RAREX LIMITED — Interim / Quarterly Report 2012

Sep 11, 2012

CLANCY EXPLORATION LIMITED

ABN: 65 105 578 756 AND CONTROLLED ENTITY

HALF YEAR ENDED 30 JUNE 2012

CLANCY EXPLORATION LIMITED

CORPORATE DIRECTORY

DIRECTORS

LAWYERS

Dr Michael Etheridge Non-Executive Chairman

Mr Gordon Barnes

Managing Director

Dr James Macdonald Non-Executive Director (Technical)

Ms Natalie Forsyth-Stock

Executive Director (Financial)

COMPANY SECRETARY

Mr Rowan Caren

Holborn Lenhoff Massey

3rd Floor, Irwin Chambers 16 Irwin Street Perth 6000 Western Australia

Watson Mangioni

Level 13 50 Carrington Street Sydney New South Wales 2000

Hilary Macdonald

Suite 29, 18 Stirling Highway Nedlands Western Australia 6009

CHIEF FINANCIAL OFFICER

Natalie Forsyth-Stock

PRINCIPAL PLACE OF BUSINESS

3 Corporation Place Orange New South Wales 2800

Telephone: (02) 6361 1285 Facsimile: (02) 6361 1202 Website: www.clancyexploration.com

REGISTERED OFFICE

Suite 4, 6 Richardson Street West Perth Western Australia 6005

AUDITOR

Ernst & Young

Ernst & Young Centre 680 George Street Sydney New South Wales 2000

SHARE REGISTRY

Security Transfer Registrar

770 Canning Highway Applecross WA 6153 Australia

Telephone: +61 8 9315 2333 Facsimile: +61 8 9315 2233

ASX CODE : CLY, CLYO

CLANCY EXPLORATION LIMITED

TABLE OF CONTENTS

DIRECTORS’ REPORT..........................................................................................................................................1 AUDITORS’ INDEPENDENCE DECLARATION ...................................................................................................2 STATEMENT OF COMPREHENSIVE INCOME.....................................................................................................3 STATEMENT OF FINANCIAL POSITION..............................................................................................................4 STATEMENT OF CHANGES IN EQUITY ..............................................................................................................5 STATEMENT OF CASH FLOWS ...........................................................................................................................6 NOTES TO THE FINANCIAL STATEMENTS ........................................................................................................7 DIRECTORS’ DECLARATION.............................................................................................................................19 AUDITORS’ REPORT .........................................................................................................................................20

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

DIRECTORS’ REPORT

FOR THE HALF YEAR ENDED 30 JUNE 2012

The Board of Directors has pleasure in presenting their report on the consolidated entity for the half-year ended 30 June 2012.

1. DIRECTORS

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

Dr A J Macdonald Dr M A Etheridge Mr G J Barnes Mr M A Lester, Resigned 31 August 2012 Ms N L Forsyth-Stock, Appointed 3 September 2012

2. REVIEW OF OPERATIONS

The consolidated entity continued to explore its portfolio of exploration properties during the half-year.

3. FINANCIAL RESULTS

The loss of the Company for the period ending 30 June 2012 was $1,719,576 (2011: loss of $1,268,758). During half year, total expenses amounted to $1,847,588 (2011: $1,337,402) of which $829,644 related to direct cash and equity settled exploration expenditure (2011: $608,222).

Unrestricted cash and cash equivalents amounted to $1,260,183 as at 30 June 2012 (31 December 2011: $3,230,010).

4. AUDITORS’ INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The auditors’ independence declaration is set out on page 2 and forms part of the directors’ report for the half year ended 30 June 2012.

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

On behalf of the directors.

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G BARNES Managing Director

Signed in Orange this 12th day of September 2012.

1

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

In relation to our review of the financial report of Clancy Exploration Limited for the financial half year ended 30 June 2012, 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.

Ernst & Young

Ryan Fisk Partner 12 September 2012

Liability limited by a scheme approved under Professional Standards Legislation

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 30 JUNE 2012

		Consolidated	Consolidated
		30.06.2012	30.06.2011
Income	Notes	$	$
Other Income	3	128,012	68,644
Income		128,012	68,644
Employee benefits expense		(543,006)	(447,083)
Consulting and outsourced services
expense		(365,669)	(160,636)
Exploration expenditure		(723,318)	(608,222)
Share based payment expense		(106,326)	-
Computer related costs		(9,614)	(8,009)
Travel expense		(15,442)	(36,909)
Occupancy costs		-	(13,701)
Insurance expense		(13,905)	(11,900)
Marketing expense		(1,324)	(2,666)
Depreciation, amortisation and
impairment expense	4	(34,780)	(33,707)
Unrealised loss on financial
instruments	6	(4,250)	-
Finance costs		-	(1,183)
Other expenses		(29,954)	(13,386)
Total expenses		(1,847,588)	(1,337,402)
Loss from continuing operations
before income tax expense		(1,719,576)	(1,268,758)
Income tax expense		-	-
Loss from continuing operations after income tax
expense		(1,719,576)	(1,268,758)
Other comprehensive income:
Other		-	-
Other comprehensive loss net of
tax		-	-
Total comprehensive loss attributable to owners of the
parent		(1,719,576)	(1,268,758)
Loss per share
- basic and diluted		(1.0) cents	(1.1) cents

The above Statement of Comprehensive Income is to be read in conjunction with the accompanying notes, on pages 7 to 18.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF FINANCIAL POSITION

FOR THE HALF YEAR ENDED 30 JUNE 2012

Notes ASSETS Current Assets Cash and cash equivalents 5 Restricted cash asset 5 Trade and other receivables Financial Asset 6 Total Current Assets Non-current Assets Plant and equipment Intangible assets Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities Non-current Liabilities Provisions Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 7 Reserves Accumulated losses TOTAL EQUITY	Consolidated 30.06.2012 31.12.2011 $ $ 1,260,183 3,230,010 300,000 118,000 482,482 631,841 183,625 -
	2,226,290 3,979,851
	127,189 154,209 2,471 3,551
	129,660 157,760
	2,355,950 4,137,611
	166,548 347,146 55,599 38,952
	222,147 386,098
	37,526 37,472
	37,526 37,472
	259,673 423,570
	2,096,277 3,714,041
	13,511,783 13,409,971 1,660,974 1,660,974 (13,076,480) (11,356,904)
	2,096,277 3,714,041

The above Statement of Financial Position is to be read in conjunction with the accompanying notes on pages 7 – 18.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 30 JUNE 2012

CONSOLIDATED Notes	Ordinary Shares $ Options Reserve $ (Accumulated Losses) $ Total Equity $
At 1 January 2012 Total comprehensive income for the period, net of tax Issue of share capital 7 Transaction costs on share issues 7 At 30 June 2012 At 1 January 2011 Total comprehensive income for the period, net of tax Issue of share capital 7 Issue of free attaching options 7 Transaction costs on share issues 7 Proceeds from exercise of options 7 At 30 June 2011	13,409,971 1,660,974 (11,356,904) 3,714,041 (1,719,576) (1,719,576) 106,326 - - 106,326 (4,514) - - (4,514)
	13,511,783 1,660,974 (13,076,480) 2,096,277
	10,166,442 824,008 (9,031,639) 1,958,811 - - (1,268,758) (1,268,758) 3,646,798 - - 3,646,798 - 733,740 - 733,740 (356,265) - - (356,265) 45 - - 45
	13,457,020 1,557,748 (10,300,397) 4,714,371

The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes on pages 7 – 18.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF CASH FLOWS FOR THE

HALF YEAR ENDED 30 JUNE 2012

Notes CASH FLOWS USED IN OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest paid Receipts of Research and Development Rebate NET CASH FLOWS USED IN OPERATING ACTIVITIES CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of plant and equipment Purchase of intangible assets Proceeds from sale of fixed assets Payments for financial instruments NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue Costs of share issue Proceeds from borrowings Repayment of borrowings Loans to related entity - payments made NET CASH FLOWS (USED)/FROM FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD 5	Consolidated 30.06.2012 30.06.2011 $ $ - 45,568 (1,895,770) (1,363,848) 52,762 28,553 - (1,183) - 375,843
	(1,843,008) (915,067)
	(6,118) (21,765) (562) (1,600) - 268 (115,625) -
	(122,305) (23,097)
	- 4,315,583 (4,514) (356,265) - 19,409 - (9,358) - (284)
	(4,514) 3,969,085
	(1,969,827) 3,030,921 3,230,010 1,660,368
	1,260,183 4,691,289

The above Condensed Statement of Cash Flows is to be read in conjunction with the accompanying notes on pages 7 – 18.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The consolidated financial report of Clancy Exploration Limited (“the Company”) for the half-year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors on 12 September 2012.

Clancy Exploration is a company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The principal activities during the year of the entities within the consolidated entity were mineral exploration and development.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The half-year financial report does not include all the notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report and should be read in conjunction with the annual Financial Report of Clancy Exploration Limited for the year ended 31 December 2011.

It is also recommended that the half-year financial report be considered together with any public announcements made by Clancy Exploration Limited and its controlled entities (‘the Group’) during the half-year ended 30 June 2012 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 .

(a) Basis of Preparation

The half-year condensed consolidated financial report has been prepared in accordance with AASB 134 “Interim Financial Reporting”. The half-year financial report has been prepared on a historical cost basis, except for the revaluation of financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless otherwise noted.

For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

(b) Changes in accounting policies

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2011, except for the adoption of new standards and interpretations as at 1 January 2012, noted below:

AASB 124 Related Party Transactions (Amendment)

The AASB has issued an amendment to AASB 124 that clarifies the definition of a related party. The new definitions emphasise a symmetrical view of related party relationships as well as clarifying in which circumstances persons and key management personnel affect related party circumstances of an entity. Secondly, the amendment introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.

AASB 132 Financial Instruments: Presentation (Amendment)

The amendment alters the definition of a financial liability in AASB 132 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity’s non derivative equity instruments, to acquire a fixed number of the entity’s own instruments for a fixed amount of currency. The amendment has had no impact on the financial position or performance of the Group.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

Improvements to AASB (issued May 2010)

In May 2010, the AASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. These are separate transitional provisions for each standard. The option of the following amendments has had no impact on the financial position or performance of the Group.

 AASB 7 Financial Instruments – Disclosures : The amendments was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring the volume of disclosures by requiring qualitative information to put the quantitative in context. The amendment has had no impact on the financial position or performance of the Group.

 AASB 101 Presentation of Financial Statements : The amendment clarifies that an option to present an analysis of each component of other comprehensive income may be included either in the statement of changing in equity or in the notes to the financial statements. The amendment has had no impact on the financial position or performance of the Group.

 AASB 134 Interim Financial Statements : The amendment requires additional disclosures for fair values and changes in classification of financial assets, as well as changes to contingent assets and liabilities in interim condensed financial statements. The amendment has had no impact on the financial position or performance of the Group

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

(c) Significant accounting policies

The half-year condensed consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 31 December 2011 except for the adoption of amending standards mandatory for annual periods beginning on or after 1 January 2012, as described above in Note 2(b) and below:

 Comparative financial information

Where required, the prior period financial information has been restated to present comparative financial information.

(d) Basis of consolidation

The half-year condensed consolidated financial statements comprise the financial statements of Clancy Exploration Limited and its controlled subsidiary.

(e) New Standards and Interpretations Not Yet Adopted

The following table sets out new Australian Accounting Standards and Interpretations that have been issued but are not yet mandatory and which have not been early adopted by the Company for the half year reporting period ending 30 June 2012:

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

2(e) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reference	Title	Summary	Applicati on date of standard*	Impact on Group financial report	Application date for Group*
AASB 2011-9	Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]	This Standard requires entities to group items presented in other comprehensive income on the basis of whether they might be reclassified subsequently to profit or loss and those that will not.	1 July 2012	No impact expected	1 Jan 2013
AASB 10	Consolidated Financial Statements	AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements_dealing with the accounting for consolidated financial statements and UIG-112 _Consolidation – Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Consequential amendments were also made to other standards via AASB 2011-7.	1 January 2013	No impact expected	1 Jan 2013

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

2(e) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reference	Title	Summary	Applicati on date of standard*	Impact on Group financial report	Application date for Group*
AASB 12	Disclosure of Interests in Other Entities	AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non- controlling interests.	1 January 2013	No impact expected	1 Jan 2013
AASB 13	Fair Value Measurement	AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 2011-8.	1 January 2013	No impact expected	1 Jan 2013

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

2(e) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reference	Title	Summary	Application date of standard*	Impact on Group financial report	Application date for Group*
AASB 119	Employee Benefits	The main change introduced by this standard is to revise the accounting for defined benefit plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets. The revised standard changes the definition of short-term employee benefits. The distinction between short-term and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly within 12 months after the reporting date. Consequential amendments were also made to other standards via AASB 2011-10.	1 January 2013	No impact expected	1 Jan 2013

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

2(e) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reference	Title	Summary	Application date of standard*	Impact on Group financial report	Application date for Group*
Annual Improveme nts 2009–2011 Cycle	Annual Improvements to IFRSs 2009–2011 Cycle	This standard sets out amendments to International Financial Reporting Standards (IFRSs) and the related bases for conclusions and guidance made during the International Accounting Standards Board’s Annual Improvements process. These amendments have not yet been adopted by the AASB. The following items are addressed by this standard: IAS 1 Presentation of Financial Statements • Clarification of the requirements for comparative information IAS 32 Financial Instruments: Presentation • Tax effect of distribution to holders of equity instruments IAS 34 Interim Financial Reporting • Interim financial reporting and segment information for total assets and liabilities	1 January 2013	No impact expected	1 Jan 2013
AASB 2012-5	Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle; and	AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The Standard addresses a range of improvements, including the following: • repeat application of AASB 1 is permitted (AASB 1); and • clarification of the comparative information requirements when an entity provides a third balance sheet (AASB 101 Presentation of Financial Statements).	1 January 2013	No impact expected	1 Jan 2013

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

2(e) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reference	Title	Summary	Application date of standard*	Impact on Group financial report	Application date for Group*
AASB 9	Financial Instruments	AASB 9 includes requirements for the classification, measurement and derecognition of financial assets and liabilities. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities.	1 January 2015	No impact expected	1 Jan 2015

All other new Australian Accounting Standards that have been issued but are not yet effective are not expected to have a material impact on the group.

(f) Segment Reporting

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. Accordingly, no segment information is presented in this half-year financial report.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

Notes 3. OTHER INCOME Sale of interest in tenements Interest received Unrealised gain on financial assets 6 4. EXPENSES Depreciation, amortisation and impairment included in income statement Depreciation of plant & equipment Amortisation of software/leasehold improvements Loss on scrapping of assets	Consolidated 30.06.2012 30.06.2011 $ $ - 40,091 52,762 28,553 75,250 - 128,012 68,644 30,062 28,812 4,718 3,896 - 999 34,780 33,707

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

5. CASH AND CASH EQUIVALENTS Cash at bank Short term bank deposits	Consolidated 30.06.2012 31.12.2011 $ $ 1,010,183 75,443 250,000 3,154,567
	1,260,183 3,230,010

In addition, as at 30 June 2012 the Company has $300,000 in restricted cash (2011: $118,000) which is included as a current asset in the Statement of Financial Position, held at Westpac Banking Corporation which have been provided as set-off security in respect of a $250,000 bank guarantee facility provided in turn for exploration licence security purposes and a $50,000 corporate credit card facility.

6. FINANCIAL ASSETS

During the half year, the Company made an off market takeover offer for Genesis Resources Limited. In connection with this off market takeover offer, the Company entered into a number of arrangements in respect of shares in Genesis Resources Limited, as summarised in below:

• On 2 April 2012, the Company paid $20,000 to enter into two option call agreements in respect of 4,250,000 shares in Genesis Resources Limited, which allowed the Company the right to purchase these shares for total consideration of $320,000. The market value of these shares was $335,750 as at 30 June 2012. The fair value of these option call agreements was $15,750 as at 30 June 2012. The loss on changes in fair values of $4,250 was recognised in the statement of comprehensive income.

• On 24 April 2012, the Company entered into a loan agreement with two shareholders (“the Borrowers”) of Genesis Resources Limited to enable them to participate in the non-renounceable 1 for 2 rights offer announced by Genesis Resources on 27 March 2012. The total amount of the loans was $92,625. As part of the loan agreement the Borrowers have an obligation to the Company to settle the loan by transferring the shares acquired under the rights offer. As at 30 June 2012, the market value of the shares was $167,875. The gain on changes in fair value of $75,250 recognised in the statement of comprehensive income.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

Notes 7. CONTRIBUTED EQUITY Ordinary shares (a) (a) Ordinary shares Issued and fully paid	Consolidated 30.06.2012 31.12.2011 $ $ 13,511,783 13,409,971
	13,511,783 13,409,971

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Movement in ordinary shares on issue As at 1 January Add: Shares issued pursuant to a 1 for 4 rights issue (i) Free attaching options exercised (ii) Shares issued pursuant to a drilling for equity agreement (iii) Less: Transaction costs on share issues (iv) As at 30 June	30.06.2012 31.12.2011 Number of shares $ Number of shares $ 165,242,425 13,409,971 109,513,447 10,166,442 - - 54,756,724 3,646,798 - - 300 45 2,719,585 106,326 971,954 52,530 - (4,514) - (455,844)
	167,962,010 13,511,783 165,242,425 13,409,971

• (i) Pursuant to the prospectus issued 3 May 2011, 54,756,724 ordinary shares and 54,756,724 free attaching options were issued in June 2011, at a subscription price of 8 cents per share, as a result of a one for two non-renounceable rights offer. These shares were listed on the Australian Securities Exchange on 24 June 2011. The offering successfully raised $4,380,538 before costs of the issue. According to AASB 132 the company is required to determine the value of the free attaching options and using that value, apportion part of the proceeds of the share issue to the options reserve. These options were valued at $733,740 according to the Binomial Tree method with an exercise price of 15 cents when the market trading price was 6.3 cents, a volatility factor of 75.4% and a risk free rate of 4.69%. Refer note: Movements in shares under option, below.

• (ii) On 13 May 2011 300 previously issued free attaching options were exercised over 300 ordinary shares at an exercise price of 15 cents per share.

• (iii) On 1 December 2011, 20 December 2011, 25 January 2012 and 18 April 2012 respectively, 200,507, 771,447, 527,399 and 2,192,186 ordinary shares were issued to Australian Mineral and Waterwell Drilling Pty Ltd (“AMWD”), subject to a 12 month escrow, pursuant to a drilling earn-in agreement. Under this agreement, AMWD provides drilling services up to the value of $5 million or for a three year period from 23 September 2011, with 25% of monthly invoice amount settled by the issue of fully paid ordinary shares escrowed for 12 months from date of issue. The transaction costs relate to the issue of these shares.

• (iv) The transaction costs represent the cost of issuing shares pursuant to the prospectus per (i) above and shares under the drilling earn-in agreement in (iii) above.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

7. CONTRIBUTED EQUITY (continued)

Movement in shares under option

Exercise price Options expiring on 10 August 2013 $0.175 Options expiring on 31 December 2013 $0.195 Options expiring on 30 September 2013 $0.185 Options expiring on 31 July 2013 $0.150 Options expiring on 31 July 2013 $0.150 Options expiring on 31 July 2013 $0.150 Options expiring on 31 July 2013 $0.150	On issue at 1 January 2012 Issued Exercised On issue at 30 June 2012 2,050,000 - - 2,050,000 1,650,000 - - 1,650,000 1,100,000 - - 1,100,000 27,378,062 - - 27,378,062 10,000,000 - - 10,000,000 2,000,000 - - 2,000,000 54,756,724 - - 54,756,724
	98,934,786 - - 98,934,786

8. COMMITMENTS AND CONTINGENCIES

Consolidated

30.06.2012 31.12.2011 $ $

The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below:

(a) Exploration Expenditure Commitments:

Under 27 (2011: 27) New South Wales (“NSW”) Government and 1 (2011:1) Western Australian (“WA”) and 3 (2011: 2) Tasmanian Government exploration licences

Payable - not later than one year - later than one year and not later than five years	311,501 581,067 232,727 538,627
	544,228 1,119,694

(b) Operating Lease Commitments

The Company has operating lease commitments in respect of its office and core shed together with a photocopier, as follows:

Payable - not later than one year - later than one year and not later than five years	20,172 74,172 3,077 4,163
	23,249 78,335

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS

9. EVENTS AFTER THE BALANCE SHEET DATE

On 16 July 2012, the Company announced that it had issued 3,053,681 shares to employees and consultants pursuant to its Employee Incentive Scheme .

On 13 August 2012, the Company announced that it had entered into a joint venture with Mitsubishi Materials Corporation of Japan (Mitsubishi) on three copper-gold projects in NSW. Under the terms of the agreement, Mitsubishi has the right to earn 49% of the Cundumbul, Currumburrama and Genaren projects by funding A$3 million over three years with A$500,000 minimum commitment in the first year. The Company will manage the projects on behalf of the joint venturers .

On 20 August 2012, the Company’s off market takeover offer for Genesis Resources Limited closed. As at the close of the offer, the Company’s voting interest in Genesis Resources Limited were 8.92% or 8,157,000 shares.

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CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

DIRECTORS’ DECLARATION

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

In the opinion of the Directors:

• (a) the financial statement and notes set out on pages 3 to 18 are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the half-year ended on that date; and

• (ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 including compliance with Accounting Standards; and

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

On behalf of the Board,

==> picture [69 x 53] intentionally omitted <==

G Barnes Managing Director

Dated at Orange, this 12th day of September 2012

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To the members of Clancy Exploration Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Clancy Exploration Limited, which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entity it controlled at the half-year end.

Directors’ Responsibility for the half-year Financial Report

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

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and its performance for the halfyear ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Clancy Exploration Limited and the entity it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration.

Liability limited by a scheme approved under Professional Standards Legislation

2

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Clancy Exploration Limited is not in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the half-year ended on that date; and

• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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Ernst & Young

Ryan Fisk Partner Sydney 12 September 2012