director and executive remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. The achievement of this aim has been through the issue of options to the majority of directors and executives to encourage the alignment of personal and shareholder interests.

Executive and non-executive directors, other key management personnel and other senior employees have been granted options over ordinary shares. The options will vest on 11 July 2009 if the grantee has not voluntarily terminated his position with the Company, or the Company has not terminated the grantee's position with the Company for reasons of serious misconduct. The recipients of options are responsible for growing the Company and increasing shareholder value. If they achieve this goal the value of the options granted to them will also increase. Therefore the options provide an incentive to the recipients to remain with the Company and to continue to work to enhance the Company's value.

Clancy Exploration Limited – Annual Report 2007

22

DIRECTORS' REPORT

Key Management Personnel Remuneration Policy

The board’s policy for determining the nature and amount of remuneration of key management for the group is as follows:

The remuneration structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned and their role within the organisation. The contracts of service between the company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future.

Key Management Personnel Remuneration

Remuneration for the year ended 31 December 2007

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----- Start of picture text -----

Key Management Person & Short-term Benefits Share-based Post- Total
Position Payment [1] employment
Benefits
Salary Consulting Options Superannuation
fees
$ $ $ $ $
M Stewart 94,624 - 20,183 8,516 123,323
Managing Director
J Macdonald - - 5,934 42,226 48,160
Chairman
N Archibald - - 4,743 13,080 17,823
Non-Executive Director
M Lester - - 4,747 21,179 25,926
Non-Executive Director
R Caren - 73,730 2,295 - 76,025
Company Secretary
G Barnes 70,968 - 11,600 6,387 88,955
Exploration Manager
- -
G Doig 43,806 2,295 46,101
Chief Financial Officer
165,592 117,536 51,797 91,388 426,313
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1 There is no performance-related component to remuneration. The nature of the options granted to KMP's serve to align the interest of the KMP's with the interests of shareholders.

There was no key management personnel remuneration in 2006.

Options Granted As Part of Remuneration for the year ended 31 December 2007

Options are issued to directors and executives as part of their remuneration for nil consideration. The options are issued to the directors and executives of Clancy Exploration Limited and its subsidiaries to increase goal congruence between executives, directors and shareholders. No options vested during the year and no options were exercised, lapsed or forfeited during the year. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. For details on the valuation of the options, including models and assumptions used, refer to Note 27 in the Financial Statements. The options granted to directors and executives are set out below. All options are subject to escrow for two years from 11 July 2007.

The options will vest after two years but may be cancelled at the discretion of the Board if the grantee voluntarily terminates his employment with the Company or the Company terminates the employment for reasons of serious misconduct.

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Clancy Exploration Limited – Annual Report 2007

23

DIRECTORS' REPORT

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Key Option Granted Grant Date Exercise Date Fair Exercise Value of Remuneration
management Series no. Value Price Options Consisting of
Personnel per Granted Options for the
Option During Year
at Grant the Year
Date
$ $ $ %
M Stewart Incentive 500,000 23 April 2007 30 April 2010 0.0996 0.20 49,818 26.5%
PS 1 250,000 23 April 2007 30 April 2010 0.0775 0.30 19,363 10.3%
PS 2 250,000 23 April 2007 30 April 2010 0.0624 0.40 15,611 8.3%
J Macdonald Incentive 250,000 23 April 2007 30 April 2010 0.0997 0.20 24,930 37.1%
N Archibald Incentive 200,000 23 April 2007 30 April 2010 0.0996 0.20 19,927 60.4%
M Lester Incentive 200,000 23 April 2007 30 April 2010 0.0997 0.20 19,944 48.5%
R Caren Incentive 100,000 23 April 2007 30 April 2010 0.0964 0.20 9,640 11.6%
G Barnes Incentive 300,000 23 April 2007 30 April 2010 0.0964 0.20 28,921 22.9%
PS 1 150,000 23 April 2007 30 April 2010 0.0737 0.30 11,053 8.8%
PS 2 150,000 23 April 2007 30 April 2010 0.0584 0.40 8,761 6.9%
G Doig Incentive 100,000 23 April 2007 30 April 2010 0.0964 0.20 9,640 18.0%
2,450,000 217,608 36.8%
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No comparatives provided as Clancy was listed on 11 July 2007

Incentive options are exercisable at 20 cents by no later than 30 April 2010.

PS 1 options are exercisable at 30 cents by no later than 30 April 2010. PS 2 options are exercisable at 40 cents by no later than 30 April 2010.

Contracts with Directors and Key Management Personnel

mark Stewart.

The key provisions of the contract with Mark Stewart (Managing Director) are as follows:

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----- Start of picture text -----

Contract Duration Rolling contract
Notice Period for Termination and Mr Stewart may terminate employment by providing 3 months notice in
Termination Payments writing.
The Company may terminate Mr Stewart’s employment, for reasons other
than serious misconduct, during the first 12 months of employment by
providing 12 months notice or providing payment in lieu of this notice
period.
The Company may terminate Mr Stewart’s employment, for reasons
other than serious misconduct, after the first 12 months of employment
by providing 6 months notice or providing payment in lieu of this notice
period.
The Company may immediately terminate Mr Stewart's employment for
reasons of serious misconduct.
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Gordon Barnes

The key provisions of the contract with Gordon Barnes (Exploration Manager) are as follows:

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----- Start of picture text -----

Contract Duration Rolling contract
Notice Period for Termination and Either party may terminate employment by providing 3 months notice in
Termination Payments writing. Normal remuneration continues to be paid over notice period.
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24 Clancy Exploration Limited – Annual Report 2007

DIRECTORS' REPORT

12. Auditor Independence and Non-Audit Services

The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditors’ independence for the following reasons:

• all material non-audit services are reviewed and approved by the Board of Directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

• the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s Professional Statement F1: Professional Independence.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 31 December 2007:

Tax Advisory Services in relation to initial public offering (Capitalised to Costs of Share Issue) $22,671 Tax Compliance Services $1,670

13. Auditors’ Independence Declaration

The auditors’ independence declaration for the year ended 31 December 2007 has been received and can be found on page 27 of the Directors’ Report.

14. Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors support and have adhered to the principles of corporate governance. The company’s corporate governance statement is included in the Annual Report.

15. Share Options

At the date of this report 4,900,000 options to acquire ordinary shares in Clancy Exploration Limited were on issue, as follows:

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Number expiry Date Exercise Price Transferable/Non-Transferable
2,000,000 10 July 2011 20 cents Non-Transferable Brokers Options
1,900,000 30 April 2010 20 cents Incentive Options
500,000 30 April 2010 30 cents PS 1 Options
500,000 30 April 2010 40 cents PS 2 Options
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All options are subject to escrow for two years from 11 July 2007.

No options were exercised during the year or in the period up to the date of this report. Details of options issued to directors, consultants and eligible employees, are disclosed in this Directors’ Report and Notes 17, 26 and 27 to the Annual Financial Statement.

16. 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 were as follows:

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----- Start of picture text -----

Director Directors’ Directors’ Remuneration Remuneration Audit Audit
Meetings Meetings Committee Committee Committee Committee
Eligible to Attended Meetings Meetings Meetings Meetings
Attend Eligible to Attended Eligible to Attended
Attend Attend
M Stewart 5 5 - - - -
J Macdonald 5 5 1 1 - -
N Archibald 5 5 - - - -
M Lester 5 5 1 1 - -
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In accordance with the Constitution, Mr Lester retires as a director at the Annual General Meeting and being eligible, offers himself for re-election.

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Clancy Exploration Limited – Annual Report 2007

25

DIRECTORS' REPORT

17. Insurance and Indemnity of Officers

The Company has in respect of any person who is or has been a director or officer of the Company paid a premium in respect of a contract insuring all directors and officers against a liability. The Company maintains insurance policies for the benefit of the relevant director or officer for the term of their appointment and for a period of seven years after retirement or resignation.

The Company has entered into a Deed of Indemnity, Access and Insurance with each of its Directors and the Company Secretary. Under the Deeds of Indemnity, Access and Insurance the Company will indemnify each officer to the extent permitted by the Corporations Act against any liability arising as a result of the officer acting as an officer of the Company. The Deeds of Indemnity, Access and Insurance also provide for the right to access Board papers.

18. Risk Management

The Company takes a proactive approach to risk management including monitoring actual performance against budgets and forecast and monitoring investment performance. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the consolidated entity’s objectives and activities are aligned with the risks and opportunities identified by the Board.

19. Environmental Regulations and Performance

The company is required to carry out the exploration and evaluation of its mining tenements in accordance with various State Government Acts and Regulations.

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In regard to environmental considerations, the Company is required to obtain approval from various State regulatory authorities before any exploration requiring ground disturbance, such as line clearing, drilling programs and costeaning is carried out. It is normally a condition of such regulatory approval that any area of ground disturbed during the company’s activities is rehabilitated in accordance with various guidelines.

There have been no significant breaches of these guidelines.

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

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M. R. STEWART Managing Director

Signed at Perth this 31st day of March, 2008

Clancy Exploration Limited – Annual Report 2007

26

AUDITOR'S INDEPENDENCE DECLARATION

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Auditor’s Independence Declaration to the Directors of Clancy Exploration Limited

In relation to our audit of the financial report of Clancy Exploration Limited for the financial year ended 31 December 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

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Ernst & Young

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T S Hammond Partner Perth 31 March 2008

TH;HG;CLANCY;004

Liability limited by a scheme approved under Professional Standards Legislation

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Clancy Exploration Limited – Annual Report 2007

27

INCOME STATEMENT

for the Year ended 31 December 2007

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notes	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
Contnuing operatons Rendering of services Net joint venture reimbursed exploraton expenditure 5(d) Other revenue 4 Employee benefts expense 5(a) Consultng and outsourced services expense Exploraton expenditure 5(d) Computer related costs Travel expense Equipment insurance and hire expense Depreciaton, amortsaton and impairment expense 5(b) Net reimbursed expenses refunded Finance costs 5(c) Other expenses Total expenses Loss before income tax beneft Income tax beneft 6 Loss atributable to members of the parent entty Basic loss per share (cents per share) 7 Diluted loss per share (cents per share) 7	195,088 - 195,088 - 11,342 - 11,342 - 131,374 - 131,374 -
	337,804 - 337,804 - (407,346) - (407,346) - (330,613) (71,975) (330,613) (71,975) (353,475) - (353,475) - (21,283) - (21,283) - (19,587) (1,435) (19,587) (1,435) (9,167) - (9,167) - (7,055) - (467,054) - - (35,516) - (35,516) (171) - (171) - (46,760) (437) (46,483) (437)
	(1,195,457) (109,363) (1,655,179) (109,363)
	(857,653) (109,363) (1,317,375) (109,363) 17,388 - 17,388 -
	(840,265) (109,363) (1,299,987) (109,363)
	(2.6 cents) (0.9 cents) (2.6 cents) (0.9 cents)

The accompanying notes form part of these financial statements.

Clancy Exploration Limited – Annual Report 2007

28

BALANCE SHEET

As at 31 December 2007

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----- Start of picture text -----

Consolidated Parent
2007 2006 2007 2006
notes $ $ $ $
ASSeTS
current Assets
Cash and cash equivalents 8 3,767,671 1,345 3,767,671 1,345
Trade and other receivables 9 169,321 1,669 169,215 1,669
Available-for-sale investments 10 401,013 - 401,013 -
Total current Assets 4,338,005 3,014 4,337,899 3,014
Non-current Assets
Other financial assets 11 - - 1 -
Plant and equipment 12 77,119 - 77,119 -
Intangible assets 13 19,523 - 19,523 -
Total Non-current Assets 96,642 - 96,643 -
ToTAl ASSeTS 4,434,647 3,014 4,434,542 3,014
lIABIlITIeS
Current Liabilities
Trade and other payables 14 433,731 114,549 432,082 114,549
Provisions 15 10,472 - 10,472 -
Total Current Liabilities 444,203 114,549 442,554 114,549
ToTAl lIABIlITIeS 444,203 114,549 442,554 114,549
NET ASSETS/(LIABILITIES) 3,990,444 (111,535) 3,991,988 (111,535)
EQUITY
Contributed equity 16 4,722,292 1 5,182,291 1
Reserves 17 221,220 - 221,220 -
Accumulated losses 18 (953,068) (111,536) (1,411,523) (111,536)
TOTAL EQUITY/(DEFICIENCY) 3,990,444 (111,535) 3,991,988 (111,535)
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The accompanying notes form part of these financial statements.

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Clancy Exploration Limited – Annual Report 2007

29

STATEMENT Of RECOGNISED INCOME AND ExPENSE

for the Year ended 31 December 2007

notes	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
Net fair value gain on available-for-sale investment Income tax on items taken directly to or transferred from equity 6 Net income recognised directly in equity Loss for the year Total recognised income/(loss) and expense for the period atributable to parent	57,961 - 57,961 - (17,388) - (17,388) -
	40,573 - 40,573 - (840,265) (109,363) (1,299,987) (109,363)
	(799,692) (109,363) (1,259,414) (109,363)

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The accompanying notes form part of these financial statements.

Clancy Exploration Limited – Annual Report 2007

30

CASH fLOW STATEMENT

for the Year ended 31 December 2007

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Consolidated Parent
2007 2006 2007 2006
notes $ $ $ $
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers 1,008,100 - 1,008,100 -
(Payments to)/refunds from suppliers and employees (1,654,746) 1,345 (1,654,746) 1,345
Interest received 131,228 - 131,228 -
Interest paid (171) - (171) -
NET CASH FLOWS (USED IN)/FROM OPERATING
ACTIVITIES 19 (515,589) 1,345 (515,589) 1,345
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (83,146) - (83,146) -
Purchase of intangible assets (20,550) - (20,550) -
Purchase of investment (62,500) - (62,500) -
NET CASH FLOWS USED IN INVESTING ACTIVITIES (166,196) - (166,196) -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue 5,000,000 - 5,000,000 -
Costs of share issue (725,821) - (725,821) -
Loans to related entity - repayments
received /(payments made) (3,310) - (3,310) -
Proceeds from borrowings - related entity 500,657 - 500,657 -
Loan from related entity - repayments made (323,415) - (323,415) -
NET CASH FLOWS FROM FINANCING ACTIVITIES 4,448,111 - 4,448,111 -
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 3,766,326 1,345 3,766,326 1,345
Cash and cash equivalents at beginning of period 1,345 - 1,345 -
CASH AND CASH EQUIVALENTS AT END OF PERIOD 8 3,767,671 1,345 3,767,671 1,345
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The accompanying notes form part of these financial statements.

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Clancy Exploration Limited – Annual Report 2007

31

NOTES TO THE fINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The financial report of Clancy Exploration Limited (the Company) for the year ended 31 December 2007 was authorised for issue in accordance with a resolution of the directors on 31 March 2008.

Clancy Exploration Limited (the parent) is a company limited by shares, incorporated in Australia, and whose shares are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the consolidated entity are described in the Directors' Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Clancy Exploration Limited as an individual entity and the consolidated entity consisting of Clancy Exploration Limited and its controlled entity.

Table of Contents

• a) Basis of preparation

• b) Compliance with IFRS

• c) New accounting standards and interpretations

• d) Basis of consolidation

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• e) Business combinations – Note 29

• f) Segment reporting – Note 21

• g) Foreign currency translation

• h) Cash and cash equivalents – Note 8

• i) Trade and other receivables – Note 9

• j) Investments and other financial assets – Note 10 and 11

• k) Interest in a jointly controlled operation – Note 20

• l) Impairment of non-financial assets other than goodwill – Note 13

• m) Plant and equipment – Note 12

• n) Trade and other payables – Note 14

• o) Provisions and employee benefits – Note 15

• p) Share-based payment transactions – Note 27

• q) Contributed equity – Note 16

• r) Revenue recognition

• s) Income tax and other taxes – Note 6

• t) Earnings per share – Note 7

• u) Exploration expenditure

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for available-forsale investments, which have been measured at fair value.

The financial report is presented in Australian dollars.

(b) Compliance with IFRS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).

(c) New accounting standards and interpretations

The following Australian Accounting Standards and Interpretations that have recently been issued but are not yet effective have not been adopted by the Group for the annual reporting period ending 31 December 2007. Those that are relevant to the Group are outlined in the table below:

32 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

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----- Start of picture text -----

Reference Title Summary Application Impact on Group financial Application
date of report date for
standard Group
AASB Amendments Amending standard 1 March This is consistent with the 1 January
to Australian issued as a 2007 Group's existing accounting 2008
2007-1
Accounting consequence of policies for share-based
Standards arising AASB Interpretation payments, so the amendments
from AASB 11 AASB 2 – Group are not expected to have any
Interpretation 11 and Treasury Share impact on the Group's financial
[AASB 2] Transactions. report
AASB Amendments Amending standard 1 January AASB 8 is a disclosure standard 1 January
2007-3 to Australian issued as a 2009 so will have no direct impact 2009
Accounting consequence of on the amounts included in the
Standards arising AASB 8 Operating Group's financial statements.
from AASB 8 Segments. However the amendments
[AASB 5, AASB, may have an impact on the
AASB 6, AASB Group’s segment disclosures as
102, AASB 107, segment information included
AASB 119, AASB in internal management
127, AASB 134, reports is more detailed than is
AASB 136, AASB currently reported under AASB
1023 & AASB 114 Segment Reporting .
1038]
AASB Amendments Amendments arising 1 July 2007 These amendments are 1 January
2007-4 to Australian as a result of the expected to reduce the extent 2008
Accounting AASB decision of some disclosures in the
Standards that, in principle, Group's financial report.
arising from ED all options that
151 and Other currently exist
Amendments under IFRSs should
[AASB 1, 2, 3, 4, be included in
5, 6, 7, 102, 107, the Australian
108, 110, 112, equivalents to IFRSs
114, 116, 117, and additional
118, 119, 120, Australian
121, 127, 128, disclosures should
129, 130, 131, be eliminated,
132, 133, 134, other than those
136, 137, 138, now considered
139, 141, 1023 & particularly
1038] relevant in the
Australian reporting
environment.
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Clancy Exploration Limited – Annual Report 2007

33

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

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----- Start of picture text -----

Reference Title Summary Application Impact on Group financial Application
date of report date for
standard Group
AASB Amendments Amending standard 1 January The amendments to AASB 123 1 January
2007-6 to Australian issued as a 2009 require that all borrowing costs 2009
Accounting consequence of associated with a qualifying
Standards arising revisions to AASB asset be capitalised. The
from AASB 123 123 Borrowing Group has no borrowing costs
[AASB 1, AASB Costs. associated with qualifying
101, AASB assets and as such the
107, AASB 111, amendments are not expected
AASB 116 & to have any impact on the
AASB 138 and Group's financial report.
Interpretations 1
& 12]
AASB Amendments Amending standards 1 July 2007 The amendments are 1 January
2007-7 to Australian for wording errors, minor and do not affect the 2008
Accounting discrepancies and recognition, measurement or
Standards [AASB inconsistencies. disclosure requirements of
1, AASB 2, AASB the standards. Therefore the
4, AASB 5, AASB amendments are not expected
107 & AASB 128] to have any impact on the
Group's financial report.
AASB Amendments Amending standard 1 January The amendments are expected 1 January
2007-8 to Australian issued as a 2009 to only affect the presentation 2009
Accounting consequence of of the Group’s financial report
Standards arising revisions to AASB and will not have a direct
from AASB 101 101 Presentation of impact on the measurement
Financial Statements and recognition of amounts
under the current AASB 101.
The Group has not determined
at this stage whether to
present the new statement of
comprehensive income as one
or two statements.
AASB 8 Operating New standard 1 January Refer to AASB 2007-3 above. 1 January
Segments replacing AASB 114 2009 2009
Segment Reporting ,
which adopts
a management
approach to
segment reporting.
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34 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

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----- Start of picture text -----

Reference Title Summary Application Impact on Group Application
date of financial report date for
standard Group
AASB 101 Presentation Introduces a statement 1 January Refer to AASB 2007-8 1 January
(revised) of Financial of comprehensive 2009 above. 2009
Statements income. Other revisions
include impacts on
the presentation of
items in the statement
of changes in equity,
new presentation
requirements for
restatements or
reclassifications of
items in the financial
statements, changes
in the presentation
requirements for
dividends and changes to
the titles of the financial
statements.
AASB 123 Borrowing Costs The amendments to 1 January Refer to AASB 2007-6 1 January
AASB 123 require that 2009 above. 2009
(revised)
all borrowing costs
associated with a
qualifying asset must be
capitalised.
AASB AASB 2 – Addresses whether 1 March Refer to AASB 2007-1 1 January
Interpretation Group and certain types of 2007 above. 2008
11 Treasury Share share-based payment
Transactions transactions with
employees (or other
suppliers of good
and services) should
be accounted for as
equity-settled or as
cash-settled transactions
under AASB 2. It also
specifies the accounting
in a subsidiary’s
financial statements for
share-based payment
arrangements involving
equity instruments of the
parent.
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*designates the beginning of the applicable annual reporting period unless otherwise stated

Adoption of new accounting standard

The Group has adopted AASB 7 Financial Instruments : Disclosures and all consequential amendments which become applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit and loss or the financial position of the entity.

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Clancy Exploration Limited – Annual Report 2007

35

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

(d) Basis of consolidation

The consolidated financial statements comprise the financial statements of Clancy Exploration Limited and its subsidiary (as outlined in Notes 24 and 29) as at 31 December each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

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. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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

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Investments in subsidiaries held by Clancy Exploration Limited are accounted for at cost in the separate financial statements of the parent entity.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition (see Note 2 (e)).

(e) Business combinations – Note 29

The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Where a business combination occurs that involves Group entities under common control, both before and after the business combination, the requirements of AASB 3 Business Combinations do not apply and thus the combination has been accounted for according to the pooling of interest method based on the carrying value of the net assets. Furthermore, no goodwill or fair value treatment is required, given that this transaction is outside the scope of AASB 3. This treatment is also supported by the fact that Group entities, all being related parties, could not transact in an arms’ length transaction and therefore determine the fair value of the company acquired.

Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at the fair values at the acquisition date. The excess of the cost of the business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as the gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

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

(f) Segment Reporting

A business segment is a distinguishable component of the entity that is engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. Management has assessed the reportable business segments under AASB 114 Segment Reporting and have determined that on adoption of AASB 8 Segment Reporting (applicable from 1 January 2009), additional operating segments are not likely to be reported.

Clancy Exploration Limited – Annual Report 2007

36

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

(f) Segment Reporting (cont.)

A geographical segment is a distinguishable component of the entity that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. The company operates in a single business segment, in one geographical location. The operations of the consolidated entity consist of gold and copper exploration and development, within Australia.

• (g) Foreign currency translation

• (i) 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 Clancy Exploration Limited’s functional and presentation currency.

• (ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(h) Cash and cash equivalents – Note 8

Cash and cash equivalents in the balance sheet comprise cash at bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above. The consolidated entity does not have any bank overdraft facilities.

(i) Trade and other receivables – Note 9

Trade receivables are generally paid on 30 day settlement terms and are recognised and carried at original invoice amount less an allowance for impairment. Trade receivables are non-interest bearing.

Collectibility of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment provision would be recognised when legal notice has been sent and a reply not received within 30 days.

(j) Investments and other financial assets – Note 10 and 11

Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as either financial assets at fair value through profit and loss, loans and receivables, held-tomaturity investments, or available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Designation is re-evaluated at each financial year end, but there are restrictions on reclassifying to other categories.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit and loss, directly attributable transaction costs.

Recognition and Derecognition

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the consolidated entity commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred.

• (i) Loans and receivables – Note 9

Loans and receivables including loans to KMP are non-derivative financial assets with fixed or determinable

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Clancy Exploration Limited – Annual Report 2007

37

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

(j) Investments and other financial assets – Note 10 and 11 (cont.)

payments that are not quoted in an active market. Such assets are carried at the transaction price minus principal repayments and minus any allowance for impairment or uncollectibility. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. Loans and receivables are included with receivables in current assets in the balance sheet, except for those with maturities greater than 12 months after balance date, which are classified as non-current. Loans and receivables with maturities greater than 12 months are carried at amortised cost using the effective interest rate method.

(ii) Available-for-sale securities – Note 10

Available-for-sale investments are those non-derivative financial assets, principally equity securities, that are designated as available-for-sale or are not classified as any of the following categories: financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. After initial recognition available-for-sale securities are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

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The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgmental inputs to a minimum.

(iii) Financial assets carried at cost – Note 11

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

(k) Interest in a jointly controlled operation – Note 20

The consolidated entity has interests in joint ventures that are jointly controlled operations. 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.

All exploration expenditure in relation to jointly controlled operations where the consolidated entity is the manager is currently recovered from the other joint venture partner in its entirety until it has earned an 80% interest. That joint venture partner has also established environmental security bonds.

All exploration expenditure in relation to jointly controlled operations where the other joint venture partner is the manager, is sole funded by that joint venture partner, until the completion of a pre-feasibility study on any one of the tenements. It may not withdraw from the joint venture until at least one year has expired after the grant of the last tenement. At the time of any withdrawal by the joint venture partner the tenements must be in good standing and expenditure commitments met.

(l) Intangibles and Impairment of non-financial assets other than that of goodwill – Note 13

Intangible assets acquired separately are initially measured at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing

38 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

• (l) Intangibles and Impairment of non-financial assets other than that of goodwill – Note 13 (cont.)

the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

The consolidated entity does not have any intangible assets with indefinite lives.

The consolidated entity conducts an annual internal review of asset values, which is used as a source of information to assess for any indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of the asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are tested for possible reversal of the impairment when events or changes in circumstances indicate that the impairment may have reversed.

(m) Plant and Equipment – Note 12

Plant and equipment is stated at historical cost less depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of these items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated using the straight line and diminishing value methods to allocate their cost over their estimated useful lives. The expected useful lives are detailed in Note 12.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.

(i) Impairment

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

The directors have determined that items of plant and equipment do not generate independent cash inflows and that the business of the consolidated entity is, in its entirety, a cash-generating unit. The recoverable amount of plant and equipment is thus determined to be its fair value less costs to sell.

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. For plant and equipment, impairment losses are recognised in the income statement as an expense.

• (ii) Derecognition and disposal

An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

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

(n) Trade and other payables – Note 14

Trade payables and other payables are carried at the transaction price minus principal repayments. They

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Clancy Exploration Limited – Annual Report 2007

39

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

• (n) Trade and other payables – Note 14

represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year that are unpaid and arise when the consolidated entity becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(o) Provisions and employee benefits – Note 15

Provisions are recognised when the consolidated entity 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 consolidated entity 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.

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Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

Employee leave benefits

(i) Wages, salaries, annual leave and sick leave

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

(ii) Long Service Leave

The liability for long service leave is recognised 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.

(p) Share-based payment transactions – Note 27

(i) Equity settled transactions:

The consolidated entity provides benefits to its directors and employees in the form of share-based payments, whereby directors and employees render services in exchange for options to acquire shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions is measured by reference to the fair value to the Company of the equity instruments at the date at which they were granted. The fair value is determined using a binominal tree model, taking into account the terms and conditions upon which the options were granted.

The cost of equity-settled transactions is recognised as an expense, together with a corresponding increase in equity, on a straight-line basis, over the period in which the vesting and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant directors and employees become fully entitled to the options (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the income statement reflects: (i) the grant date fair value of the options;

40 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

• (p) Share-based payment transactions – Note 27 (cont.)

• (ii) the current best estimate of the number of options that will ultimately vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of vesting conditions being met, based on best available information at balance date; and

• (iii) the extent to which the vesting period has expired.

The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

• (q) Contributed Equity – Note 16

Ordinary shares are classified as equity. Where equity instruments are issued in a business combination, transaction costs arising on the issue of equity instruments are recognised directly in equity.

• (r) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the consolidated entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

• (i) Rendering of Services

• Where the work performed in relation to a joint venture or other contract outcome can be reliably measured:

• right to receive compensation for the services provided and the stage of completion can be reliably measured. Stage of completion is measured by reference to the labour hours performed to date as a percentage of total estimated labour hours in relation to a joint venture or for each contract. Where it is probable that a loss will arise in relation to a joint venture or from a contract, the excess of total costs over revenue is recognised as an expense immediately.

• Where the contract outcome cannot be reliably measured:

• revenue is recognised only to the extent that the costs that have been incurred are recoverable.

Unearned income is recognised in respect of progress billings and advances on exploration contracts in progress, received in advance, or not represented by work done or reimbursable expenditure incurred, under joint venture arrangements. Such income is recognised and brought to account over time as it is earned.

• (ii) Interest revenue

Revenue is recognised as interest accrued using the effective interest method. This is a method of calculating the amortised costs of a financial asset and allocating the interest revenue over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

All revenue is stated net of Goods and Services Tax (“GST”).

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Clancy Exploration Limited – Annual Report 2007

41

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

(s) Income tax and other taxes – Note 6

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 based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets, 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/liability in a transaction that is not a business combination and that, at the time of 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 interest 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.

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Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits 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 the 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 profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet 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 balance sheet 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 substantively enacted at the balance sheet date.

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 legislation

Clancy Exploration Limited and its wholly-owned Australian controlled entity formed a tax consolidated group on 2 July 2007. However they continue to account for their own current and deferred tax amounts. The consolidated entity has applied the stand alone taxpayer approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes.

In addition to its own current and deferred tax amounts, Clancy Exploration Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Members of the tax consolidated group have not entered into a tax funding agreement and as no current tax assets or liabilities or deferred tax assets are recognised in relation to tax losses or unused tax credits, no contributions or distributions are required to be made under UIG 1052 Tax Consolidation Accounting.

42 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

1. CORPORATE INFORMATION (cont.)

• (s) Income tax and other taxes – Note 6 (cont.)

Other taxes

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 balance sheet.

Cash flows are included in the Cash Flow Statement 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 is classified as part of operating cash flows.

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

(t) earnings per share – note 7

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.

• Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

• costs of servicing equity (other than dividends);

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

• divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

• (u) Exploration expenditure

Exploration expenditure incurred by the consolidated entity in relation to its own sole-funded projects is recognised in profit or loss as incurred and is classified in the income statement under the expense category “Exploration expenditure”.

Exploration expenditure incurred by the consolidated entity, on those joint venture projects it manages, is almost completely recovered from joint venture partners and as such is recognised in profit or loss as incurred. It is classified in the income statement within the income or expense category “Net client reimbursed expenses”.

3. cRITIcAl AccoUnTInG eSTImATeS AnD JUDGemenTS

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Equally, the consolidated entity continually employs judgement in the application of its accounting policies.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions. Those which may materially affect the carrying amounts of assets and liabilities reported in future periods are discussed below:

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Clancy Exploration Limited – Annual Report 2007

43

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont.)

(a) Significant accounting judgements

• (i) Classification of and valuation of investments

The consolidated entity has decided to classify investments in listed securities as ‘available-for-sale’ investments and movements in fair value are recognised directly in equity. The fair value of listed shares has been determined by reference to published price quotation in an active market.

• (ii) Impairment of non-financial assets including intangible computer software

The consolidated entity assesses impairment on all assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. These include technology and economic environments. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves value-in-use calculations, which incorporate a number of key estimates and assumptions.

(iii) Impairment of non-current investments

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During the year the parent entity has recognised an impairment loss of $459,999 relating to its investment in its wholly owned subsidiary Geoinformatics Tasmania Pty Ltd ("GET"). This loss was based on an assessment of the value-in-use and fair value less costs to sell. As the assets of GET comprise of interests in exploration licences, the expenditure for which has been expensed as incurred in accordance with the Group's accounting policy on exploration expenditure, the company has determined that neither the value-in-use nor the fair value less costs to sell can be reliably estimated.

• (b) Significant accounting estimates and assumptions

(i) Share-based payment transactions

The consolidated entity measures the cost of equity settled transactions with directors and employees by reference to the fair value of the equity instruments at the date at which they are granted. Equity settled transactions comprise only options. Their fair value is determined using a Binomial Tree model, in accordance with the assumptions detailed in Note 27. The accounting estimates and assumptions relating to equity settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

• (ii) Estimation of useful lives of assets

The estimation of useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for plant and equipment) and software developers’ support and maintenance program (operating computer software and intangible computer software). Adjustments to useful lives are made when considered necessary. Depreciation and amortisation charges as well as estimated useful lives are included in Notes 12 and 13.

	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
4. OTHER REVENUE
Interest revenue	131,374 - 131,374 -
	131,374 - 131,374 -

44 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

notes	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
5. EXPENSES
(a) Employee benefts expense includes: Salaries Share-based payments expense Workers’ compensaton costs Annual leave provision Post employment benefts expense Other employee benefts expense (b) Depreciaton, amortsaton and impairment expense included in Income Statement Impairment of investment in subsidiary 11 Depreciaton of plant & equipment Amortsaton of sofware (c) Finance costs Interest expense – other (d) Exploraton expenditure Gross direct exploraton expenditure - Self funded projects including depreciaton - Joint venture projects including depreciaton Total gross exploraton expenditure Less: Expenditure reimbursed by joint venture partner Less: Depreciaton classifed separately in Income Statement Net disclosure in Income Statement	251,756 - 251,756 - 50,175 - 50,175 - 2,837 - 2,837 - (10,411) - (10,411) - 99,143 - 99,143 - 13,845 - 13,845 -
	407,346 - 407,346 -
	- - 459,999 - 6,028 - 6,028 - 1,027 - 1,027 -
	7,055 - 467,054 -
	171 - 171 -
	171 - 171 -
	355,176 - 355,176 - 767,804 - 767,804 -
	1,122,980 - 1,122,980 - (776,144) - (776,144) - (4,703) - (4,703) -
	342,133 - 342,133 -
6. INCOME TAX
(a) Income tax expense The major components of income tax expense are: Income Statement Current income tax Current income tax charge/(beneft) Adjustments in respect of current income tax of previous years Deferred income tax Relatng to originaton and reversal of temporary diferences Income tax beneft reported in Income Statement	- - - - - - - - (17,388) - (17,388) -
	(17,388) - (17,388) -

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Clancy Exploration Limited – Annual Report 2007

45

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

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	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
6. INCOME TAX(cont.)
(b) Amounts charged or credited directly to equity Deferred income tax related to items charged or credited directly to equity Deducton available for capital raising costs - - - - Unrealised gain on available-for-sale fnancial assets 17,388 - 17,388 - Income tax expense reported in equity 17,388 - 17,388 - (c) Numerical reconciliaton of accountng proft to tax expense A reconciliaton between tax expense and the accountng proft before income tax multplied by the consolidated entty's applicable income tax rate is as follows: Accountng loss before income tax (857,653) (109,363) (1,317,375) (109,363) At the consolidated entty's statutory income tax rate of 30% (2006: 30%) (257,296) (32,809) (395,213) (32,809) Non-deductble entertainment/penaltes 1,271 - 1,251 - Share based payments 17,462 - 17,462 - Impairment of shares in subsidiary entty - - 138,000 - Increase/(decrease) in unrecognised deferred tax assets 355,511 13,415 355,384 13,415 Unrecognised deferred tax asset relatng to capital raising costs charged to equity (217,746) - (217,746) - Unrecognised deferred tax assets inherited under exit history rule (15,990) - (15,798) - Tax losses not recognised and assumed by the former head entty 99,400 19,394 99,367 19,394 Tax losses assumed from subsidiary - - (95) - (17,388) - (17,388) - (d) Current tax assets and liabilites Current tax liability - - - - (e) Recognised deferred tax assets and liabilites Deferred income tax at 31 December relates to the following: (i) Deferred tax liabilites Unrealised gain on available-for-sale fnancial assets 17,388 - 17,388 - 17,388 - 17,388 - (ii) Deferred tax assets Accrued expenses 17,388 - 17,388 - 17,388 - 17,388 - Net deferred tax assets Amount recognised in Income Statement (17,388) - (17,388) - Amount recognised in equity 17,388 - 17,388 - Net movement - - - -	- - - - 17,388 - 17,388 -
	17,388 - 17,388 -
	17,388 - 17,388 -
	17,388 - 17,388 -
	17,388 - 17,388 -
	(17,388) - (17,388) - 17,388 - 17,388 -
	- - - -

Clancy Exploration Limited – Annual Report 2007

46

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

6. INCOME TAX (cont.)

(f) Tax losses

The group has Australian revenue tax losses for which no deferred tax asset is recognised in the balance sheet of $555,904 (2006: $Nil) which are available indefinitely for offset against future taxable income subject to meeting the relevant statutory tests.

(g) Unrecognised temporary differences

As at 31 December 2007, the group has other temporary differences (excluding tax differences relating to tax losses) for which no deferred tax asset is recognised in the balance sheet of $629,131 (2006: $Nil). None of these unrecognised temporary differences relate to investments in subsidiaries, associates or joint ventures.

(h) Tax consolidation

• (i) Members of the tax consolidated group and the tax sharing agreement

Clancy Exploration Limited and its 100% owned Australian resident subsidiary were both subsidiaries in a tax-consolidated group with Geoinformatics Exploration Australia Pty Ltd as the head entity until 2 July 2007. A new tax-consolidated group was formed on 2 July 2007 with Clancy Exploration Limited as head entity. Members of the new tax-consolidated group have not yet entered into a tax sharing agreement.

• (ii) Tax-effect accounting by members of tax consolidated group

The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the stand alone taxpayer approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes .

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Members of the tax consolidated group have not entered into a tax funding agreement, but as no current tax assets or liabilities or deferred tax assets in relation to tax losses or unused tax credits have been recognised, there have been no contributions or distributions required under UIG 1052 Tax Consolidation Accounting .

consolidated 2007 2006 $ $	consolidated 2007 2006 $ $
7. EARNINGS PER SHARE
The following refects the income used in the basic and diluted earnings per share computatons. (a) Earnings used in calculatng earnings per share For basic and diluted earnings per share: Net loss for the year atributable to ordinary shareholders of the parent (840,265) (109,363)
no. of shares no. of shares
(b) Weighted average number of shares Weighted average number of ordinary shares for basic and diluted earnings per share (c) Earnings per share Basic loss per share (cents) Diluted loss per share (cents)	31,923,575 12,000,000
	(2.6) (0.9) (2.6) (0.9)

(i) Diluted earnings per share are calculated after classifying all options on issue remaining unconverted at 31 December 2007 as potential ordinary shares. As at 31 December 2007, the Company has on issue 4,900,000 options over unissued capital and has incurred a net loss. As the notional exercise prices of these options is greater than the current market price of the shares, they have not been included in the calculations of the diluted earnings per share as they are anti-dilutive for all periods presented.

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Clancy Exploration Limited – Annual Report 2007

47

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

7. EARNINGS PER SHARE (cont.)

(ii) There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

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note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
8. CASH AND CASH EQUIVALENTS
Cash at bank Short term bank deposits Reconciliaton to Cash Flow Statement For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 31 December: Cash at bank Short term bank deposits	15,065 1,345 15,065 1,345 3,752,606 - 3,752,606 -
	3,767,671 1,345 3,767,671 1,345
	15,065 1,345 15,065 1,345 3,752,606 - 3,752,606 -
	3,767,671 1,345 3,767,671 1,345

(i) Cash at bank is non-interest bearing

(ii) At balance date, the Company did not have any financing facilities available

9. TRADE AND OTHER RECEIVABLES (Current)

9. TRADE AND OTHER RECEIVABLES (Current)
Trade receivables (a) (i) Sundry debtors (ii) Accrued income (iii) GST input tax refundable Prepayments Related party receivables (b) Trade receivables Amount receivable from associated entty	1,358 - 1,358 - 6,881 - 6,881 - 59,468 - 59,468 - 67,120 1,669 67,015 1,669 17,850 - 17,850 - 13,334 - 13,334 - 3,310 - 3,310 -
	169,321 1,669 169,215 1,669

(a) Allowance for impairment loss

(i) Trade receivables are non-interest bearing and are generally paid on 30 day settlement terms. A provision for impairment loss would be recognised when legal notice has been sent and reply not received in 30 days. No debtors were outside terms at 31 December 2007 (31 December 2006 - $Nil) and no allowance for impairment losses have been made (2006: $Nil)

48 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

9. TRADE AND OTHER RECEIVABLES (Current) (cont.)

At 31 December, the ageing analysis of trade receivables is as follows:

	Total	0-30 days
2007 Consolidated	1,358	1,358
Parent	1,358	1,358
2006 Consolidated	-	-
Parent	-	-

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

• (ii) Sundry debtors are non-interest bearing and represent receivables with various maturities.

• (iii) Accrued income comprises joint venture partner reimbursable expenses received from suppliers after month end joint venture billing processes were closed off.

(b) Related party receivables

For terms and conditions of related party receivables refer to Note 24.

(c) Fair value and credit risk

Due to the short term nature of the receivables, their carrying value is assumed to approximate their fair value.

Given the nature of the receivables as detailed above, the consolidated entity’s exposure to credit risk is not considered to be material. The consolidated entity’s joint venture partner in relation to its NSW exploration projects is billed and pays for estimated expenditure in advance of the consolidated entity incurring such expenditure. Collateral is not held as security. Nor is it the consolidated entity's policy to transfer (on-sell) receivables to special purpose entities.

	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
10. AVAILABLE-FOR-SALE INVESTMENTS (Current)
Investments comprise: Shares - in listed corporaton - at fair value Optons - in listed corporaton - at fair value	394,825 - 394,825 - 6,188 - 6,188 -
	401,013 - 401,013 -

The available-for-sale investment comprises Australian investments in ordinary shares and listed options, and therefore have no fixed maturity date or coupon rate. However, certain of these shares are held in escrow as follows:

• 250,000 shares in escrow for 12 months until 6 November 2008 of a total of 1,161,250 shares

The listed options expire on 30 April 2010.

(a) Listed shares and options

The fair value of listed available-for-sale investments has been determined directly by reference to published price quotations in an active market.

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Clancy Exploration Limited – Annual Report 2007

49

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

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note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
11. OTHER FINANCIAL ASSETS
(Non-Current) Shares in controlled enttes - net carrying amount 24 Shares in controlled enttes Cost (Gross carrying amount) Accumulated impairment losses Net carrying amount Reconciliaton of carrying amount Beginning of fnancial year Acquisiton of subsidiary at cost Impairment of investment in subsidiary Net carrying amount	- - 1 -
	- - 460,000 - - - (459,999) -
	- - 1 -
	- - - - - - 460,000 - - - (459,999) -
	- - 1 -

During the year the parent entity has recognised an impairment loss of $459,999 relating to its investment in its wholly owned subsidiary Geoinformatics Exploration Tasmania Pty Ltd ("GET"). This loss was based on an assessment of the value-in-use and fair value less costs to sell. As the assets of GET comprise of interests in exploration licences, the expenditure for which has been expensed as incurred in accordance with the Group's accounting policy on exploration expenditure, the Company has determined that neither the value-in-use nor the fair value less costs to sell can be reliably estimated.

12. PLANT AND EQUIPMENT

Year ended 31 December

Computer Equipment At 1 January, net of accumulated depreciaton Additons Depreciaton charge for the year Net of accumulated depreciaton and impairment Plant and Equipment At 1 January, net of accumulated depreciaton Additons Depreciaton charge for the year Net of accumulated depreciaton and impairment Motor Vehicles At 1 January, net of accumulated depreciaton Additons Depreciaton charge for the year Net of accumulated depreciaton and impairment	- - - - 6,584 - 6,584 - (835) - (835) -
	5,749 - 5,749 -
	- - - - 2,615 - 2,615 - (490) - (490) -
	2,125 - 2,125 -
	- - - - 73,947 - 73,947 - (4,703) - (4,703) -
	69,245 - 69,245 -

Clancy Exploration Limited – Annual Report 2007

50

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

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||||||
|---|---|---|---|---|
|Consolidated|Parent|
|2007|2006|2007|2006|
|note|$|$|$|$|

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12. PLANT AND EQUIPMENT (cont.)
Total Plant and Equipment
At 1 January, net of accumulated depreciation - - - -
Additions 83,146 - 83,146 -
Depreciation charge for the year (6,028) - (6,028) -
Net of accumulated depreciation 77,119 - 77,119 -
(i) There was no plant and equipment at 1 January 2007.
At 31 December
Computer equipment at cost 6,584 - 6,584 -
Accumulated depreciation (835) - (835) -
Net carrying amount 5,749 - 5,749 -
Plant and equipment at cost 2,615 - 2,615 -
Accumulated depreciation (490) - (490) -
Net carrying amount 2,125 - 2,125 -
Motor vehicles at cost 73,947 - 73,947 -
Accumulated depreciation (4,703) - (4,703) -
Net carrying amount 69,245 - 69,245 -
Total cost 83,146 - 83,146 -
Accumulated depreciation, amortisation and impairment (6,028) - (6,028) -
Net carrying amount 77,119 - 77,119 -
----- End of picture text -----

• (i) No provision has been made for the impairment of plant and equipment as the directors consider the net carrying amount of these assets to be reflective of their fair value, with acquisition thereof occurring in the period since August 2007.

(ii) The useful life of the assets was estimated as follows for 2007:

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|||
|---|---|
|Sundry equipment:|5 to 7 years|
|Computer equipment:|4 years|
|Motor vehicles:|5 to 8 years|

----- End of picture text -----

(iii) No assets have been pledged as security for borrowings.

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Clancy Exploration Limited – Annual Report 2007

51

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

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note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
13. INTANGIBLE ASSETS
Computer Sofware Year ended 31 December At 1 January, net of accumulated amortsaton Additons Amortsaton charge for the year Net of accumulated amortsaton and impairment At 31 December Cost (gross carrying amount) Accumulated amortsaton and impairment Net carrying amount	- - - - 20,550 - 20,550 - (1,027) - (1,027) -
	19,523 - 19,523 -
	20,550 - 20,550 - (1,027) - (1,027) -
	19,523 - 19,523 -

(i) There were no intangible assets at 1 January 2007.

(ii) A recoverable amount estimation was applied to computer software - as a cash generating (cost saving) unit - based on a value in use calculation. The resultant recoverable amount was greater than the net carrying amount. Accordingly no impairment of computer software has been recognised

(iii) The useful life of intangible assets was estimated as follows for 2007:

Computer software: 2.5 years

14. TRADE AND OTHER PAYABLES (Current)

Trade payables (ii) & (v) Unearned income (iii) Accrued expenses GST payable Amount payable to parent entty (iv) Amount payable to related party (iv)	236,193 - 236,193 - 80,373 - 80,373 - 89,878 - 89,878 - 25,638 1,791 25,638 1,791 - 112,758 - 112,758 1,649 - - -
	433,731 114,549 432,082 114,549

Terms and conditions:

• (i) Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

• (ii) Trade payables are non-interest bearing and are normally settled on 30 day terms.

• (iii) The unearned income is in respect of progress billings and advances, not represented by work done, or reimbursable expenditure incurred, under Gold Fields Australasia Pty Ltd joint venture and alliance restructure agreements.

• (iv) The amounts payable to associate (31 December 2007) and parent (31 December 2006) are to Geoinformatics Exploration Australia Pty Ltd. The loans are unsecured, free of interest and are repayable on demand.

• (v) Included in trade payables is an amount of $17,167 which is owed to an associated entity Geoinformatics Exploration Australia Pty Ltd.

52 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

	Consolidated	Consolidated		Parent
	2007	2006	2007	2006
note	$	$	$	$

15. PROVISIONS

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Employee Entitlements
At 1 January - - - -
Transferred in from related party 7,548 - 7,548 -
Arising during the year 9, 26(e) 2,924 - 2,924 -
At 31 December 10,472 - 10,472 -
Total
At 1 January - - - -
Transferred in from related party 7,548 - 7,548 -
Arising during the year 9, 26(e) 2,924 - 2,924 -
At 31 December 10,472 - 10,472 -
cURRenT
Employee entitlements 10,472 - 10,472 -
10,472 - 10,472 -
----- End of picture text -----

(i) There were no employee entitlements at 1 January 2007.

16. CONTRIBUTED EQUITY
Ordinary shares (a) (a) ordinary shares Issued and fully paid	4,722,292 1 5,182,291 1
	4,722,292 1 5,182,291 1

Fully paid ordinary shares carry one vote per share and carry the right to dividends. movement in ordinary shares on issue

note	consolidated consolidated 2007 2006 Number $ Number $ of Shares of Shares
Consolidated Entty
Beginning of fnancial year Add: Division of capital by 100:1 (i) Conversion of debt to equity (ii) Shares issued for acquisiton of subsidiary (iii) Shares issued on acquisiton of shares and optons in Bass Metals Limited (iv) Shares issued during the year under an inital public ofering (v) Less: Transacton costs on share issue (vi) End of fnancial year	120,000 1 120,000 1 11,880,000 - - - 3,400,000 290,000 - - 4,600,000 1 - - 2,805,506 280,551 - - 25,000,000 5,000,000 - - - (848,261) - -
	47,805,506 4,722,292 120,000 1

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Clancy Exploration Limited – Annual Report 2007

53

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

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note	Parent Parent 2007 2006 Number $ Number $ of Shares of Shares
16. CONTRIBUTED EQUITY(cont.)
Parent Entty Beginning of fnancial year Add: Division of capital by 100:1 (i) Conversion of debt to equity (ii) Shares issued for acquisiton of subsidiary (iii) Shares issued on acquisiton of shares and optons in Bass Metals Limited (iv) Shares issued during the year under an inital public ofering (v) Less: Transacton costs on share issue (vi) End of fnancial year	120,000 1 120,000 1 11,880,000 - - - 3,400,000 290,000 - - 4,600,000 460,000 - - 2,805,506 280,551 - - 25,000,000 5,000,000 - - - (848,261) - -
	47,805,506 5,182,291 120,000 1

• (i) On 9 March 2007 each share in the capital of the company was divided into 100 shares in its capital.

• (ii) On 7 March 2007 and 8 May 2007 2,600,000 and 800,000 shares were issued respectively to the then parent entity Geoinformatics Exploration Australia Pty Ltd ("GEA") in partial satisfaction of an inter-company loan arising from services provided and expenditure incurred from 1 January 2007 to 30 April 2007.

• (iii) On 8 May 2007, 4,600,000 shares were issued to GEA as consideration for the acquisition of the entire issued share capital of Geoinformatics Exploration Tasmania Pty Ltd (“GET”). The transaction has been accounted for at fair value of $460,000 by the parent entity. At the time of this acquisition both the parent entity and GET were under the common control of GEA and the combination was accounted for using the pooling of interests method. On consolidation, the difference of $459,999 between the consideration paid of $460,000 and the net assets acquired of $1 is taken to equity in the consolidated entity. Refer to note 29 for details of this transaction.

• (iv) On 8 May 2007, 2,643,750 shares were issued to GEA as consideration for the acquisition of 911,250 shares in Bass Metals Limited and separately a further 161,756 shares were issued to GEA as consideration for the acquisition of 250,000 unlisted options and 56,250 listed options, in Bass Metals Limited.

• (v) Pursuant to the prospectus issued 22 May 2007, 25,000,000 ordinary shares were issued on 2 July 2007 as a result of an initial public offer of shares which resulted in the Company listing on the Australian Securities Exchange on 11 July 2007.

• (vi) The transaction costs represent the cost of issuing shares pursuant to the prospectus as per previous point (v).

(b) Capital risk management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

In order to maintain or adjust the capital structure, the entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, enter into joint ventures or sell assets.

The entity does not have a defined share buy-back plan.

No dividends were paid in 2007 and no dividends are expected to be paid in 2008.

54 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

16. CONTRIBUTED EQUITY (cont.)

There is no current intention to incur debt funding on behalf of the company as on-going exploration expenditure will be funded via equity or joint ventures with other companies such as those currently in place with Gold Fields Australasia Pty Ltd and Bass Metals Ltd.

The consolidated entity is not subject to any externally imposed capital requirements.

Management reviews management accounts on a monthly basis and reviews actual expenditures against budget on a quarterly basis.

note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
17. RESERVES
Available-for-sale investments revaluaton reserve Share-based payment reserve (a) movement in reserves (i) Available-for-sale investments revaluaton reserve Balance at beginning of the fnancial year Net unrealised gain/(loss) on available-for-sale investment before tax Tax efect of net gain on available-for-sale investment Balance at the end of the fnancial year (ii) Share-based payment reserve Balance at beginning of the fnancial year On 23 April 2007, 2,600,000 optons were granted to directors and employees, subject to a 2 year escrow period ending 10 July 2009 and an expiry date of 30 April 2010. They have been valued according to the Binomial Tree method and are being expensed proportonately over their 2 year vestng period. On 25 June 2007, 2,000,000 optons were granted to the sponsoring broker as a fee in respect of the inital public ofering, subject to a 2 year escrow period ending 10 July 2009 and an expiry date of 10 July 2010. They have been valued according to the Binomial Tree method and have been included in the transacton costs of the share issue. On 2 November 2007, 300,000 optons were granted to an employee subject to an escrow period ending 10 July 2009 and an expiry date of 30 April 2010. They have been valued according to the Binomial Tree method and are being expensed proportonately over their 2 year vestng period. Balance at the end of the fnancial year	40,573 - 40,573 - 180,647 - 180,647 -
	221,220 - 221,220 -
	- - - - 57,961 - 57,961 - (17,388) - (17,388) -
	40,573 - 40,573 -
	- - - - 55,240 - 55,240 - 122,440 - 122,440 - 2,967 - 2,967 -
	180,647 - 180,647 -

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Clancy Exploration Limited – Annual Report 2007

55

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

17. RESERVES (cont.)

(b) Nature and purpose of reserves

The available-for-sale investments revaluation reserve records increments and decrements in fair value to the extent that they offset one another.

The share-based payments reserve records the value of share options issued to the Company's directors, employees and brokers.

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note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
18. ACCUMULATED LOSSES
Accumulated losses (953,068) (111,536) (951,524) (111,536) movements Balance at beginning of year (111,536) (2,173) (111,536) (2,173) Net loss atributable to members of Clancy Exploraton Ltd (840,265) (109,363) (1,299,987) (109,363) Accumulated losses assumed following the acquisiton of Geoinformatcs Exploraton Tasmania Pty Ltd (1,267) - - - Balance at end of year (953,068) (111,536) (1,411,523) (111,536) 19. CASH FLOW STATEMENT RECONCILIATION (a) Reconciliaton of the net proft/(loss) afer tax to net cash fows from operatons Loss from ordinary actvites afer income tax (840,265) (109,363) (1,299,987) (109,363) Adjustments for: Depreciaton 6,028 - 6,028 - Amortsaton of intangible assets 1,028 - 1,028 - Impairment of non-current investments - - 459,999 - Share optons expensed 58,207 - 58,207 - Deferred tax liability on unrealised gain on available-for-sale investment set of against current tax expense (17,388) - (17,388) - Non-cash expense paid by associated entty via loan account 277 - - - Non-cash net expenses paid by parent entty via loan account - 100,736 - 100,736 Changes in assets and liabilites (Increase)/decrease in trade and other receivables (133,260) 9,972 (133,260) 9,972 (Increase)/decrease in prepayments and bonds (17,850) - (17,850) - (Decrease)/increase in trade and other payables 430,498 - 430,498 - (Decrease)/increase in provisions (2,864) - (2,864) - Net cash fow from/(used in) operatng actvites (515,589) 1,345 (515,589) 1,345 (b) Non-cash fnancing and investng actvites Share-based payments – broker’s capital raising fees 122,440 - 122,440 - Setlement of subsidiary purchase with shares - - 460,000 - Setlement of investment purchase with shares 280,551 - 280,551 - Setlement of debt to parent entty with shares 290,000 - 290,000 -	(953,068) (111,536) (951,524) (111,536)
	(111,536) (2,173) (111,536) (2,173) (840,265) (109,363) (1,299,987) (109,363) (1,267) - - -
	(953,068) (111,536) (1,411,523) (111,536)
	(515,589) 1,345 (515,589) 1,345
	122,440 - 122,440 - - - 460,000 - 280,551 - 280,551 - 290,000 - 290,000 -

56 Clancy Exploration Limited – Annual Report 2007

Notes to the financial Statements (cont.)

20. INTEREST IN JOINTLY CONTROLLED OPERATIONS

(a) Bass Metals Limited unincorporated joint venture

• (i) Bass Metals Limited ("Bass") and Clancy Exploration Limited have a 75% and 25% interest respectively in each of 12 Tasmanian exploration licences ("tenements") in the Mt Read Volcanic Belt in Western Tasmania.

• (ii) Joint venture property initially consists of these tenements and all mining information in the possession or control of either party relating to these tenements. It is owned by the parties as tenants in common in proportion to their respective interests. Exploration costs are currently incurred by Bass and there are no joint venture assets or liabilities.

• (iii) Bass as the party holding the majority interest is the manager of the joint venture and all joint venture activities.

• (iv) A management committee has been established with representatives voting in accordance with their joint venture interests.

• (v) Bass, as manager, has duties to maintain the tenements in good standing, comply with approved programs and budgets and incur expenditure.

• (vi) Expenditure is in proportion to joint venture interests. However, Bass has agreed to sole fund the joint venture until the completion of a pre-feasibility study on any one of the tenements. Furthermore, Bass may not withdraw from the joint venture until at least 1 year has expired after the grant of the last tenement which was 27 February 2007. At the time of any withdrawal by Bass the tenements must be in good standing and expenditure commitments met. As at the date of this report, Bass had not withdrawn from the joint venture.

(vii) The Company has no capital commitments or contingent liabilities in respect of this joint venture.

(viii) The cost of security deposits in relation to the joint venture tenements has been funded by Bass.

(b) Gold Fields Australasia Pty Ltd unincorporated joint venture

• (i) Clancy Exploration Limited has a 100% interest in 6 tenements, in the eastern Lachlan Fold Belt in New South Wales. These tenements are divided over 3 project areas and are governed by three joint ventures and an Alliance Restructure Agreement with Gold Fields Australasia Pty Ltd ("GFA").

• (ii) GFA has sole-funded the first exploration phase and is currently sole-funding first-pass exploration on a number of projects. GFA can earn 80% by spending up to $5 million over three years on these projects. If GFA has not earned the 80% interest within 3 years after formation of the initial joint ventures, these joint ventures will terminate.

• (iii) Upon GFA earning its 80% interest the parties' joint venture interests will be GFA 80% and Clancy 20%. Expenditure will be in proportion to joint venture interests, except if a party elects to dilute their interest according to the joint venture terms.

• (iv) GFA may terminate the joint ventures on 60 days notice provided it has incurred not less than $1 million in exploration expenditure according to certain formulae set out in the joint venture agreements.

• (v) The Company is the manager of these joint venture projects.

• (vi) The cost of security deposits in relation to the joint venture and also non-joint venture tenements in the Lachlan Fold Belt has been funded by GFA

• (vii) There are no joint venture assets or liabilities.

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Clancy Exploration Limited – Annual Report 2007

57

Notes to the financial Statements (cont.)

21. SEGMENT INFORMATION

The consolidated entity operates predominantly in one business segment and in one geographical location. The operations of the consolidated entity consist of gold and copper exploration, within Australia.

Consolidated	Consolidated		Parent
2007	2006	2007	2006
$	$	$	$

22. COMMITMENTS

Estimated commitments for which no provisions were included in the financial statements are as follows:

• (a) Exploration Expenditure Commitments:

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(i)	Under 17 (2006:14) NSW Government exploraton licences	Under 17 (2006:14) NSW Government exploraton licences
	Payable
	- not later than one year	210,581	299,902	210,581	299,902
	- later than one year and not later than fve years	240,000	579,500	240,000	579,500
		450,581	879,402	450,581	879,402

In respect of the expenditure commitments relating to 6 of the 17 NSW Government exploration licences, an amount of $24,182 (2006: 14 NSW exploration licences - $879,402 under a previous alliance agreement subject to extension thereof) is recoverable from Gold Fields Australasia Pty Ltd under alliance and joint venture agreements. At the time of this report, 7 applications for renewal of exploration licences had been made. It is currently not possible to quantify the amount of any commitments that may arise, in the event these applications for renewal are successful.

The Company and its subsidiary Geoinformatics Exploration Tasmania Pty Ltd have a 25% interest in 12 Tasmanian exploration licences under a mining exploration alliance agreement with Bass Metals Ltd (“Bass”) entered into on 10 May 2005. Under this agreement, responsibility for all remaining commitments to exploration expenditure, in regard to these exploration licences, has been undertaken by Bass, who is also manager of this joint venture under this agreement.

Refer to Note 20 for details of Jointly Controlled Operations.

All the exploration expenditure commitments are non-binding, in respect of outstanding expenditure commitments, in that the Company has the option to relinquish and lose these licences or its contractual commitments at any stage, at the cost of its cumulative expenditures up to the point of relinquishment.

(b) Operating Lease Commitments

The consolidated entity has no operating leases. Office premises are currently occupied on a month-to-month basis with rent payable monthly in advance.

23. CONTINGENT LIABILITIES

In accordance with normal industry practice the consolidated entity has entered into joint venture operations and farm-in agreements with other parties for the purpose of exploring and developing its mineral interests. If a party to a joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venture partners are liable to meet those obligations. In this event the interest in the tenements held by the defaulting party may be redistributed to the remaining joint venture partners. A contingent liability exists in respect of contributions due to be paid by farm-in partners of the consolidated entity to some of its joint ventures. However, no material losses are anticipated in respect of any of these contingencies as expenditure commitments, if not recovered from joint venture partners, can be terminated through mining lease relinquishment at any stage.

Clancy Exploration Limited – Annual Report 2007

58

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

24. RELATED PARTY DISCLOSURES

(a) Ultimate parent

The ultimate Australian parent entity and the ultimate parent of the consolidated entity is Clancy Exploration Limited.

(b) Subsidiaries

The subsidiary of Clancy Exploration Limited is listed in the following table:

Name	Nature of	Country of	% Equity	interest	Investment	$
	investment	incorporaton	2007	2006	2007	2006
Geoinformatcs Exploraton
Tasmania Pty Ltd	Ordinary shares	Australia	100	-	1	-

(c) Transactions with related parties

The following table provides the total amount of transactions (GST inclusive where GST applies) entered into with related parties for the relevant financial year (for information regarding outstanding balances at year-end, refer to Note 14):

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Consolidated Parent
2007 2006 2007 2006
note $ $ $ $
Sales of goods and services
Sales of services and reimbursable
expenses to former parent - 17,415 - 17,415
Sales of services and reimbursable
expenses to entity with significant
influence over the Group 15,619 - 15,619 -
Expenses paid on behalf of controlled entity 277 - - -
Expenses paid on behalf of entity with
significant influence over the Group 3,310 - 3,310 -
Purchase of goods and services
Purchase of services and reimbursable
expenses from former parent - 127,823 - 127,823
Environmental bond paid on Company's
behalf by former parent prior to recovery
from joint venture partner 10,000 - 10,000 -
Share issue expenses paid on Company's
behalf by former parent 95,000 - 95,000 -
Purchase of services from entity with
significant influence over the Group 394,507 - 394,507 -
Purchase of services from other related
entities 330 - 330 -
Loans from related parties
Loans advanced from former parent entity
to part finance initial public offering costs
and working capital requirements (i) 500,607 - 500,607 -
Loan repayments to former parent entity (i) 323,365 - 323,365 -
Amounts settled on trade payables and
on loan account by conversion of debt
to equity
Former parent entity (ii) & 16(ii) 290,000 - 290,000 -
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Clancy Exploration Limited – Annual Report 2007

59

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
24. RELATED PARTY DISCLOSURES(cont.)
Amounts received setling trade and other receivables Entty with signifcant infuence over the Group Amounts paid on trade and other payables Former parent entty Entty with signifcant infuence over the Group	21,809 - 21,809 - 150,926 - 150,926 -
	161,721 - 161,721 -

(i) The loans from related parties consist of a loan from Geoinformatics Exploration Australia Pty Ltd, the former parent entity. The loan, which was repaid in full during the year, was unsecured and interest free.

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(ii) Of the current year loans of $500,607 received from the former parent entity, an amount of $323,365 was repaid, with the balance plus an amount of $112,758 owing at 31 December 2006 settled by the issue of ordinary shares in the Company. This comprised the issue on 7 March 2007 of 2,600,000 shares at 5 cents each amounting to $130,000, and on 8 May 2007, 800,000 shares at 20 cents each amounting to $160,000.

(iii) Related party trade receivables and trade payables are non-interest bearing and are paid on 30 day settlement terms. During the year ended 31 December 2007 a trade payable amount of $175,004 (31 December 2006 $95,067) owing to the former parent, was converted to an inter-company loan, prior to being settled by way of the share issue per preceding point (ii).

25. EVENTS AFTER BALANCE DATE

No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the consolidated entity in subsequent financial years.

26. DIRECTORS AND KEY MANAGEMENT PERSONNEL

• (a) Details of Key Management Personnel

The names of the company’s directors and executives in office at any time during the financial year are as follows. Directors were in office for the entire period unless otherwise stated.

(i) Directors

M Stewart^ Director, additionally appointed Managing Director and Chief Executive Officer, 11 July 2007

A Macdonald Chairman (Non-Executive) – appointed 10 January 2007

N Archibald^ Director (Non-Executive – Technical)

M Lester Director (Non-Executive – Financial) – appointed 9 March 2007

^ = Also directors of controlled entity Geoinformatics Exploration Tasmania Pty Ltd

(ii) Executives

R Caren* Company Secretary – appointed 20 March 2007

G Doig Chief Financial Officer – appointed 11 July 2007 Company Secretary – resigned 20 March 2007 G Barnes Exploration Manager – appointed 11 July 2007

• = Also company secretary of controlled entity Geoinformatics Exploration Tasmania Pty Ltd

60 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

note	Consolidated Parent 2007 2006 2007 2006 $ $ $ $
26. DIRECTORS AND KEY MANAGEMENT PERSONNEL(cont.)
(b) Compensaton for Key Management Personnel Short-term employee benefts Short-term consultng fees Post-employment benefts Other long-term benefts Terminaton benefts Share-based payments Total Compensaton	165,592 - 165,592 - 117,536 - 117,536 - 91,388 - 91,388 - - - - - - - - - 51,797 - 51,797 -
	426,313 - 426,313 -

Clancy Exploration Limited has applied the option under Corporations Amendments Regulation 2006 to transfer KMP remuneration disclosures required by AASB 124 Related Party Disclosures paragraphs Aus 25.4 to Aus 25.7.2 to the Remuneration Report section of the Directors’ Report. These transferred disclosures have been audited.

• (c) Option holdings of Key Management Personnel (Consolidated)

(i) OPTIONS – 31 DECEMBER 2007

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Option Held at 1 Granted as Options Expired/ Held at 31 Exercisable/
Series January Remuneration Exercised Forfeited December Vested at 31
2007 2007 December
2007
Director
M Stewart Incentive - 500,000 - - 500,000 -
PS 1 - 250,000 - - 250,000 -
PS 2 - 250,000 - - 250,000 -
J Macdonald Incentive - 250,000 - - 250,000 -
N Archibald Incentive - 200,000 - - 200,000 -
M Lester Incentive - 200,000 - - 200,000 -
Executives
R Caren Incentive - 100,000 - - 100,000 -
G Barnes Incentive - 300,000 - - 300,000 -
PS 1 - 150,000 - - 150,000 -
PS 2 - 150,000 - - 150,000 -
G Doig Incentive - 100,000 - - 100,000 -
- - - -
2,450,000 2,450,000
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Refer to note 27 for a detailed explanation of the valuation of options granted during the year. Refer to the Directors' Report for a description of the share options terms and conditions.

There were no options provided to key management personnel in 2006.

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Clancy Exploration Limited – Annual Report 2007

61

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

26. DIRECTORS AND KEY MANAGEMENT PERSONNEL (cont.)

(d) Shareholdings of Key Management Personnel (Consolidated)

The movement during the reporting period in the number of ordinary shares of Clancy Exploration Limited held directly, indirectly or beneficially, by each specified director and each specified executive, including their personally related entities is as follows:

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(i)

SHARES – 31 DECEMBER 2007

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Held at 1 Granted as On Exercise Acquired Net Change Held at 31
January 2007 Remuneration of Options Other December
2007
Director
M Stewart - - - 301,000 - 301,000
J Macdonald - - - 250,000 - 250,000
N Archibald - - - 25,000 - 25,000
M Lester - - - 50,000 - 50,000
Executives
R Caren - - - 20,000 - 20,000
G Barnes - - - 90,000 - 90,000
G Doig - - - 25,000 - 25,000
- - - -
761,000 761,000
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Refer to Remuneration Report on the types of share-based payment plans

The ordinary shares acquired by the directors and executives during the year were from on-market trades and/or a Prospectus Offer of shares (at 20 cents per share) to the public. The shares acquired through the Prospectus Offer were subject to the same terms as the other shares issued pursuant to that Prospectus.

There were no key management personnel shareholdings at 31 December 2006.

(e) Amount receivable from Key Management Personnel (Consolidated)

During the year M Stewart took leave in excess of his normal entitlement. The equivalent dollar value of this receivable is $13,334 and this amount has been transferred from Provision for Annual Leave to a separate receivable account. It is interest-free and is expected to be recouped against his leave entitlements arising during the course of his employment over the next year.

(f) Transaction with related entity

During the year N Archibald elected to take all his 2007 non-share-based remuneration as post-employment benefits-superannuation. In this regard an amount of $13,080 has or will be paid to Geocrust Pty Ltd (“Geocrust”) inclusive of superannuation guarantee contributions. Geocrust is effectively controlled by N Archibald and has a significant shareholding in Geoinformatics Exploration Inc. the Toronto Stock Exchange listed ultimate 100% controlling parent of Geoinformatics Exploration Australia Pty Ltd which in turn has a 47.7% interest in Clancy Exploration Limited.

62 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

	Consolidated	Consolidated		Parent
	2007	2006	2007	2006
note	$	$	$	$

27. SHARE-BASED PAYMENTS

(a) Recognised share-based payments expenses

The expense recognised for employee and consultant services received during the year is shown in the table below:

Expense arising from equity-setled share-based payment transactons-employees
	58,207 - 58,207 -

• (b) Options granted during the year ended 31 December 2007

Employee Option Scheme and Broker’s Options – During the year the Company issued options to directors, employees and brokers as detailed in the table below:

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Holder Option Granted Grant Vesting Date expiry Date Fair Exercise
Series no. Date Value per Price
Option $
at Grant
Date
$
M Stewart Incentive 500,000 23 April 2007 11 July 2009 30 April 2010 0.0996 0.20
PS 1 250,000 23 April 2007 11 July 2009 30 April 2010 0.0775 0.30
PS 2 250,000 23 April 2007 11 July 2009 30 April 2010 0.0624 0.40
J Macdonald Incentive 250,000 23 April 2007 11 July 2009 30 April 2010 0.0997 0.20
N Archibald Incentive 200,000 23 April 2007 11 July 2009 30 April 2010 0.0996 0.20
M Lester Incentive 200,000 23 April 2007 11 July 2009 30 April 2010 0.0997 0.20
R Caren Incentive 100,000 23 April 2007 11 July 2009 30 April 2010 0.0964 0.20
G Barnes Incentive 300,000 23 April 2007 11 July 2009 30 April 2010 0.0964 0.20
PS 1 150,000 23 April 2007 11 July 2009 30 April 2010 0.0737 0.30
PS 2 150,000 23 April 2007 11 July 2009 30 April 2010 0.0584 0.40
G Doig Incentive 100,000 23 April 2007 11 July 2009 30 April 2010 0.0964 0.20
D Ward Incentive 150,000 23 April 2007 11 July 2009 30 April 2010 0.0964 0.20
Incentive 100,000 2 November 2007 11 July 2009 30 April 2010 0.1287 0.20
PS 1 100,000 2 November 2007 11 July 2009 30 April 2010 0.0986 0.30
PS 2 100,000 2 November 2007 11 July 2009 30 April 2010 0.0779 0.40
Martin Place Broker 2,000,000 25 June 2007 25 June 2009 10 July 2011 0.0612 0.20
Securities
Total 4,900,000
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Clancy Exploration Limited – Annual Report 2007

63

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

27. SHARE-BASED PAYMENTS (Cont'd)

The options have been valued using the Binomial Tree option valuation methodology by the Company and based upon the following assumptions:

• (i) Directors and employees options:

• Options expire 30 April 2010;

• The underlying share price at 23 April 2007, before the company was listed was 20 cents;

• The market trading price of the shares as at 2 November 2007 was 25 cents;

• A continuously compounding risk free rate (Australian Government Bonds) ranging from 6.34% to 6.9%;

• A volatility factor ranging from 71.28% to 73.93%;

• Expected option lives ranging from 2.09 to 2.82 years based on periods from issue date to vesting dates of 1.69 to 2.22 years and remaining post vesting periods of 0.80 to 0.81 years;

• No expected dividend yield; and

• No discounts have been applied in respect of the 2 year escrow period that applies to all the options.

• (ii) Broker’s options:

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1. Options expire 10 July 2011;

2. The underlying share price at 25 June 2007, before the company was listed was 20 cents;

3. A continuously compounding risk free rate (Australian Government Bonds) of 6.29%;

4. A volatility factor of 57.82%;

5. Expected option lives 4.04 years. However these options vested on grant date of 25 June 2007 and accordingly they have been capitalised to cost of share issue;

6. No expected dividend yield; and

7. A discount of 40% has been applied in respect of the 2 year escrow period that applies to these specific options.

(c) Options granted during the year ended 31 December 2006

There were no Employee or Broker Option Schemes in existence during 2006.

(d) Weighted average remaining contractual life

The weighted average remaining contractual life for the share options outstanding as at 31 December 2007 is 2.33 years

(e) Range of exercise price

The range of exercise prices for directors and employees options outstanding at the end of the year was $0.20 to $0.40 (2006: $Nil).

The range of exercise prices for broker's options outstanding at the end of the year was $0.20 (2006: $Nil).

As the range of exercise is wide, refer to section (b) above for further information in assessing the number and timing of additional shares that may be issued and the cash that may be received upon exercise of those options.

(f) Weighted average fair value

The weighted average fair value of the directors and employees options granted during the year was $0.09 (2006: $Nil), while the weighted average fair value of the brokers options granted during the year was $0.06 (2006: $Nil).

(g) Weighted average share price

The weighted average price per share during the year was $0.21 (2006: $Nil).

64 Clancy Exploration Limited – Annual Report 2007

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

28. AUDITORS’ REMUNERATION

The auditor of Clancy Exploration Limited is Ernst & Young.

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Consolidated Parent
2007 2006 2007 2006
$ $ $ $
Amounts received or due and receivable by Ernst & Young for:
• an audit or review of the financial report of the entity and
any other entity in the consolidated group 28,000 - 28,000 -
• other services in relation to the entity and any other
entity in the consolidated group:
- tax advisory services in relation to initial public
offering (capitalised to costs of share issue) 22,671 - 22,671 -
- tax compliance services 1,670 - 1,670 -
52,341 - 52,341 -
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29. BUSINESS COMBINATION

Acquisition of Geoinformatics Exploration Tasmania Pty Ltd

On 8 May 2007, Clancy Exploration Limited (“Clancy”) acquired 100% of the issued ordinary shares of Geoinformatics Exploration Tasmania Pty Ltd (“GET”) from its then parent entity Geoinformatics Exploration Australia Pty Ltd (“GEA”). The only property of GET is its 25% joint venture interest with Bass Metals Limited (“Bass”), in each of 12 Tasmanian exploration licences in Mt Read Volcanic Belt in Western Tasmania. All expenditure in relation to this interest has been incurred by Bass.

The total cost of the combination was $460,000 which was settled by an issue of 4,600,000 ordinary shares at 10 cents each in Clancy. Given that both Clancy and GET were under the common control of GEA, both before and after the business combination, the requirements of AASB 3 do not apply and thus the combination has been accounted for in the consolidated entity according to the pooling of interest method based on the carrying value of net assets. The net assets (both identifiable and unidentifiable) of GET are $1. Furthermore, in respect of the consolidated entity, no goodwill or fair value treatment is required, given that this transaction is outside the scope of AASB 3. This treatment is also supported by the fact that the above entities, all being related parties, could not transact in an arms’ length transaction and therefore determine the fair value of the company acquired.

The transaction has been accounted for at $460,000, which is the fair value of the consideration given by the parent entity.

From the date of acquisition, GET has incurred a loss of $277. If the combination had taken place at the beginning of the year, the loss would have been $489.

Included in this acquisition is a contingent liability with respect to the joint venture with Bass Metals. Refer to note 23 for further information.

30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The consolidated entity’s principal financial instruments comprise cash, short-term deposits and available-for-sale investments.

The main purpose of these financial instruments is to finance the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period under review, the consolidated entity’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the consolidated entity’s financial instruments are cash flow interest rate risk and equity price risk. Other minor risks are either summarised below or disclosed at Note 9 in the case of credit risk and Note 16 in the case of capital risk management. The Board reviews and agrees policies for managing each of these risks.

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Clancy Exploration Limited – Annual Report 2007

65

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.)

(a) Cash flow interest rate risk

The consolidated entity’s exposure to the risks of changes in market interest rates relates primarily to the consolidated entity’s short-term deposits with a floating interest rate. These financial assets with variable rates expose the consolidated entity to cash flow interest rate risk. All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The consolidated entity does not engage in any hedging or derivative transactions to manage interest rate risk.

The following tables set out the carrying amount by maturity of the parent entity and consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of these financial instruments. Also included is the effect on profit and equity after tax if interest rates at that date had been 10% higher or lower with all other variables held constant as a sensitivity analysis.

The consolidated entity has not entered into any hedging activities to cover interest rate risk. In regard to its interest rate risk, the consolidated entity continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates.

Consolidated Entity

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notes Floating Non-Interest Total Interest Rate Risk
Interest Bearing carrying Amount Sensitivity 2007
Rate
-10% +10%
$ $ $ $ $ $ $ $
2007 2006 2007 2006 2007 2006 Profit Equity Profit Equity
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Financial Assets: Cash at bank 8 Short-term deposits 8 Trade and other receivables 9 Available-for- sale investments 10 Total Weighted average interest rate Financial Liabilites: Trade and other payables 14 Total Weighted average interest rate Net fnancial assets (liabilites)	- - 15,065 1,645 15,065 1,345 - - - - 3,752,606 - - - 3,752,606 - (25,518) (25,518) 25,518 25,518 - - 169,321 1,669 169,321 1,669 - - - - - - 401,013 - 401,013 - - - - -
	3,752,606 - 585,399 3,014 4,338,005 3,014 (25,518) (25,518) 25,518 25,518
	6.28% - - - 433,731 114,549 433,731 114,549 - - - -
	- - 433,731 114,549 433,731 114,549 - - - -
	- -
	3,752,606 - 151,668 (111,535) 3,904,276 (111,535) (25,518) (25,518) 25,518 25,518

Clancy Exploration Limited – Annual Report 2007

66

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.)

Parent Entity

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notes Floating Non-Interest Total Interest Rate Risk
Interest Bearing carrying Amount Sensitivity 2007
Rate
-10% +10%
$ $ $ $ $ $ $ $
2007 2006 2007 2006 2007 2006 Profit Equity Profit Equity
Financial
Assets:
Cash at bank 8 - - 15,065 1,345 15,065 1,345 - - - -
Short-term
deposits 8 3,752,606 - - - 3,752,606 - (25,518) (25,518) 25,518 25,518
Trade and
other
receivables 9 - - 169,215 1,669 169,215 1,669 - - - -
Available-for-
sale
investments 10 - - 401,013 - 401,013 - - - - -
Other
Financial
Assets 11 - - 1 - 1 - - - - -
Total 3,752,606 - 585,294 3,014 4,337,900 3,014 (25,518) (25,518) 25,518 25,518
Weighted
average
interest rate 6.28% -
Financial
Liabilities:
Trade and
other payables 14 - - 432,082 114,549 432,082 114,549 - - - -
Total - - 432,082 114,549 432,082 114,549 - - - -
Weighted
average
interest rate - -
Net financial
assets
(liabilities) 3,752,606 - 153,212 (111,535) 3,905,818 (111,535) (25,518) (25,518) 25,518 25,518
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A sensitivity of 10% has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. A 10% sensitivity would move short term interest rates at 31 December 2007 from around 6.75% to 7.43% representing a 68 basis points shift. This would represent two to three increases which is reasonably possible in the current environment with the bias coming from the Reserve Bank of Australia and confirmed by market expectations that interest rates in Australia are more likely to move up than down in the coming period.

Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances is impacted resulting in a decrease or increase in overall income.

(b) Price risk

The consolidated entity is exposed to equity securities price risk. This arises from investments held and classified on the balance sheet as available-for-sale. The investments are traded on the ASX.

The following table sets out the carrying amount of the consolidated and parent entity’s exposure to equity securities price risk on available for sale investments. Also included is the effect on profit and equity after tax if these prices at that date had been 25% higher or lower with all other variables held constant as a sensitivity analysis:

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Clancy Exploration Limited – Annual Report 2007

67

NOTES TO THE fINANCIAL STATEMENTS (CONT.)

30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.)

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notes carrying Amount Price Risk Sensitivity
2007 $
-25% +25%
$ $ $ $
2007 2006 Profit Equity Profit Equity
Financial Assets:
Available-for-sale investments 10 401,013 - - (100,253) - 100,253
----- End of picture text -----

A sensitivity of 25% has been selected as this is considered reasonable given the current and recent trending and volatilities of both Australian and international stock markets.

(c) Liquidity risk

The consolidated entity manages liquidity risk by maintaining sufficient cash reserves and marketable securities, and through the continuous monitoring of budgeted and actual cash flows.

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		Consolidated	Consolidated		Parent
		2007	2006	2007	2006
		$	$	$	$
Contracted maturites of payables year ended 31 December:
Payable
-	less than 6 months	433,730	-	432,082	-
-	6 to 12 months	-	114,549	-	114,549
-	1 to 5 years	-	-	-	-
-	later than 5 years	-	-	-	-
Total		433,730	114,549	432,082	114,549

(d) Commodity Price Risk

The consolidated entity is exposed to commodity price risk. This risk arises from its activities directed at exploration and development mineral commodities. If commodity prices fall, the market for companies exploring for these commodities is affected. The consolidated entity does not hedge its exposures.

(e) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The consolidated entity’s foreign transactions are immaterial and it is not exposed to foreign currency risk.

(f) net fair values

For financial assets and liabilities, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form, other than listed investments. The consolidated entity has no financial assets where carrying amount exceeds net fair values at balance date.

The consolidated entity’s receivables at balance date are detailed in Note 9 and comprise primarily accrued income receivable from a joint venture partner and GST input tax credits refundable by the ATO. The balance of receivables comprises amounts receivable from related parties and prepayments.

The credit risk on financial assets of the economic entity which have been recognised on the Balance Sheet is generally the carrying amount.

68 Clancy Exploration Limited – Annual Report 2007

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Clancy Exploration Limited, I state that:

1. In the opinion of the directors:

2. (a) the financial statements, notes and the additional disclosures included in the directors’ report designated as audited, of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

   • (i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 31 December 2007 and of their performance for the year ended on that date; and

   • (ii) complying with Accounting Standards and Corporations Regulations 2001; and

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

4. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 31 December 2007.

On behalf of the Board

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M.R. STEWART Managing Director

Perth, WA

Dated this 31st day of March 2008

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Clancy Exploration Limited – Annual Report 2007

69

INDEPENDENT AUDITOR'S REPORT

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Independent auditor’s report to the members of Clancy Exploration Limited

We have audited the accompanying financial report of Clancy Exploration Limited, which comprises the balance sheet as at 31 December 2007, and the income statement, statement of recognised income and expense and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of Accounting Standard 124 Related Party Disclosures (“remuneration disclosures”) , under the heading “Remuneration Report” on pages 21 to 24 of the directors’ report, as permitted by Corporations Regulation 2M.6.04.

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Directors’ Responsibility for the Financial Report

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

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement and that the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures .

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

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

Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. In addition to our audit of the financial report and the remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Liability limited by a scheme approved under Professional Standards Legislation

TH;HG;CLANCY;003

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70

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Auditor’s Opinion In our opinion:

1. the financial report of Clancy Exploration Limited is in accordance with the Corporations Act 2001 , including:

2. (i) giving a true and fair view of the financial position of Clancy Exploration Limited and the consolidated entity at 31 December 2007 and of their performance for the year ended on that date; and

3. (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 .

4. the consolidated/parent financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(b).

5. the remuneration disclosures that are contained on pages 21 to 24 of the directors’ report comply with Accounting Standard AASB 124 Related Party Disclosures .

Ernst & Young

T S Hammond Partner Perth 31 March 2008

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TH;HG;CLANCY;003
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Clancy Exploration Limited – Annual Report 2007

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ASx ADDITIONAL INfORMATION

As at 31 March 2008

A. TOTAL EQUITY SECURITIES

Total on Issue Restricted Restricton or Voluntary Expiry Date Escrow	Total on Issue Restricted Restricton or Voluntary Expiry Date Escrow
SHAReS UNLISTED OPTIONS - Incentve Optons - Series 1 Performance Optons - Series 2 Performance Optons - Broker Optons TOTAL UNLISTED OPTIONS	47,805,506 21,355,506 10 July 2009 1,900,000 1,900,000 10 July 2009 500,000 500,000 10 July 2009 500,000 500,000 10 July 2009 2,000,000 2,000,000 10 July 2009 4,900,000

B DISTRIBUTION OF EQUITY SECURITIES

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	Shares Incentve Series 1 Series 2 Broker Performance Performance
1-1000 1001-5000 5001-10000 10001-100000 100001 and over Total Shareholders/Optonholders Marketable Parcel Closing price of Clancy shares on 31 March 2008 No of shares in a marketable parcel No of unmarketable parcels	7 - - - - 26 - - - - 71 - - - - 238 2 1 1 - 32 6 2 2 1
	374 8 3 3 1
	$500 0.175 2858 16

C. TOP 20 SHAREHOLDERS

No. of shares % of Total

No. of shares % of Total

1 Geoinformatcs Exploraton Australia Pty Ltd 2 GRI Holdings LLC 3 Mr A & Mrs R Getz 4 Martn Place Securites Staf Superannuaton Fund 5 Alcardo Investments Limited 6 Damplin Investments Pty Ltd 7 Resource Asia Limited 8 Mr A & Mrs R Getz Super Fund 9 Citcorp Nominees Pty Ltd 10 Mr M Stewart 11 Mrs D Campbell 12 Cryptodome Pty Ltd 13 Mr A Getz 14 Goldsword Holdings Pty Ltd 15 Dr Alasdair James Macdonald 16 Wythenshawe Pty Ltd 17 Calama Holdings Pty Ltd 18 JSM Corporate Pty Ltd 19 Nalmor Pty Ltd 20 Mr James Whitng

22,805,506 47.70% 3,750,000 7.84% 1,402,677 2.93% 1,350,000 2.82% 1,085,000 2.27% 1,000,000 2.09% 950,000 1.99% 595,590 1.25% 433,417 0.91% 301,000 0.63% 250,000 0.52% 250,000 0.52% 250,000 0.52% 250,000 0.52% 250,000 0.52% 250,000 0.52% 235,000 0.49% 200,000 0.42% 200,000 0.42% 200,000 0.42% 36,008,190 75.30%

Clancy Exploration Limited – Annual Report 2007

72

D. SUBSTAnTIAl SHAReHolDeRS

Geoinformatics Exploration Australia Pty Ltd 22,805,506 47.70% GRI Holdings LLC 3,750,000 7.84%

E. VOTING RIGHTS ATTACHING TO EQUITY SECURITIES

Subject to the Constitution of the Company and any rights or restrictions at the time being attached to a class of shares, at a general meeting of the Company every Shareholder present in person, or by proxy, attorney or representative has one vote on a show of hands, and upon a poll, one vote for each Share held by the Shareholder. In the case of an equality of votes, the chairperson has a casting vote.

Options to acquire ordinary shares do not carry any voting rights.

F. CONSISTENCY OF EXPENDITURE WITH BUSINESS OBJECTIVES

The Company was listed on 11 July 2007. The Company’s use of the cash and assets that it had at the time of admission to quotation on ASX has been consistent with its business objectives as set out in the Company’s Prospectus dated 22 May 2007.

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Clancy Exploration Limited – Annual Report 2007

73

CORPORATE GOVERNANCE STATEMENT

The directors of Clancy Exploration Limited believe firmly that benefits will flow from the maintenance of the highest possible standards of corporate governance. A description of the company’s main corporate governance practices is set out below. The Company has elected to early adopt the 2[nd] Edition of the “Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council” issued by the ASX Corporate Governance Council in August 2007.

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Principle No Best Practice Recommendation Compliance Reason for Non-compliance
1.1 Establish the functions reserved to The board has adopted a Not applicable
the board and those delegated to formal charter setting out the
senior executives and disclose those responsibilities of the Board. This
functions. charter can be accessed at www.
clancyexploration.com. Any
functions not reserved for the
Board and not expressly reserved
for members by the Corporations
Act and ASX Listing Rules are
reserved for senior executives.
1.2 Disclose the process for evaluating The Remuneration sub-committee Not applicable
the performance of senior of the Board meets annually
executives. to review the performance of
executives. The senior executives’
performance is assessed against the
performance of the company as a
whole.
1.3 Provide the information indicated in A performance evaluation has Senior Executives were appointed in
the Guide to reporting on Principle not been completed during the April 2007 and the company listed
1. reporting period. in July 2007. The Company intends
to complete annual performance
evaluations with the first due in
April 2008. In future periods it is
anticipated that the Company will
comply with this recommendation.
2.1 A majority of the Board should be A definition of director Currently the number of
independent directors. independence can be accessed at independent directors is equal to
www.clancyexploration.com the number of non-independent
directors. The Chairman is an
Currently Clancy Exploration
independent director and would
Limited has two independent have the casting vote in the event
directors, Dr James Macdonald of a tied vote. The Board considers
and Mr Mark Lester and two non-
that its current Board structure is
independent directors, Mr Mark
appropriate given its size and the
Stewart and Dr Nick Archibald
early stage of its business. The Board
considers that the Directors provide
the necessary diversity of skills and
experience which is appropriate for
the Company’s current business.
2.2 The chair should be an independent The chairman, Dr James Not applicable
director. Macdonald, is independent.
2.3 The roles of chair and chief The roles of chairman and chief Not applicable
executive officer should not be executive officer are not performed
exercised by the same individual by the same individual. The
Chairman is Dr James Macdonald
and the Managing Director is Mr
Mark Stewart.
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Principle No Best Practice Recommendation Compliance Reason for Non-compliance
2.4 The board should establish a The board does not have a It is not a company policy to have
nomination committee nomination committee. a nomination committee, given the
size and scale of Clancy Exploration
Limited. The role of a nomination
committee is carried out by the full
Board. The full board considers the
appointment of new directors on an
informal basis. The Board’s policy for
the appointment of new directors to
the Board can be accessed at www.
clancyexploration.com
2.5 Disclose the process for evaluating The performance evaluation of Not applicable
the performance of the board, its board members occurs by way of an
committees and individual directors. informal review by the full board (in
the absence of the relevant Board
member).
2.6 Provide the information indicated in The skills, experience and expertise Not applicable
the Guide to reporting on Principle 2 relevant to the position held by
each director is disclosed in the
Directors' Report which forms part
of this Annual Report.
The names of the independent
directors are disclosed above.
The directors are entitled to take
independent professional advice
at the expense of the company.
The period of office held by
each director is disclosed in the
Directors' Report which forms part
of this Annual Report.
3.1 Establish a code of conduct and The Company has adopted a Not applicable
disclose the code or a summary of Board Code of Conduct and a
the code as to: Company Code of Conduct, both
 the practices necessary to of which can be accessed at www.
maintain confidence in the clancyexploration.com
Company's integrity;

the practices necessary to take
into account their legal obligations
and the reasonable expectations of
their stakeholders;
 the responsibility and
accountability of individuals for
reporting and investigating reports
of unethical practices.
3.2 Establish a policy concerning trading The Company has adopted a Not applicable
in Company securities by directors, Trading Policy which can be
senior executives and employees, accessed at www.clancyexploration.
and disclose the policy or a com
summary of that policy.
3.3 Provide the information indicated in The information has been disclosed Not applicable
the Guide to reporting on Principle 3 in the Annual Report.
4.1 The board should establish an audit The company established an Audit Not applicable
committee. Committee on 20 March 2007.
4.2 The audit committee should be The Audit Committee has Not applicable
structured so that it: consists only of three members, consisting of
non-executive directors; the independent directors, Dr
 consists of a majority of Macdonald and Mr Lester, and the
independent directors; Company Secretary.
 is chaired by an independent chair, The Audit Committee is chaired by
who is not chair of the board; Mr Lester.
 has at least three members.
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Clancy Exploration Limited – Annual Report 2007 75

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Principle No Best Practice Recommendation Compliance Reason for Non-compliance
4.3 The audit committee should have a The formal charter of the Audit Not applicable
formal charter. Committee was adopted on 20
March 2007. The Audit committee
charter can be accessed at www.
clancyexploration.com
4.4 Provide the information indicated in The names of the members of the Not applicable
the Guide to reporting on Principle 4 Audit Committee are disclosed
above. The qualifications of the
members of the Audit Committee
are disclosed in the Directors'
Report which forms part of
this Annual Report. The audit
committee will meet twice in each
year, before sign off of the annual
and half year financial statements.
The first financial statements of
Clancy Exploration Limited as a
listed company are the annual
financial statements for the year
ended 31 December 2007. The
first meeting of the Audit sub-
committee was held on 19 March
2008. All members of the Audit
sub-committee attended the
meeting. The external auditor, Ernst
& Young, has a rotation policy such
that lead partners are rotated every
5 years and review partners are
rotated every 5 years.
5.1 Establish written policies and The Company has adopted a Not applicable
procedures designed to ensure Disclosure Policy which can be
compliance with ASX Listing Rule accessed at www.clancyexploration.
disclosure requirements and to com
ensure accountability at a senior
executive level for that compliance
and disclose those policies or a
summary of those policies.
5.2 Provide the information indicated in The information has been disclosed Not applicable
the Guide to reporting on Principle 5 in the Annual Report.
6.1 Design a communications policy for The Company has adopted a Not applicable
promoting effective communication Shareholder Communications Policy
with shareholders and encouraging which can be accessed at www.
their participation at general clancyexploration.com
meetings and disclose that policy or
a summary of that policy.
6.2 Provide the information indicated in The information has been disclosed Not applicable
the Guide to reporting on Principle in the Annual Report.
6.
7.1 Establish policies for the oversight The Company has adopted a Risk Not applicable
and management of material Management Policy which can be
business risks and disclose a accessed at www.clancyexploration.
summary of those policies. com This policy outlines the
material risks faced by the
Company as identified by the
Board. Given the size and scale of
Clancy Exploration Limited it does
not have a Risk sub-committee or
Internal Audit function
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Principle No Best Practice Recommendation Compliance Reason for Non-compliance
7.2 The board should require The Board believes the risk Management has not formally
management to design and management and internal control reported to the Board as to the
implement the risk management and systems designed and implemented effectiveness of the Company's
internal control system to manage by the Chief Executive Officer management of its material business
the Company's material business risks and the Chief Financial Officer risks. Given the nature and size
and report to it on whether those are adequate given the size and of the company and the Board’s
risks are being managed effectively. nature of the company’s activities. ultimate responsibility to manage
The board should disclose that The Board informally reviews and the risks of the Company this is not
management has reported to it as to requests management to report considered critical. The company
the effectiveness of the Company's on risk management and internal intends to develop the risk reporting
management of its material business control. framework into a detailed policy as
risks. its operations continue to grow.
7.3 The board should disclose The Board receives assurance Not applicable
whether it has received assurance from the chief executive officer
from the chief executive officer (Managing Director) and the chief
(or equivalent) and the chief financial officer in the form of a
financial officer (or equivalent) declaration, prior to approving
that the declaration provided in financial statements.
accordance with section 295A of
the Corporations Act is founded on
a sound system of risk management
and internal control and that the
system is operating effectively in
all material respects in relation to
financial reporting risks.
7.4 Companies should provide the The information has been disclosed Not applicable
information indicated in the Guide in the Annual Report.
to reporting on Principle 7.
8.1 The board should establish a The formal charter of the Not applicable
remuneration committee. Remuneration Committee was
adopted on 20 March 2007. The
Remuneration Committee has
three members, consisting of
the independent directors, Dr
Macdonald and Mr Lester, and the
Company Secretary. There was a
single meeting of the Remuneration
Committee during the reporting
period which was attended by all
members of the Remuneration
Committee. The Remuneration
Committee is chaired by Dr
Macdonald. The Remuneration
committee charter can be accessed
at www.clancyexploration.com
8.2 Companies should clearly distinguish The structure of non-executive As part of their remuneration
the structure of non-executive directors' remuneration is clearly packages, non-executive directors
directors' remuneration from that distinguished from that of executive of the company have been granted
of executive directors and senior directors and senior executives, as options to acquire shares in the
executives. described in the Directors' Report company. For a company of the
which forms part of this Annual size and cash resources of Clancy
Report. Exploration this is a useful tool for
attracting and retaining quality
directors without diminishing the
company’s cash resources. The
options granted to non-executive
directors are escrowed for two years
from date of listing on ASX and may
be cancelled in the event that the
director voluntarily terminates his
position with the company or the
company terminates the position for
reasons of serious misconduct.
8.3 Companies should provide the The information has been disclosed Not applicable
information indicated in the guide to in the Annual Report.
reporting on Principle 8.
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Clancy Exploration Limited – Annual Report 2007

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A.B. “Banjo” Paterson

Clancy Exploration Limited

��� 105 578 756

• 57 Havelock Street West Perth, WA 6005

• (08) 9481 8241

• (08) 9226 1299

� info@clancyexploration.com

� www.clancyexploration.com

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