RED MOUNTAIN MINING LIMITED - AGM Information 2011

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ABN 40 119 658 106

NOTICE OF ANNUAL GENERAL MEETING

EXPLANATORY STATEMENT

PROXY FORM

Date of Meeting 22 November 2011

Time of Meeting 12:00 noon (WST)

Place of Meeting

Chartered Secretaries Australia Ltd Ground Floor, 8 Victoria Avenue PERTH WA 6000

YOUR ANNUAL REPORT IS AVAILABLE ONLINE, SIMPLY VISIT

http://www.redmm.com.au/Investor-Centre/Investor-Centre/Investor-Centre-.asp

TIME AND PLACE OF MEETING AND HOW TO VOTE

Venue

The Annual General Meeting of the Shareholders of Red Mountain Mining will be held at 12:00 noon WST on Tuesday 22 November 2011 at:

Chartered Secretaries Australia Ltd Ground Floor, 8 Victoria Avenue Perth, Western Australia 6000

Voting Entitlement

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001 (Cth), the Board has determined that a person’s entitlement to vote at the Meeting will be the entitlement of that person set out in the register of Shareholders as at 5:00pm (WST) on Sunday, 20 November 2011. Accordingly, transactions registered after that time will be disregarded in determining Shareholder’s entitlement to attend and vote at the Meeting.

How to Vote

You may vote by attending the meeting in person, by proxy or authorised representative.

Voting in Person

To vote in person, attend the meeting on the date and at the place set out above. The meeting will commence at 12:00 noon WST.

Voting by Proxy

To vote by proxy, please complete and sign the Proxy Form enclosed with this Notice of Annual General Meeting as soon as possible and either:

send the Proxy Form by facsimile to the Company on facsimile number (61 8) 9322 1474; or
deliver or post the Proxy Form to the principal office of the Company at Unit 2, 2 Richardson Street, West Perth, Western Australia, 6005.

so that it is received by no later than 12:00 noon WST on Sunday 20 November 2011, being 48 hours before the Meeting.

Your Proxy Form is enclosed.

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Shareholders of Red Mountain Mining ABN 40 119 658 106 (“ Company ”) will be held at Chartered Secretaries Australia Ltd, Ground Floor, 8 Victoria Avenue, Perth, Western Australia, on Tuesday 22 November 2011 12 noon WST, for the purpose of transacting the business referred to in this Notice of Annual General Meeting (“ Notice ”).

An Explanatory Statement, containing information in relation to the following Resolutions, and a Proxy Form accompany this Notice. Please note capitalised terms used in this Notice have the meanings set out in the glossary of the Explanatory Statement accompanying this Notice.

AGENDA

GENERAL BUSINESS:

Financial Reports

To receive and consider the Annual Financial Statements of the Company including the Directors’ Report and the Auditor's Report, for the year ended 30 June 2011.

Resolution 1 – Non Binding Resolution to adopt Remuneration Report

To consider and, if thought fit, to pass the following as an advisory only resolution :

“To adopt the Remuneration Report for the year ended 30 June 2011."

Note: The vote on this resolution is advisory only and does not bind the Directors or the Company.

Voting Exclusion

A vote in respect of Resolution 1 must not be cast (in any capacity) by or on behalf of any of the following persons: (a) a member of the key management personnel, details of whose remuneration are included in the Remuneration Report; or (b) a closely related party of such a member, unless: (c) the person does so as a proxy appointed in writing that specifies how the proxy is to vote on Resolution 1; and (d) the vote is not cast on behalf of a person described in subparagraphs (a) or (b) above.

Resolution 2 – Election of Director – Mr Michael Wolley

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, Mr Michael Wolley, having been appointed as an additional director of the Company on 4 April 2011, who retires in accordance with clause 12.17 of the Company’s Constitution and being eligible and offering himself for election, be elected as a Director of the Company.”

Resolution 3 – Re-election of Mr Neil Warburton as a Director

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That for all purposes, Mr Neil Warburton, who ceases to hold office in accordance with clause 12.9 of the Company’s Constitution and, being eligible, offers himself for re-election, be re-elected as a Director of the Company."

Resolution 4 – Issue of Options to Director – Mr Michael Wolley

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 10.11, section 208 of the Corporations Act and all other purposes, the Company approves and authorises the grant and issue of up to 2,000,000 Options comprising the following:

(a) 1,000,000 Tranche 1 Options; and
(b) 1,000,000 Tranche 2 Options

to Mr Michael Wolley (or his nominee), being a non-executive Director, in the manner and on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion

For the purposes of Listing Rule 10.13 and section 224 of the Corporations Act, the Company will disregard any votes cast on Resolution 4 by Mr Wolley or his nominee and any associates of Mr Wolley or his nominee. However, the Company need not disregard a vote if the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 5 – Issue of Options to Director – Mr Neil Warburton

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 10.11, section 208 of the Corporations Act and all other purposes, the Company approves and authorises the grant and issue of up to 1,545,444 Options comprising the following:

(c) 772,722 Tranche 1 Options; and
(d) 772,722 Tranche 2 Options

to Mr Neil Warburton (or his nominee), being a non-executive Director, in the manner and on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion

For the purposes of Listing Rule 10.13 and section 224 of the Corporations Act, the Company will disregard any votes cast on Resolution 5 by Mr Warburton or his nominee and any associates of Mr Warburton or his nominee. However, the Company need not disregard a vote if the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 6 – Issue of Options to Director – Mr Keith Rowe

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 10.11, section 208 of the Corporations Act and all other purposes, the Company approves and authorises the grant and issue of up to 2,318,168 Options comprising the following:

(e) 1,159,084 Tranche 1 Options; and
(f) 1,159,084 Tranche 2 Options

to Mr Keith Rowe (or his nominee), being an executive Director, in the manner and on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion

For the purposes of Listing Rule 10.13 and section 224 of the Corporations Act, the Company will disregard any votes cast on Resolution 6 by Mr Rowe or his nominee and any associates of Mr Rowe or his nominee. However, the Company need not disregard a vote if the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 7 – Issue of Options to Director – Mr Bo Zhou

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 10.11, section 208 of the Corporations Act and all other purposes, the Company approves and authorises the grant and issue of up to 1,159,084 Options comprising the following:

(g) 579,542 Tranche 1 Options; and
(h) 579,542 Tranche 2 Options

to Mr Bo Zhou (or his nominee), being a non-executive Director, in the manner and on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion

For the purposes of Listing Rule 10.13 and section 224 of the Corporations Act, the Company will disregard any votes cast on Resolution 7 by Mr Zhou or his nominee and any associates of Mr Zhou or his nominee. However, the Company need not disregard a vote if the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 8 – Issue of Options – Mr Des Kelly

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 7.1, and all other purposes, the Company approves and authorises the grant and issue of up to 1,159,084 Options comprising the following:

(i) 579,542 Tranche 1 Options; and

(j) 579,542 Tranche 2 Options

to Mr Des Kelly (or his nominee), being a former Company Secretary, in the manner and on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion

The Company will disregard any votes cast on Resolution 8 by Mr Kelly or his nominee and a person who might obtain a benefit, except if benefit solely in the capacity as a Shareholder, if this Resolution 8 is passed and any associates of those persons. However, the Company need not disregard a vote if the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

OTHER BUSINESS

To transact any other business which may be properly brought before the Meeting in accordance with the Company's Constitution and the Corporations Act.

BY ORDER OF THE BOARD

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Shannon Coates Company Secretary 11 October 2011

NOTES:

Completion of a proxy form will not prevent individual Shareholders from attending the Meeting in person if they wish. Where a Shareholder completes and lodges a valid proxy form and attends the Meeting in person, then the proxy's authority to speak and vote for that Shareholder is suspended while the Shareholder is present at the Meeting.
A Shareholder entitled to attend and vote is entitled to appoint not more than two proxies to attend and vote on behalf of the Shareholder. A proxy need not be a Shareholder of the Company, but must be a natural person (not a corporation). A proxy may also be appointed by reference to an office held by the proxy (eg “the Company Secretary”).
Where more than one proxy is appointed, each proxy may be appointed to represent a specified proportion of the Shareholder's voting rights. If no such proportion is specified, each proxy may exercise half of the Shareholder's votes.
A proxy form is enclosed. A separate form must be used for each proxy. An additional form can be obtained by writing to the Company at Unit 2, 2 Richardson Street, Perth, Western Australia, 6005 or by fax to (61 8) 9322 1474. Alternatively, you may photocopy the enclosed form.
A duly completed proxy form and (where applicable) any power of attorney or a certified copy of the power of attorney must be received by the Company at its registered office or the address or fax number set out below, not less than 48 hours before the time for commencement of the Meeting. Please send by post to Unit 2, 2 Richardson Street, Perth, Western Australia, 6005 or by fax to (61 8) 9322 1474
The Chairman of the Meeting will vote undirected proxies on, and in favour of, all of the proposed Resolutions, except for Resolution 1 (Remuneration Report). Any undirected proxies held by the Chairman of the Meeting will not be voted on Resolution 1. Accordingly, if you appoint the Chairman of the meeting as your proxy, you should direct him how to vote on Resolution 1 if you want your shares to be voted on that Resolution. The same will apply if you appoint any other Director, any other of its key management personnel or any of their closely related parties. Key management personnel of the Company are the Directors and those other persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The Remuneration Report identifies the Company’s key management personnel for the financial year 30 June 2011. Their closely related parties are defined in the Corporations Act, and include certain of their family members, dependants and companies they control.
The Company will accept proxy appointments by a corporate Shareholder executed in accordance with either section 127(1) (not under seal) or section 127(2) (under seal) of the Corporations Act.
The time nominated by the Board for the purpose of determining the voting entitlements at the Meeting is 5.00pm WST on 20 November 2011.
The Explanatory Statement attached to this Notice forms part of this Notice.

E X P L A N A T O R Y S T A T E M E N T

This Explanatory Statement has been prepared to provide Shareholders with material information to enable them to make an informed decision on the business to be conducted at the Annual General Meeting of Red Mountain Mining Limited (“ Company ”).

The Explanatory Statement and all attachments are important documents. They should be read carefully. The Directors recommend Shareholders read this Explanatory Statement in full before making any decision in relation to the Resolutions.

1. Financial Statements

The first item of the Notice of Annual General Meeting deals with the annual financial report of the Company for the financial year ended 30 June 2011 together with the Directors’ Declaration and Report in relation to that financial year and the Auditor’s Report on those Financial Statements being laid before the Annual General Meeting. Shareholders should consider these documents and raise any matters of interest with the Directors when this item is being considered. The reports are available on the Company’s website at www.redmm.com.au.

No resolution is required to be moved in respect of this item.

Shareholders will be given a reasonable opportunity at the Annual General Meeting to ask questions and make comments on the accounts and on the business, operations and management of the Company.

The Chairman will also provide Shareholders a reasonable opportunity to ask the Auditor questions relevant to:

the conduct of the audit;
the preparation and content of the independent Audit Report;
the accounting policies adopted by the Company in relation to the preparation of accounts; and
the independence of the Auditor in relation to the conduct of the audit.

2. Resolution 1 – Non Binding Resolution to adopt Remuneration Report

The Directors’ Report for the year ended 30 June 2011 contains a Remuneration Report which sets out the policy for the remuneration of the Directors and executives of the Company. Section 250R(3) of the Corporations Act expressly provides that the vote on the Resolution is advisory only and does not bind the Directors or the Company.

However, pursuant to the Corporations Amendment (Improving Accountability for Director and Executive Remuneration) Bill 2010 which amended the Corporations Act from 1 July 2011, if the remuneration report for a company receives a “no” vote of 25% or more at two consecutive annual general meetings of the company, a resolution must be put to the Shareholders of that company at the second annual general meeting as to whether a further general meeting should be held within 90 days at which all directors (other than the managing director) in office at the date of the second approved remuneration report must stand for re-election.

Also, the Corporations Amendment (Improving Accountability for Director and Executive Remuneration) Bill 2010 has introduced new prohibitions on key management personnel and their closely related parties from voting or voting undirected proxies on, amongst other things, remuneration matters. Accordingly, if your proxy is the Chairman, key management personnel, or a closely related party of a member of key management personnel and you do not direct your proxy on how to vote on Resolution 1, your vote will not be counted in computing the required majority.

3. Resolution 2 – Election of Director – Mr Michael Wolley

3.1 Background

Clause 12.16 of the Constitution states that the Directors may at any time appoint a person to be a Director, either to fill a casual vacancy or as an addition to the existing Board, but so that the total number of Directors does not at any time exceed the maximum number specified by the Constitution. Clause 12.17 of the Constitution provides that any Director so appointed holds office only until the next following annual general meeting and is then eligible for re-election.

Mr Wolley was appointed to the Board on 4 April 2011 to act as non-executive Chairman. In accordance with clause 12.8 of the Constitution, Mr Wolley now seeks re-election as a Director at this Annual General Meeting.

3.2 Biography

Mr Wolley has a depth of experience in the resources and industrial sectors in both Australia and internationally. He was recently Managing Director of a junior gold development business, Golden Iron Resources, and prior to that was Chief Operating Officer for Lynas Corporation, an ASX 100 company that is a vertically integrated mining and minerals business with mining and processing facilities in Western Australia and downstream processing in Malaysia.

Prior to Lynas Corporation, Mr Wolley held senior executive roles with industrial and construction services businesses across Asia Pacific including the position of Managing Director Asia Pacific for a refrigeration and climate control business and as President of BlueScope Steel China.

Prior to joining BlueScope Steel Mr Wolley was General Manger Operations for Dexion, a business servicing the logistics industry across Asia Pacific. He began his career with Mobil Oil Australia and over a 15 year period held senior roles in engineering, production and planning across Australia and New Zealand.

Mr Wolley holds a first class honours degree in Chemical and Materials Engineering from Auckland University and a Masters of Management from Macquarie Graduate School of Management. Mr Wolley is a Member of the Australian Institute of Company Directors.

3.3 Directors’ Recommendation

The Board (other than Mr Wolley) recommends shareholders vote in favour of the Resolution.

4. Resolution 3 – Re-election of Mr Neil Warburton as a Director

4.1 Background

Mr Warburton retires by rotation in accordance with Clause 12.11 of the Constitution and, being eligible, offers himself for re-election.

Mr Warburton was appointed to the Board on 5 May 2006 to act as non-executive Director. In accordance with clause 12.11 of the Constitution, Mr Warburton now seeks re-election as a Director at this Annual General Meeting.

4.2 Biography

Mr Warburton is Chief Executive Officer of Barminco, Australia’s largest domestic underground mining contractor with operations in Australia and Africa. Barminco mines (under contract) over 800,000 oz of gold per annum in Australia alone. Neil has successfully guided and grown the company with annual revenues having more than doubled during his tenure. Before joining Barminco he was Managing Director of Coolgardie Gold NL.

Mr Warburton is also a non-executive director of Australian Mines Limited, a company publicly listed on the ASX. Mr Warburton has over 30 years’ experience in gold and base metal mining. His experience includes 7 years with Western Mining Corporation as a Senior Mining Engineer and Mine Manager at Kambalda, Western Australia.

Mr Warburton is a graduate from the Western Australian School of Mines and is a Fellow of the Australian Institute of Company Directors.

4.3 Directors’ Recommendation

The Board (other than Mr Warburton) recommends shareholders vote in favour of the Resolution.

5. Resolutions 4 - Issue of Options to Mr Michael Wolley

5.1 Background

As contemplated in the Company’s prospectus dated 4 July 2011 and pursuant to ASX Listing Rule 10.11, the Company seeks Shareholder approval to issue a total of 2,000,000 Director and Management Incentive Options to non-executive Director, Mr Michael Wolley (or his nominees), in two tranches and on the terms and conditions set out below and in Annexures A and B (as applicable) to this Explanatory Statement.

	Tranche 1 Options	Tranche 2 Options
Number of Options	1,000,000	1,000,000
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Options will be restricted for 24 months from the date the Company was admitted to the official list of the ASX, in accordance with Appendix 9B of the Listing Rules.

The grant of Options is designed to encourage Mr Wolley (or his nominees) to have a greater involvement in the achievement of the Company’s objectives and to provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership.

Under the Company’s current circumstances, the Directors consider that the incentives to Mr Wolley noted above, represented by the issue of these Options, are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as the payment of cash compensation.

Mr Wolley is a non-executive Director of the Company. The Company acknowledges that the issue of Options to non-executive Directors is contrary to recommendation 8.2 of the ASX’s Corporate Governance Principles and Recommendations (2[nd] Edition). However the Directors are of the view that at this stage of the Company’s development it is far better for Directors of the Company to be compensated by way of securities in the Company, rather than by way of cash.

The number of Options to be issued to Mr Wolley has been determined based on a number of factors including:

Consistency with options held by the other Directors of the Company.
Continuity of senior management. Mr Wolley has complementary skills and has acquired substantial and extensive knowledge regarding the development of the Company. The retention of Mr Wolley as a member of the current Board with the skills and knowledge possessed by him will be critical to the successful development of the Company.
Alignment of interests. The Directors consider that it is in the interests of Shareholders to align the interests of Directors and Shareholders by encouraging Directors, subject to appropriate milestones, to have an equity holding in the Company. However, the Directors consider that similarly to other Shareholders, this interest should arise through direct investment by the Directors in the Company. In this regard, if all of the Options issued under Resolution 4 are exercised, Mr Wolley will be investing $600,000 into the Company.

5.2 Corporations Act

(a) Section 208 of the Corporations Act

Under section 208 of the Corporations Act, a public company cannot give a “financial benefit” (including an issue of shares and options) to a “related party” of the Company, unless one of the exceptions set out in section 210 to 216 of the Corporations Act apply, or the holders of ordinary securities have approved the giving of the financial benefit to the related party in a general meeting.

Mr Wolley, as a Director, is a related party of the Company within the meaning specified under section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under section 208 of the Corporations Act to permit the issue of the Option on the terms set out in Resolution 4 to Mr Wolley as a related party of the Company.

Section 219 of the Corporations Act requires the following information be provided to the Shareholders in relation to Resolution 4 for approval to be granted for the purposes of section 208 of the Corporations Act:

Related parties to whom the proposed resolution would permit financial benefits

Mr Michael Wolley or his nominee.

Nature of financial benefits

If Resolution 4 is passed, Mr Wolley or his nominee will receive the following Options:

	Tranche 1 Options	Tranche 2 Options

Number of Options	1,000,000	1,000,000
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

Full terms and conditions of the above Options are set out in Annexures A and B of this Explanatory Statement.

 Directors’ recommendation or reasons for declining to make a recommendation

Messrs Rowe, Warburton and Zhou (who do not have any interest in Resolution 4) recommend that Shareholders approve the grant of Options under Resolution 4 to Mr Wolley (or his nominee) as they consider the grant of Options is:

to incentivise Mr Wolley for the reasons and factors set out above;
a fair and reasonable alternative to additional cash payment of Directors’
fees;
in consideration and recognition of the services provided or to be
provided by Mr Wolley to the Company and the number of Options proposed to be issued is fair and reasonable and reflective of the contribution he has or will make to the Company; and
necessary to reflect remuneration benefits to non-executive Directors by
companies operating in the Company’s industry.

Mr Wolley declines to make a recommendation to Shareholders in respect of Resolution 4 as he has a material personal interest in the outcome of Resolution 4.

Directors’ interests in outcome of resolution

Other than Mr Wolley (who has a material personal interest in the outcome of Resolution 4), the remaining Directors, Messrs Rowe, Warburton and Zhou, have no interest in the outcome of Resolution 4.

 Current Capital Structure

At the date of this Explanatory Statement, the Company currently has on issue:

79,060,026 Shares;
1,718,433 unlisted Options, exercisable at 20 cents each on or before 12 September 2013;
27,728,125 unlisted Options, exercisable at 20 cents each on or before 30 June 2014.
909,110 unlisted Options, exercisable at 25 cents each on or before 31 July 2014; and
909,110 unlisted Options, exercisable at 35 cents each on or before 31 July 2016.

 Current Remuneration and Relevant Interest

Details of Mr Wolley’s remuneration for both the current financial year and the year ending 30 June 2011, as well as his current interests (both direct and indirect) in the Company are outlined below:

Current Financial Year	Year Ended 30 June 20111
38,332	62,500

(1) Mr Wolley was appointed as a Director on 4 April 2011.

Shares (RMX)	Listed Options	Unlisted Options
Nil	Nil	Nil

 Dilution

If all of the Options granted to Mr Wolley (or his nominees) under Resolution 4 are exercised, the effect would be to dilute the shareholding of existing Shareholders by approximately 2.53% based on the number of Shares on issue as at the date of the Notice, assuming no other existing Options are exercised.

 Exercise

The market price of the Company's shares during the period of the Options will normally determine whether or not Option holders exercise the Options. At the time any Options are exercised and Shares are issued pursuant to the exercise of the Options, the Company's Shares may be trading on the ASX at a price which is higher than the exercise price of the Options.

 Trading History

At the date of this Explanatory Statement, the price of the Shares in the Company trading on the ASX was $0.18. Since listing on 1 September 2011, the highest price of the shares in the Company trading on the ASX was 22.5 cents which occurred on 14 September 2011 and the lowest price of the shares in the Company trading on the ASX was 18 cents which occurred on 4 October 2011.

 Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in granting the Options.

 Accounting

The Company’s adoption of Australian equivalents to International Financial Reporting Standards for reporting periods means that, under AASB2 Share-based Payment, equity-based compensation (such as the Options under Resolution 4) will be recognised as an expense in respect of the services received.

 Value of the Options

The Options under Resolution 4 are not to be quoted on the ASX and as such have no actual market value. At the date of this Explanatory Statement, the latest ASX price

of the Shares to which the Options may be converted was 18 cents. The Options are capable of being converted to Shares by payment of 25 cents for Tranche 1 Options and 35 cents for Tranche 2 Options. The Options may acquire future value dependent upon the extent, if any, by which the Shares exceed 25 and 35 cents respectively during the term of the Options.

The Company engaged BDO Corporate Finance to prepare an independent valuation of the Options. The Options have been valued using the Binomial option valuation methodology (using 300 binomial steps) and using the following assumptions:

The Company’s share price was 18 cents. This is based on the Company’s closing share price on 3 October 2011, being the last trading day prior to the date of the independent valuation;
The exercise price for the Options is 25 cents for Tranche 1, and 35 cents for Tranche 2;
Options in Tranche 1 and Tranche 2 will be issued at the Company’s shareholder meeting on 22 November 2011;
The maximum life of the Options is 2.69 years for Tranche 1, and 4.70 years for Tranche 2;
Annualised volatility level is 85%. As Red Mountain Mining only has a limited trading history on ASX, volatility was calculated based on the share price of seven comparable companies using Hoadley’s volatility calculator for 3 and 5 year periods;
The risk free rate of interest is based on the Australian Government 3-year bond rate of 3.68% for Tranche 1 Options, and the Australian Government 5-year bond rate of 3.83% for Tranche 2 Options as at 4 October 2011; and
A dividend yield of 0%;
Options in Tranche 1 and Tranche 2 will eventually vest to the option holder.

Accordingly, the total values of the Options to be issue to Mr Wolley are as follows:

Tranche 1 Options	Tranche 2 Options	Total
$	$	$
$83,000 (8.3 cents each)	$99,000 (9.9cents each)	$182,000

The Options will need to be formally revalued for IFRS purposes following approval by shareholders and the values noted above may alter.

 Other relevant information

Other than as set out in this Explanatory Statement, there is no further information which the Shareholders would reasonably require in order to decide whether or not it is in the Company’s best interests to pass Resolution 4.

(b) Listing Rule 10.11

Listing Rule 10.11 provides that a company must not issue equity securities to a

“related party” without the approval of holders of ordinary securities, or to a person whose relationship with the company or a related party of the company is, in ASX’s opinion, such that approval should be obtained. Further, Listing Rule 7.2 (Exception 14) states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

As a Director, Mr Wolley (or his nominee) is a related party of the Company within the definition specified in Listing Rule 19.12. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of 2,000,000 Options to Mr Wolley (or his nominee) as a related party of the Company on the terms set out in Resolution 4 and in this Explanatory Statement (including Annexures A and B).

The issue of the Options under Resolution 4 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those Options (once issued) will be excluded from the calculations under Listing Rule 7.1.

Listing Rule 10.13 requires that the following information be provided to the Shareholders in relation to obtaining approval of Resolution 4 as an exception to Listing Rule 10.11:

 The name of the allottee of the securities

Mr Michael Wolley or his nominee.

 The maximum number of securities to be allotted and issued

Class of Option	Tranche 1 Options	Tranche 2 Options
Number of Options	1,000,000	1,000,000

 The date of allotment and issue of the securities

The Options will be issued as soon as possible after the Meeting and in any event, no later than 1 month after the Meeting (or such later date to the extent permitted by any ASX waiver of the Listing Rules).

 The relationship that requires Shareholder approval

Mr Wolley is a Director of the Company and is accordingly a related party.

 The issue price of the securities

The issue price of the Options is nil.

 The terms of the securities

The key terms of the Options to be issued under Resolution 4 are set out in the following table, and are set out in full in Annexures A and B to the Explanatory Statement.

Class of Option	Tranche 1 Options	Tranche 2 Options
Expiry Date	31 July 2014	31 July 2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Shares issued on the exercise of these Options are ordinary fully paid shares which rank equally with existing Shares on issue.



The intended use of the funds

No funds will be raised from the issue of the Options under Resolution 4. The funds raised on exercise of these Options, if exercised, will be applied to working capital requirements of the Company at that stage. However there is no guarantee that any of these Options will be exercised.

6. Resolutions 5 - Issue of Options to Mr Neil Warburton

6.1 Background

As contemplated in the Company’s prospectus dated 4 July 2011 and pursuant to ASX Listing Rule 10.11, the Company seeks Shareholder approval to issue a total of 1,545,444 Director and Management Incentive Options to non-executive Director, Mr Neil Warburton (or his nominees), in two tranches and on the terms and conditions set out below and in Annexures A and B (as applicable) to this Explanatory Statement.

	Tranche 1 Options	Tranche 2 Options
Number of Options	772,722	772,722
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Options will be restricted for 24 months from the date the Company was admitted to the official list of the ASX, in accordance with Appendix 9B of the Listing Rules.

The grant of Options is designed to encourage Mr Warburton (or his nominees) to have a greater involvement in the achievement of the Company’s objectives and to provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership.

Under the Company’s current circumstances, the Directors consider that the incentives to Mr Warburton noted above, represented by the issue of these Options, are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as the payment of cash compensation.

Mr Warburton is a non-executive Director of the Company. The Company acknowledges that the issue of Options to non-executive Directors is contrary to recommendation 8.2 of the ASX’s Corporate Governance Principles and Recommendations (2[nd] Edition). However the Directors are of the view that at this stage of the Company’s development it is far better for Directors of the Company to be compensated by way of securities in the Company, rather than by way of cash.

The number of Options to be issued to Mr Warburton has been determined based on a number of factors including:

Consistency with options held by the other Directors of the Company.
Continuity of senior management. Mr Warburton has complementary skills and has acquired substantial and extensive knowledge regarding the development of the Company. The retention of Mr Warburton as a member of the current Board with the skills and knowledge possessed by him will be critical to the successful development of the Company.
Alignment of interests. The Directors consider that it is in the interests of Shareholders to align the interests of Directors and Shareholders by encouraging Directors, subject to appropriate milestones, to have an equity holding in the Company. However, the Directors consider that similarly to other Shareholders, this interest should arise through direct investment by the Directors in the Company. In this regard, if all of the Options issued under Resolution 5 are exercised, Mr Warburton will be investing $463,633.20 into the Company.

6.2 Corporations Act

(a) Section 208 of the Corporations Act

Mr Warburton, as a Director, is a related party of the Company within the meaning specified under section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under section 208 of the Corporations Act to permit the issue of the Option on the terms set out in Resolution 5 to Mr Warburton as a related party of the Company.

Section 219 of the Corporations Act requires the following information be provided to the Shareholders in relation to Resolution 5 for approval to be granted for the purposes of section 208 of the Corporations Act:

Related parties to whom the proposed resolution would permit financial benefits

Mr Neil Warburton or his nominee.

 Nature of financial benefits

If Resolution 5 is passed, Mr Warburton or his nominee will receive the following Options:

	Tranche 1 Options	Tranche 2 Options

Number of Options	772,722	772,722
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

Full terms and conditions of the above Options are set out in Annexures A and B of this Explanatory Statement.

 Directors’ recommendation or reasons for declining to make a recommendation

Messrs Wolley, Rowe and Zhou (who do not have any interest in Resolution 5) recommend that Shareholders approve the grant of Options under Resolution 5 to Mr Warburton (or his nominee) as they consider the grant of Options is:

to incentivise Mr Warburton for the reasons and factors set out above;
a fair and reasonable alternative to additional cash payment of Directors’
fees;
in consideration and recognition of the services provided or to be
provided by Mr Warburton to the Company and the number of Options proposed to be issued is fair and reasonable and reflective of the contribution he has or will make to the Company; and
necessary to reflect remuneration benefits to non-executive Directors by
companies operating in the Company’s industry.

Mr Warburton declines to make a recommendation to Shareholders in respect of Resolution 5 as he has a material personal interest in the outcome of Resolution 5.

Directors’ interests in outcome of resolution

Other than Mr Warburton (who has a material personal interest in the outcome of Resolution 5), the remaining Directors, Messrs Wolley, Rowe and Zhou, have no interest in the outcome of Resolution 5.

 Current Capital Structure

At the date of this Explanatory Statement, the Company currently has on issue:

79,060,026 Shares;
1,718,433 unlisted Options, exercisable at 20 cents each on or before 12 September 2013;
27,728,125 unlisted Options, exercisable at 20 cents each on or before 30 June 2014.
909,110 unlisted Options, exercisable at 25 cents each on or before 31 July 2014; and
909,110 unlisted Options, exercisable at 35 cents each on or before 31 July 2016.
Current Remuneration and Relevant Interest

Details of Mr Warburton’s remuneration for both the current financial year and the year ending 30 June 2011, as well as his current interests (both direct and indirect) in the Company are outlined below:

Current Financial Year	Year Ended 30 June 20111
$11,000	$70,000

(1) Mr Warburton was appointed as a Director on 5 May 2006.

Shares (RMX)	Listed Options	Unlisted Options
6,665,625	Nil	4,697,875

 Dilution

If all of the Options granted to Mr Warburton (or his nominees) under Resolution 5 are exercised, the effect would be to dilute the shareholding of existing Shareholders by approximately 1.95% based on the number of Shares on issue as at the date of the Notice, assuming no other existing Options are exercised.

 Exercise

 Trading History

 Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in granting the Options.

 Accounting

The Company’s adoption of Australian equivalents to International Financial Reporting Standards for reporting periods means that, under AASB2 Share-based Payment, equity-based compensation (such as the Options under Resolution 5) will be recognised as an expense in respect of the services received.

 Value of the Options

The Options under Resolution 5 are not to be quoted on the ASX and as such have no actual market value. At the date of this Explanatory Statement, the latest ASX price of the Shares to which the Options may be converted was 18 cents. The Options are capable of being converted to Shares by payment of 25 cents for Tranche 1 Options and 35 cents for Tranche 2 Options. The Options may acquire future value dependent upon the extent, if any, by which the Shares exceed $25 and 35 cents respectively during the term of the Options.

The Company’s share price was 18 cents. This is based on the Company’s closing share price on 3 October 2011, being the last trading day prior to the date of the independent valuation;
The exercise price for the Options is 25 cents for Tranche 1, and 35 cents for Tranche 2;
Options in Tranche 1 and Tranche 2 will be issued at the Company’s shareholder meeting on 22 November 2011;
The maximum life of the Options is 2.69 years for Tranche 1, and
4.70 years for Tranche 2;
Annualised volatility level is 85%. As Red Mountain Mining only has a limited trading history on ASX, volatility was calculated based on the share price of seven comparable companies using Hoadley’s volatility calculator for 3 and 5 year periods;
The risk free rate of interest is based on the Australian Government 3-year bond rate of 3.68% for Tranche 1 Options, and the Australian Government 5-year bond rate of 3.83% for Tranche 2 Options as at 4 October 2011;
A dividend yield of 0%; and
Options in Tranche 1 and Tranche 2 will eventually vest to the option holder.

Accordingly, the total values of the Options to be issue to Mr Warburton are as follows:

Tranche 1 Options	Tranche 2 Options	Total
$	$	$
$64,140 (8.3 cents each)	$76,504 (9.9cents each)	$140,644

The Options will need to be formally revalued for IFRS purposes following approval by shareholders and the values noted above may alter.

 Other relevant information

(b) Listing Rule 10.11

Listing Rule 10.11 provides that a company must not issue equity securities to a “related party” without the approval of holders of ordinary securities, or to a person whose relationship with the company or a related party of the company is, in ASX’s opinion, such that approval should be obtained. Further, Listing Rule 7.2 (Exception 14) states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

As a Director, Mr Warburton (or his nominee) is a related party of the Company within the definition specified in Listing Rule 19.12. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of 1,545,444 Options to Mr Warburton (or his nominee) as a related party of the Company on the terms set out in Resolution 5 and in this Explanatory Statement (including Annexures A and B).

The issue of the Options under Resolution 5 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those Options (once issued) will be excluded from the calculations under Listing Rule 7.1.

Listing Rule 10.13 requires that the following information be provided to the Shareholders in relation to obtaining approval of Resolution 5 as an exception to Listing Rule 10.11:

 The name of the allottee of the securities

Mr Neil Warburton or his nominee.

 The maximum number of securities to be allotted and issued

Class of Option	Tranche 1 Options	Tranche 2 Options
Number of Options	772,722	772,722

 The date of allotment and issue of the securities

 The relationship that requires Shareholder approval

Mr Warburton is a Director of the Company and is accordingly a related party.

 The issue price of the securities

The issue price of the Options is nil.



The terms of the securities

The key terms of the Options to be issued under Resolution 5 are set out in the following table, and are set out in full in Annexures A and B to the Explanatory Statement.

Class of Option	Tranche 1 Options	Tranche 2 Options
Expiry Date	31 July 2014	31 July 2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Shares issued on the exercise of these Options are ordinary fully paid shares which rank equally with existing Shares on issue.

 The intended use of the funds

No funds will be raised from the issue of the Options under Resolution 5. The funds raised on exercise of these Options, if exercised, will be applied to working capital requirements of the Company at that stage. However there is no guarantee that any of these Options will be exercised.

7. Resolutions 6 - Issue of Options to Mr Keith Rowe

7.1 Background

As contemplated in the Company’s prospectus dated 4 July 2011 and pursuant to ASX Listing Rule 10.11, the Company seeks Shareholder approval to issue a total of 2,318,168 Director and Management Incentive Options to executive Director, Mr Keith Rowe (or his nominees), in two tranches and on the terms and conditions set out below and in Annexures A and B (as applicable) to this Explanatory Statement.

	Tranche 1 Options	Tranche 2 Options
Number of Options	1,159,084	1,159,084
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

Options will be restricted for 24 months from the date the Company was admitted to the official list of the ASX, in accordance with Appendix 9B of the Listing Rules.

The grant of Options is designed to encourage Mr Rowe (or his nominees) to have a greater involvement in the achievement of the Company’s objectives and to provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership.

Under the Company’s current circumstances, the Directors consider that the incentives to Mr Rowe noted above, represented by the issue of these Options, are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as the payment of cash compensation.

The number of Options to be issued to Mr Rowe has been determined based on a number of factors including:

Consistency with options held by the other Directors of the Company.
Continuity of senior management. Mr Rowe has complementary skills and has acquired substantial and extensive knowledge regarding the development of the Company. The retention of Mr Rowe as a member of the current Board with the skills and knowledge possessed by him will be critical to the successful

development of the Company.

Alignment of interests. The Directors consider that it is in the interests of Shareholders to align the interests of Directors and Shareholders by encouraging Directors, subject to appropriate milestones, to have an equity holding in the Company. However, the Directors consider that similarly to other Shareholders, this interest should arise through direct investment by the Directors in the Company. In this regard, if all of the Options issued under Resolution 6 are exercised, Mr Rowe will be investing $695,450.40 into the Company.

7.2 Corporations Act

(a) Section 208 of the Corporations Act

Mr Rowe, as a Director, is a related party of the Company within the meaning specified under section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under section 208 of the Corporations Act to permit the issue of the Option on the terms set out in Resolution 6 to Mr Rowe as a related party of the Company.

Section 219 of the Corporations Act requires the following information be provided to the Shareholders in relation to Resolution 6 for approval to be granted for the purposes of section 208 of the Corporations Act:

Related parties to whom the proposed resolution would permit financial benefits

Mr Keith Rowe or his nominee.

 Nature of financial benefits

If Resolution 6 is passed, Mr Rowe or his nominee will receive the following Options:

	Tranche 1 Options	Tranche 2 Options

Number of Options	1,159,084	1,159,084
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

Full terms and conditions of the above Options are set out in Annexures A and B of this Explanatory Statement.

Directors’ recommendation or reasons for declining to make a recommendation

Messrs Wolley, Warburton and Zhou (who do not have any interest in Resolution 6) recommend that Shareholders approve the grant of Options under Resolution 6 to Mr Rowe (or his nominee) as they consider the grant of Options is:

to incentivise Mr Rowe for the reasons and factors set out above;
a fair and reasonable alternative to additional cash payment of Directors’ fees;
in consideration and recognition of the services provided or to be provided by Mr Rowe to the Company and the number of Options proposed to be issued is fair and reasonable and reflective of the contribution he has or will make to the Company; and
necessary to reflect remuneration benefits to executive Directors by companies operating in the Company’s industry.

Mr Rowe declines to make a recommendation to Shareholders in respect of Resolution 6 as he has a material personal interest in the outcome of Resolution 6.

 Directors’ interests in outcome of resolution

Other than Mr Rowe (who has a material personal interest in the outcome of Resolution 6), the remaining Directors, Messrs Wolley, Warburton and Zhou have no interest in the outcome of Resolution 6.

 Current Capital Structure

At the date of this Explanatory Statement, the Company currently has on issue:

o 79,060,026 Shares;

1,718,433 unlisted Options, exercisable at 20 cents each on or before 12 September 2013;
27,728,125 unlisted Options, exercisable at 20 cents each on or before 30 June 2014;
909,110 unlisted Options, exercisable at 25 cents each on or before 31 July 2014; and
909,110 unlisted Options, exercisable at 35 cents each on or before 31 July 2016.

 Current Remuneration and Relevant Interest

Details of Mr Rowe’s remuneration for both the current financial year, and the year ending 30 June 2011, as well as his current interests (both direct and indirect) in the Company are outlined below:

Current Financial Year	Year Ended 30 June 20111
$58,332	$112,664

(1) Mr Rowe was appointed as a Director on 5 May 2006.

Shares (RMX)	Listed Options	Unlisted Options
5,353,125	Nil	3,696,735

 Dilution

If all of the Options granted to Mr Rowe (or his nominees) under Resolution 6 are exercised, the effect would be to dilute the shareholding of existing Shareholders by approximately 2.93% based on the number of Shares on issue as at the date of the Notice, assuming no other existing Options are exercised.

 Exercise

 Trading History

 Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in granting the Options.

 Accounting

recognised as an expense in respect of the services received.

 Value of the Options

The Options under Resolution 6 are not to be quoted on the ASX and as such have no actual market value. At the date of this Explanatory Statement, the latest ASX price of the Shares to which the Options may be converted was 18 cents. The Options are capable of being converted to Shares by payment of 25 cents for Tranche 1 Options and 35 cents for Tranche 2 Options. The Options may acquire future value dependent upon the extent, if any, by which the Shares exceed 25 and 35 cents respectively during the term of the Options.

The Company’s share price was 18 cents. This is based on the Company’s closing share price on 3 October 2011, being the last trading day prior to the date of the independent valuation;
The exercise price for the Options is 25 cents for Tranche 1, and 35 cents for Tranche 2;
Options in Tranche 1 and Tranche 2 will be issued at the Company’s shareholder meeting on 22 November 2011;
The maximum life of the Options is 2.69 years for Tranche 1, and 4.70 years for Tranche 2;
Annualised volatility level is 85%. As Red Mountain Mining only has a limited trading history on ASX, volatility was calculated based on the share price of seven comparable companies using Hoadley’s volatility calculator for 3 and 5 year periods;
The risk free rate of interest is based on the Australian Government 3-year bond rate of 3.68% for Tranche 1 Options, and the Australian Government 5-year bond rate of 3.83% for Tranche 2 Options as at 4 October 2011;
A dividend yield of 0%; and
Options in Tranche 1 and Tranche 2 will eventually vest to the option holder.

Accordingly, the total values of the Options to be issue to Mr Rowe are as follows:

Tranche 1 Options	Tranche 2 Options	Total
$	$	$
$96,204 (8.3 cents each)	$114,749 (9.9cents each)	$210,953

The Options will need to be formally revalued for IFRS purposes following approval by shareholders and the values noted above may alter.

 Other relevant information

Other than as set out in this Explanatory Statement, there is no further information

which the Shareholders would reasonably require in order to decide whether or not it is in the Company’s best interests to pass Resolution 6.

(b) Listing Rule 10.11

As a Director, Mr Rowe (or his nominee) is a related party of the Company within the definition specified in Listing Rule 19.12. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of 2,318,168 Options to Mr Rowe (or his nominee) as a related party of the Company on the terms set out in Resolution 6 and in this Explanatory Statement (including Annexures A and B).

The issue of the Options under Resolution 6 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those Options (once issued) will be excluded from the calculations under Listing Rule 7.1.

Listing Rule 10.13 requires that the following information be provided to the Shareholders in relation to obtaining approval of Resolution 6 as an exception to Listing Rule 10.11:

 The name of the allottee of the securities

Mr Keith Rowe or his nominee.

 The maximum number of securities to be allotted and issued

Class of Option	Tranche 1 Options	Tranche 2 Options
Number of Options	1,159,084	1,159,084

 The date of allotment and issue of the securities

 The relationship that requires Shareholder approval

Mr Rowe is a Director of the Company and is accordingly a related party.

 The issue price of the securities

The issue price of the Options is nil.

 The terms of the securities

The key terms of the Options to be issued under Resolution 6 are set out in the following table, and are set out in full in Annexures A and B to the Explanatory Statement.

Class of Option	Tranche 1 Options	Tranche 2 Options
Expiry Date	31 July 2014	31 July 2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Shares issued on the exercise of these Options are ordinary fully paid shares which rank equally with existing Shares on issue.



The intended use of the funds

No funds will be raised from the issue of the Options under Resolution 6. The funds raised on exercise of these Options, if exercised, will be applied to working capital requirements of the Company at that stage. However there is no guarantee that any of these Options will be exercised.

8. Resolutions 7 - Issue of Options to Mr Zhou

8.1 Background

As contemplated in the Company’s prospectus dated 4 July 2011 and pursuant to ASX Listing Rule 10.11, the Company seeks Shareholder approval to issue a total of 1,159,084 Director and Management Incentive Options to non-executive Director, Mr Bo Zhou (or his nominees), in two tranches and on the terms and conditions set out below and in Annexures A and B (as applicable) to this Explanatory Statement.

	Tranche 1 Options	Tranche 2 Options
Number of Options	579,542	579,542
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Options will be restricted for 24 months from the date the Company was admitted to the official list of the ASX, in accordance with Appendix 9B of the Listing Rules.

The grant of Options is designed to encourage Mr Zhou (or his nominees) to have a greater involvement in the achievement of the Company’s objectives and to provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership.

Under the Company’s current circumstances, the Directors consider that the incentives to Mr Zhou noted above, represented by the issue of these Options, are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as the payment of cash compensation.

Mr Zhou is a non-executive Director of the Company. The Company acknowledges that the issue of Options to non-executive Directors is contrary to recommendation 8.2 of the ASX’s Corporate Governance Principles and Recommendations (2[nd] Edition). However the Directors are of the view that at this stage of the Company’s development it is far better for Directors of the Company to be compensated by way of securities in the Company, rather than by way of cash.

The number of Options to be issued to Mr Zhou has been determined based on a number of factors including:

Consistency with options held by the other Directors of the Company.
Continuity of senior management. Mr Zhou has complementary skills and has acquired substantial and extensive knowledge regarding the development of the Company. The retention of Mr Zhou as a member of the current Board with the skills and knowledge possessed by him will be critical to the successful development of the Company.
Alignment of interests. The Directors consider that it is in the interests of Shareholders to align the interests of Directors and Shareholders by encouraging Directors, subject to appropriate milestones, to have an equity holding in the Company. However, the Directors consider that similarly to other Shareholders, this interest should arise through direct investment by the Directors in the Company. In this regard, if all of the Options issued under Resolution 7 are exercised, Mr Zhou will be investing $347,725.20 into the Company.

8.2 Corporations Act

(a) Section 208 of the Corporations Act

Mr Zhou, as a Director, is a related party of the Company within the meaning specified under section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under section 208 of the Corporations Act to permit the issue of the Option on the terms set out in Resolution 7 to Mr Zhou as a related party of the Company.

Section 219 of the Corporations Act requires the following information be provided to the Shareholders in relation to Resolution 7 for approval to be granted for the purposes of section 208 of the Corporations Act:

Related parties to whom the proposed resolution would permit financial benefits

Mr Bo Zhou or his nominee.

 Nature of financial benefits

If Resolution 7 is passed, Mr Zhou or his nominee will receive the following Options:

	Tranche 1 Options	Tranche 2 Options

Number of Options	579,542	579,542
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

Full terms and conditions of the above Options are set out in Annexures A and B of this Explanatory Statement.

 Directors’ recommendation or reasons for declining to make a recommendation

Messrs Wolley, Warburton and Rowe (who do not have any interest in Resolution 7) recommend that Shareholders approve the grant of Options under Resolution 7 to Mr Zhou (or his nominee) as they consider the grant of Options is:

to incentivise Mr Zhou for the reasons and factors set out above;
a fair and reasonable alternative to additional cash payment of Directors’ fees;
in consideration and recognition of the services provided or to be provided by Mr Zhou to the Company and the number of Options proposed to be issued is fair and reasonable and reflective of the contribution he has or will make to the Company; and
necessary to reflect remuneration benefits to non-executive Directors by companies operating in the Company’s industry.

Mr Zhou declines to make a recommendation to Shareholders in respect of Resolution 7 as he has a material personal interest in the outcome of Resolution 7.

 Directors’ interests in outcome of resolution

Other than Mr Zhou (who has a material personal interest in the outcome of Resolution 7), the remaining Directors, Messrs Wolley, Warburton and Rowe have no interest in the outcome of Resolution 7.

 Current Capital Structure

At the date of this Explanatory Statement, the Company currently has on issue:

79,060,026 Shares;
1,718,433 unlisted Options, exercisable at 20 cents each on or before 12 September 2013;
27,728,125 unlisted Options, exercisable at 20 cents each on or before 30 June 2014.
909,110 unlisted Options, exercisable at 25 cents each on or before 31 July 2014; and
909,110 unlisted Options, exercisable at 35 cents each on or before 31 July 2016.

 Current Remuneration and Relevant Interest

Details of Mr Zhou’s remuneration for both the current financial year and the year ending 30 June 2011, as well as his current interests (both direct and indirect) in the Company are outlined below:

Current Financial Year	Year Ended 30 June 20111
$10,000	$40,000

(1) Mr Zhou was appointed as a Director on 5 May 2006.

Shares (RMX)	Listed Options	Unlisted Options
2,418,750	Nil	1,936,110

 Dilution

If all of the Options granted to Mr Zhou (or his nominees) under Resolution 7 are exercised, the effect would be to dilute the shareholding of existing Shareholders by approximately 1.47% based on the number of Shares on issue as at the date of the Notice, assuming no other existing Options are exercised.

 Exercise

 Trading History

 Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in granting the Options.

 Accounting

The Company’s adoption of Australian equivalents to International Financial Reporting Standards for reporting periods means that, under AASB2 Share-based Payment, equity-based compensation (such as the Options under Resolution 7) will be recognised as an expense in respect of the services received.

 Value of the Options

The Options under Resolution 7 are not to be quoted on the ASX and as such have no actual market value. At the date of this Explanatory Statement, the latest ASX price of the Shares to which the Options may be converted was 18 cents. The Options are capable of being converted to Shares by payment of 25 cents for Tranche 1 Options and 35 cents for Tranche 2 Options. The Options may acquire future value dependent upon the extent, if any, by which the Shares exceed 25 and 35 cents respectively during the term of the Options.

The Company’s share price was 18 cents. This is based on the Company’s closing share price on 3 October 2011, being the last trading day prior to the date of the independent valuation;
The exercise price for the Options is 25 cents for Tranche 1, and 35 cents for Tranche 2;
Options in Tranche 1 and Tranche 2 will be issued at the Company’s shareholder meeting on 22 November 2011;
The maximum life of the Options is 2.69 years for Tranche 1, and 4.70 years for Tranche 2;
Annualised volatility level is 85%. As Red Mountain Mining only has a limited trading history on ASX, volatility was calculated based on the share price of seven comparable companies using Hoadley’s volatility calculator for 3 and 5 year periods;
The risk free rate of interest is based on the Australian Government 3-year bond rate of 3.68% for Tranche 1 Options, and the Australian Government 5-year bond rate of 3.83% for Tranche 2 Options as at 4 October 2011;
A dividend yield of 0%; and
Options in Tranche 1 and Tranche 2 will eventually vest to the option holder.

Accordingly, the total values of the Options to be issue to Mr Zhou are as follows:

Tranche 1 Options	Tranche 2 Options	Total
$	$	$
$48,102 (8.3 cents each)	$57,375 (9.9cents each)	$105,477

The Options will need to be formally revalued for IFRS purposes following approval by shareholders and the values noted above may alter.

 Other relevant information

(b) Listing Rule 10.11

As a Director, Mr Zhou (or his nominee) is a related party of the Company within the definition specified in Listing Rule 19.12. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of 1,159,084 Options to Mr Zhou (or his nominee) as a related party of the Company on the terms set out in Resolution 7 and in this Explanatory Statement (including Annexures A and B).

The issue of the Options under Resolution 7 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those Options (once issued) will be excluded from the calculations under Listing Rule 7.1.

Listing Rule 10.13 requires that the following information be provided to the Shareholders in relation to obtaining approval of Resolution 7 as an exception to Listing Rule 10.11:

 The name of the allottee of the securities

Mr Bo Zhou or his nominee.

 The maximum number of securities to be allotted and issued

Class of Option	Tranche 1 Options	Tranche 2 Options
Number of Options	579,542	579,542

 The date of allotment and issue of the securities

 The relationship that requires Shareholder approval

Mr Zhou is a Director of the Company and is accordingly a related party.

 The issue price of the securities

The issue price of the Options is nil.

 The terms of the securities

The key terms of the Options to be issued under Resolution 7 are set out in the following table, and are set out in full in Annexures A and B to the Explanatory Statement.

Class of Option	Tranche 1 Options	Tranche 2 Options
Expiry Date	31 July 2014	31 July 2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Shares issued on the exercise of these Options are ordinary fully paid shares which rank equally with existing Shares on issue.



The intended use of the funds

No funds will be raised from the issue of the Options under Resolution 7. The funds raised on exercise of these Options, if exercised, will be applied to

working capital requirements of the Company at that stage. However there is no guarantee that any of these Options will be exercised.

9. Resolutions 8 - Issue of Options to Mr Des Kelly

9.1 Background

As contemplated in the Company’s prospectus dated 4 July 2011 and pursuant to ASX Listing Rule 7.1, the Company seeks Shareholder approval to issue a total of 1,159,084 Director and Management Options to former Company Secretary, Mr Des Kelly (or his nominees), in two tranches and on the terms and conditions set out below and in Annexures A and B (as applicable) to this Explanatory Statement.

	Tranche 1 Options	Tranche 2 Options
Number of Options	579,542	579,542
Expiry Date	31July2014	31July2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Options will be restricted for 24 months from the date the Company was admitted to the official list of the ASX, in accordance with Appendix 9B of the Listing Rules.

Mr Kelly is the former Company Secretary of the Company. The grant of Options to Mr Kelly was contemplated in the Company’s prospectus dated 4 July 2011.

Listing Rule 7.1

Listing Rule 7.1 provides, subject to certain exceptions, that shareholder approval is required for any issue of securities by a listed company where the securities proposed to be issued represent more than 15% of the Company’s securities then on issue. Shareholder approval is sought pursuant to Resolution 8 in order for the Company to maintain its rights to issue further securities within the 15% limit contained in Listing Rule 7.1 during the next 12 months.

For the purpose of ASX Listing Rule 7.3, the following information is provided:

 The name of the allottee of the securities

Mr Des Kelly or his nominee.

The maximum number of securities to be allotted and issued

Class of Option	Tranche 1 Options	Tranche 2 Options
Number of Options	579,542	579,542

 The date of allotment and issue of the securities

The Options will be issued as soon as possible after the Meeting and in any event, no later than 3 months after the Meeting (or such later date to the extent permitted by any ASX waiver of the Listing Rules).



The issue price of the securities

The issue price of the Options is nil.



The terms of the securities

The key terms of the Options to be issued under Resolution 8 are set out in the following table, and are set out in full in Annexures A and B to the Explanatory Statement.

Class of Option	Tranche 1 Options	Tranche 2 Options
Expiry Date	31 July 2014	31 July 2016
Exercise Price	25 cents	35 cents
Vesting Criteria	The Options will vest on date of issue.	The Options will vest on date of issue.

The Shares issued on the exercise of these Options are ordinary fully paid shares which rank equally with existing Shares on issue.



The intended use of the funds

No funds will be raised from the issue of the Options under Resolution 8. The funds raised on exercise of these Options, if exercised, will be applied to working capital requirements of the Company at that stage. However there is no guarantee that any of these Options will be exercised.

GLOSSARY

The following terms have the following meanings in this Explanatory Statement:

" Annual General Meeting " or " Meeting " means the annual general meeting the subject of the Notice.

" ASX " means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

" Board " means the board of Directors of the Company.

" Company " means Red Mountain Mining ABN 40 119 658 106.

" Constitution " means the constitution of the Company.

" Corporations Act " means the Corporations Act 2001 (Cth).

" Director " means a Director of the Company.

“ Explanatory Statement ” means this explanatory statement accompanying the Notice.

" Listing Rules " means the Listing Rules of the ASX.

" Notice " means the notice of annual general meeting accompanying this Explanatory Statement.

" Option " means an option to subscribe for a Share.

" Resolution " means a resolution proposed pursuant to the Notice.

" Share " means a fully paid ordinary share in the capital of the Company.

" Shareholder " means the holder of a Share.

“ Tranche 1 Options ” means Options issued on the terms specified in Annexure A to this Notice.

“ Tranche 2 Options ” means Options issued on the terms specified in Annexure B to this Notice.

" WST " means western standard time in Australia.

ANNEXURE A

TERMS AND CONDITIONS OF TRANCHE 1 OPTIONS TO BE ISSUED UNDER RESOLUTIONS 4, 5, 6, 7 AND 8

The terms and conditions of the Option to be issued to Directors are as follows:

(a) each Option entitles the holder to subscribe for one fully paid ordinary share, ranking equally with existing issued fully paid ordinary shares, in the capital of the Company;
(b) 25 cents per Share is payable on exercise of Option;
(c) options will expire on 31 July 2014 (“Date of Expiry”);
(d) the Options will vest on date of issue (“Vesting Date”);
(e) the Options are exercisable by notice in writing to the Company accompanied by payment of the exercise price on or prior to the Date of Expiry;
(f) exercise of the Options is effected by completing the notice of exercise of Options and forwarding it to the Company with the requisite application monies;
(g) the Options are transferrable subject to any ASX escrow restrictions;
(h) the Company will apply for quotation of the shares pursuant to the exercise of Options within 10 days of their exercise (if the shares are listed on an official exchange);
(i) there is no right to change the exercise price of the Options nor the number of underlying Shares over which the Options can be exercised, if the Company completes a bonus or entitlement issue;
(j) there are no participation rights or entitlements inherent in the Options and their holders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Options. The Company, however, will ensure that the Option holder will be notified of the proposed issue after the issue is announced. This will give the Option holder the opportunity to exercise the options prior to the date of determining entitlements to participate in any such issue;
(k) in the event of any reconstruction of the issued capital of the Company, the number of Options or the exercise price of the Options or both shall be reconstructed in a manner which complies with the Listing Rules in force at that time and in all other respects the terms for the exercise of the Options shall remain unchanged.

ANNEXURE B

TERMS AND CONDITIONS OF TRANCHE 2 OPTIONS TO BE ISSUED UNDER RESOLUTIONS 4, 5, 6, 7 AND 8

The terms and conditions of the Option to be issued to Directors are as follows:

(a) each Option entitles the holder to subscribe for one fully paid ordinary share, ranking equally with existing issued fully paid ordinary shares, in the capital of the Company;
(b) 35 cents per Share is payable on exercise of Option;
(c) options will expire on 31 July 2016 (“Date of Expiry”);
(d) the Options will vest on date of issue (“Vesting Date”);
(e) the Options are exercisable by notice in writing to the Company accompanied by payment of the exercise price on or prior to the Date of Expiry;
(f) exercise of the Options is effected by completing the notice of exercise of Options and forwarding it to the Company with the requisite application monies;
(g) the Options are transferrable subject to any ASX escrow restrictions;
(h) the Company will apply for quotation of the shares pursuant to the exercise of Options within 10 days of their exercise (if the shares are listed on an official exchange);
(i) there is no right to change the exercise price of the Options nor the number of underlying Shares over which the Options can be exercised, if the Company completes a bonus or entitlement issue;
(j) there are no participation rights or entitlements inherent in the Options and their holders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Options. The Company, however, will ensure that the Option holder will be notified of the proposed issue after the issue is announced. This will give the Option holder the opportunity to exercise the options prior to the date of determining entitlements to participate in any such issue;
(k) in the event of any reconstruction of the issued capital of the Company, the number of Options or the exercise price of the Options or both shall be reconstructed in a manner which complies with the Listing Rules in force at that time and in all other respects the terms for the exercise of the Options shall remain unchanged.

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Lodge your vote:



By Mail:

Red Mountain Mining Limited Unit 2, 2 Richardson Street West Perth, Western Australia, 6005

Alternatively you can fax your form to (within Australia) (08) 9322 1474 (outside Australia) +61 8 9322 1474

For Intermediary Online subscribers only (custodians) www.intermediaryonline.com

For all enquiries call:

(within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000

Proxy Form

 For your vote to be effective it must be received by 12.00 noon (WST) Sunday 20 November 2011

How to Vote on Items of Business

All your securities will be voted in accordance with your directions.

Appointment of Proxy

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote as they choose. If you mark more than one box on an item your vote will be invalid on that item.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf.

A proxy need not be a securityholder of the Company.

Signing Instructions

Individual: Where the holding is in one name, the securityholder must sign.

Joint Holding: Where the holding is in more than one name, all of the securityholders should sign.

Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held. Delete titles as applicable.

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.investorcentre.com under the information tab, "Downloadable Forms".

Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form.

 Turn over to complete the form



View the Annual Report:

View your securityholder information, 24 hours a day, 7 days a week:

www.investorcentre.com

www.redmm.com.au

Your secure access information is:

Click on Investor Centre

 PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.

916CR_0_Sample_Proxy/000001/000001/i

Proxy Form

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I9999999999
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Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’ X ’) should advise your broker of any changes.

I 9999999999

I ND

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Please mark

to indicate your directions

Appoint a Proxy to Vote on Your Behalf

XX

I/We being a member/s of Red Mountain Mining Limited hereby appoint

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the Chairman OR of the Meeting

 PLEASE NOTE: Leave this box blank if you have selected the Chairman of the Meeting. Do not insert your own name(s).

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General Meeting of Red Mountain Mining to be held at Chartered Secretaries Australia Ltd, Ground Floor, 8 Victoria Avenue, Perth, Western Australia on Tuesday, 22 November 2011 at 12.00 noon (WST) and at any adjournment of that meeting. The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business other than in respect of Item 1 , where the company has determined that the Chairman is unable to do so. If the Chairman of the Meeting is your proxy (or becomes your proxy by default), you authorise the Chairman to exercise your proxy on Items 4 - 8 even though the items are connected directly or indirectly with the remuneration of a member of key management personnel. For Item 4, this authority is also subject to you marking the box in the section below.

Important for Item 4: If the Chairman of the Meeting is your proxy and you have not directed the Chairman how to vote on Item 4 below, please mark the box in this section. If you do not mark this box and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on Item 4 and your votes will not be counted in computing the required majority if a poll is called on this item . The Chairman of the Meeting intends to vote undirected proxies in favour of Item 4 of business.

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I/We acknowledge that the Chairman of the Meeting may exercise my proxy even if the Chairman has an interest in the outcome of this item and that votes cast by the Chairman, other than as proxy holder, would be disregarded because of that interest.

 Items of Business

PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

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ORDINARY BUSINESS

Item	1	Non Binding Resolution to adopt Remuneration Report
Item	2	Election of Director - Mr Michael Wolley
Item	3	Re-election of Mr Neil Warburton as a Director
Item	4	Issue of Options to Director - Mr Michael Wolley
Item	5	Issue of Options to Director - Mr Neil Warburton
Item	6	Issue of Options to Director - Mr Keith Rowe
Item	7	Issue of Options to Director - Mr Bo Zhou
Item	8	Issue of Options - Mr Des Kelly

The Chairman of the Meeting intends to vote all available proxies in favour of each item of business.

SIGN Signature of Securityholder(s) This section must be completed.

Individual or Securityholder 1 Securityholder 2 Securityholder 3 Sole Director and Sole Company Secretary Director Director/Company Secretary Contact Contact Daytime Name Telephone Date

/ /

9 9 9 9 9 9 A

R M X

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A N N U A L R E P O R T 2 0 1 1

redmountain mining

C O R P O R A T E D I R E C T O R Y

DIRECTORS

Mr Michael Wolley (Non-Executive Chairman)

Mr Keith Rowe (Executive Director)

Mr Neil Warburton (Non-Executive Director)

Mr Bo Zhou (Non-Executive Director)

COMPANY SECRETARY

Ms Shannon Coates

WEBSITE

www.redmm.com.au

AUDITOR

Butler Settineri (Audit) Pty Ltd Unit 16, First Floor Spectrum Offices 100 Railway Road Subiaco, Western Australia, 6008

BANKERS National Australia Bank 1232 Hay St West Perth, Western Australia, 6005

CEO

Mr Andrew Richards

REGISTERED AND BUSINESS OFFICE

Unit 2, 2 Richardson St West Perth, Western Australia, 6005 Tel: +61 8 9226 5668 Fax: +61 8 9322 1474

C O N T E N T S

Chairmans’ Letter	1
Review of Operations	2
Directors’ Report	8
Auditors’ Independence Declaration	16
Corporate Governance Statement	17
Financial Report	24
Directors’ Declaration	49
Independent Audit Report to the Members	50
Additional Information	52

Front cover photos (from left): Red Mountain Mining Controlled Drilling Zhongqu Level 6 Zhongqu Gold Processing Plant Diebu project showing Qiatou-Shari exploration lease

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C H A I R M A N ’ S L E T T E R
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Dear Shareholder,

On behalf of the Directors of Red Mountain Mining Ltd (the “Company”), I am delighted to report on a successful year for the business. The Company’s focus of establishing itself as an operating gold producer in China has been advanced, and our strategy of acquiring advanced gold projects and underperforming mining operations in China which can be upgraded through the introduction of modern Australian mining methods is now underway.

On 30 August 2011, the Company was admitted to the Official List of the ASX having completed an oversubscribed share offer with strong institutional and retail support from within Australia and regionally. With funding now established, the business has progressed its stated objectives.

Our relationships and agreements with our Chinese partner, Lingbao Xuanrui Mineral Resources Company Limited (“Xuanrui”), have developed consistent with our binding Framework Agreements. The agreements with Xuanrui are all in good standing and the payments due to Xuanrui have been contractually met, including the planned deposit payment for the Diebu project of US$2 million.

In addition, we have advanced our exploration objectives. A 2,352 metre underground diamond core drill campaign was completed at Zhongqu and a second drill campaign has been mobilised and will commence shortly. These campaigns are aimed at expanding the known gold mineralisation and are seeking to define a JORC compliant resource. While this work is still being conducted, the results of the first drill programme are positive and have been announced; and confirm high grade mineralisation at depth and down-strike from the current mining areas.

The Company’s Executive has been expanded to support our execution plans, and the appointment of Andrew Richards at Chief Executive Officer is a highlight for the year. Andrew brings a wealth of exploration, geological and mining experience in an international context and with a specific background in China. Further depth of China experience is reflected in the appointment of Shannon Coates as Company Secretary, who also brings significant public company and resources background. I would like to acknowledge the contribution of Des Kelly, who retired as Company Secretary on October 3 this year.

The Board looks forward to continuing our exploration plans during the coming year so as to be in a position to define a JORC compliant resource estimate and assess the exercising of its options to take a controlling interest in the Zhongqu and Diebu projects. The Directors believe that the Company is positioned well in terms of prospectivity, internal executive capacity and relationships with the Chinese partner to execute these objectives. On behalf of the Directors, I would like to thank shareholders for their support for Red Mountain Mining Ltd.

Yours faithfully

Michael Wolley Non-Executive Chairman

R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1 1

R E V I E W O F O P E R AT I O N S

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Sealed road into Zhongqu Project showing power lines and topography
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Background

In November 2009, Red Mountain Mining Ltd began negotiations with its Chinese partners, Lingbao Xuanrui Mineral Resources Company Limited (“Xuanrui”) to acquire a controlling interest in the Zhongqu gold project.

Geological Solutions Asia, the Company‘s independent geologist, completed an initial due diligence on the Zhongqu project in December 2009 and concluded that the mineralisation style has the potential to produce significant gold deposits.

On 1 May 2010, the Company‘s wholly owned subsidiary Red Mountain Mining (Hong Kong) Holdings Limited (“RMMHK”) secured an option (“Zhongqu Framework Agreement”) to acquire a 51% controlling interest of the Zhongqu gold project, located in the Gansu Province,

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Diebu Gold Project
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R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

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R E V I E W O F O P E R AT I O N S

China, from Xuanrui. Further due diligence conducted by Geological Solutions Asia during May 2010 confirmed high probability of depth extensions to the existing high grade underground gold resource and possible along strike extensions. An initial underground diamond drilling programme commenced in May 2011 with very encouraging results.

The Zhongqu Framework Agreement gives the Company two years to elect to acquire 51% of an operating underground gold mine, 400,000 tonnes per annum treatment facility and infrastructure in the Qinling Mountain Belt of the Gansu Province in western China. The Zhongqu gold project has been operating profitably since 2005 at a production rate of approximately 30,000 oz of gold per annum. The Company is confident about the project’s potential and gold endowment.

Also on 1 May 2010, RMMHK signed a revised version of the option agreement for the purchase of a 90% interest in the Diebu gold tenements (3 granted Exploration Licences). No exploration activities were carried out during the reporting period.

Zhongqu Project Exploration

The Company commenced a Stage I underground drilling programme at the Zhongqu project from the lowest point of the Xinqu mine (the 6 Level) in May 2011. In order to commence that programme site facilities were established including a four room office block and the Chinese based driller Ausino was mobilized to site.

By September 2011 the Company had completed 17 holes for a total of 2,352 metres. The results were very encouraging, with previously unrecognised gold mineralisation being encountered in the limestone above the main mineralised zone. While drilling did not define extensive mineralisation immediately at or below the 6 Level, other than 7m at 5.70 g/t Au (XQ6L 005), numerous intercepts returned the width and tenor of grade that showed the potential of the mine to host mineralisation amenable to modern mechanised mining methods currently widely used in Australian underground operations.

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Zhongqu Gold Processing Plant
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Zhongqu Mine - Underground ore extraction
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Zhongqu Mine -
Zhongqu Plant Substation
Hand bogging broken ore from
underground stopes
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R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1 3

R E V I E W O F O P E R AT I O N S

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Table 1 summarises the drill intersections highlights of the Company‘s first drilling programme at Zhongqu, while Table 2 demonstrates the significant mineralisation encountered in both the main granodiorite-shear contact related style of mineralisation as well as the newly encountered mineralised structures hosted by the overlying limestone units.

Drilling commenced from the deepest working 6 Level of the Xinqu mine (Figure 3) which has been mining hematitic brecciated ore at or near a granodiorite - limestone sheared contact. Red Mountain‘s drilling encountered mineralisation in 11 of 17 drillholes, with intercepts encountering the same style of mineralisation as seen in the Xinqu mine as well as another style of gold mineralisation located in hematitic, often brecciated and carbonated, structures within the limestone unit. The spatial orientation of the limestone hosted structures has yet to be fully understood but they have returned significant gold intersections.

The deepest intersection was approximately 200 metres vertically below the 6 Level and only 400 metres below surface. This is considered shallow by Australian standards and easily accessed by a decline.

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Table 1. Highlights of RMX drilling at Xinqu mine, Zhongqu project
Hole No. From To Intersection
XQ6L 002 22m 26m 4m at 5.71 g/t Au
XQ6L 005 40m 47m 7m at 5.70 g/t Au
XQ6L 009 37m 43m 6m at 4.21 g/t Au
XQ6L 010 48m 56m 8m at 7.65 g/t Au
75m 77m 2m at 5.07 g/t Au
79m 84m 5m at 5.31 g/t Au
XQ6L 013 183.5m 192.5m 9m at 5.59 g/t Au
XQ6L 014 95m 126m 31m at 4.61 g/t Au
Including :
95m 99m 4m at 9.51 g/t Au, and
118m 126m 8m at 10.07 g/t Au
134m 135m 1m at 4.62 g/t Au
XQ6L 015 107.5m 121.8m 14.3 m at 4.50 g/ Au
Including:
107.5m 113.5m 6m at 7.14 g/t Au, and
116m 119m 3m at 6.27 g/t Au
XQ6L 017 120m 124.5m 4.5m at 6.33 g/t Au
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Samples bagged and labelled at Diebu

Red Mountain Mining controlled drilling Zhongqu Level 6

R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

R E V I E W O F O P E R AT I O N S

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Mineralised target
zone as defined by
Chinese partners
Figure 3. Plan of Xinqu mine 6 Level showing trace of underground drilling and intercepts of gold mineralisation obtained below the 6 level. The
outlined ‘zone of mineralisation’ is as proposed by Chinese partners following geochemical studies and expected to dip or plunge to the SSW - SSE.
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R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

R E V I E W O F O P E R AT I O N S

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Table 2. Xinqu underground drilling – Significant gold intercepts
Hole No. From To Intersection Style of mineralisation
XQ6L 001 14m 16m 2m at 3.92 Granodiorite contact
XQ6L 002 22m 26m 4m at 5.71 g/t Au Granodiorite contact
XQ6L 003 12.1m 15m 2.9m at 2.86 Limestone hosted
XQ6L 004 15m 15m 1m at 1.94 g/t Au Granodiorite contact
18m 19m 1m at 13.5 g/t Au Granodiorite contact
22m 23m 1m at 0.92 g/t Au Limestone hosted
XQ6L 005 23m 24m 1m at 1.64 g/t Au Limestone hosted
40m 47m 7m at 5.70 g/t Au Granodiorite contact
XQ6L 006 NSI
XQ6L 007 NSI
XQ6L 008 NSI
XQ6L 009 26m 27m 1m at 3.69 g/t Au Limestone hosted
37m 43m 6m at 4.21 g/t Au Limestone hosted
Including:
37m 40m 3m at 4.54 g/t Au Limestone hosted
41m 42m 2m at 5.82 g/t Au Limestone hosted
XQ6L 010 48m 56m 8m at 7.65 g/t Au Granodiorite contact
75m 77m 2m at 5.07 g/t Au Limestone hosted
79m 84m 5m at 5.31 g/t Au Limestone hosted
XQ6L 011 NSI
XQ6L 012 NSI
XQ6L 013 173.7m 174.7m 1m at 4.36 g/t Au Limestone hosted
183.5m 192.5m 9m at 5.59 g/t Au Limestone hosted
XQ6L 014 95m 126m 31m at 4.61 g/t Au Granodiorite contact
Including:
95m 99m 4m at 9.51 g/t Au Granodiorite contact
108m 116m 8m at 1.51 g/t Au Granodiorite (internal)
118m 126m 8m at 10.07 g/t Au Granodiorite contact
130m 132m 2m at 1.74 g/t Au Limestone hosted
134m 135m 1m at 4.62 g/t Au Limestone hosted
XQ6L 015 107.5m 121.8m 14.3m at 4.50 g/ Au Limestone hosted
Including:
107.5m 113.5m 6m at 7.14 g/t Au, and Limestone hosted
116m 119m 3m at 6.27 g/t Au Limestone hosted
148m 149.9m 1.9m at 6.74 g/t Au Limestone hosted
XQ6L 016 NSI
XQ6L 017 120m 124.5m 4.5m at 6.33 g/t Au Limestone hosted
128m 129m 1m at 0.92 g/t Au Limestone hosted
144m 145.5m 1.5m at 3.63 g/t Au Limestone hosted
146m 147m 1m at 1.9 g/t Au Limestone hosted
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NSI: No Significant Intersecton

R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

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R E V I E W O F O P E R AT I O N S

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On the basis of these results the Company approved commencement of a Stage II drilling programme which will target both styles of gold mineralisation, with up to 15 drill holes planned, totalling approximately 2,430 metres. Provision has been made to follow up encouraging drill intercepts during the programme with additional holes.

The drilling aims to establish the down dip extension of the main granodiorite-contact shear zone and provide the Company with a better understanding of the orientation and tonnage potential of the high-grade gold hematitic limestone structures.

Site preparation has commenced with drill cuddy preparation on the 6 Level. The Company already has one rig on site and is investigating the possibility of obtaining a second rig to fast track the programme. Drill crews are expected to mobilise in late October to November 2011.

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Diebu Heba lower 3km lower adit, collapsed at portal Red Mountain Mining drill contractors at Zhongqu site, May 2011
Red Mountain Mining contolled exploration activities - Zhongqu Level 6 Diebu Qiaotou Adit, open for 265m
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R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

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D I R E C TO R S ‘ R E P O R T

The Directors present their report on the Consolidated Entity (“Group”) consisting of Red Mountain Mining Ltd (“Red Mountain” or “the Company”) and the entities it controlled at the end of, or during the financial year ended 30 June 2011.

DIRECTORS

The following persons were directors of Red Mountain Mining Ltd for the full financial year and up to the date of this report, unless otherwise stated:

M B Wolley Non-Executive Chairman (appointed 4 April 2011)

N F Warburton Non-Executive Director

B Zhou Non-Executive Director

K B Rowe Executive Director

PRINCIPAL ACTIVITIES

During the financial year the principal continuing activities of the consolidated entity consisted of sourcing and evaluating suitable properties for prospective purchase in China and establishing an experienced exploration management team.

REVIEW OF OPERATIONS

A summary of consolidated revenues and results is set out below:

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2011 2010
$ $
Revenue 9,722 196
Loss before income tax expense (1,617,692) (628,165)
- -
Income tax expense
Loss attributable to members of Red Mountain Mining Ltd (1,617,692) (628,165)
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Financial Position

During the financial year the Group had a net increase in contributed equity of $2,165,183 net of share issue costs (from $1,974,665 to $4,139,848) as a result of a placement of 6,000,000 ordinary shares to sophisticated investors at 10 cents, a placement of 9,375,000 ordinary shares to sophisticated investors at 16 cents and 138,151 shares at 20 cents were issued to capital raising consultant on cancellation of previously issued options.

At the end of the financial year the Company had net cash balances of $446,894 (2010: $145,561) and net assets of $48,010 (2010 net liabilities: $338,652).

Total liabilities (being trade and other creditors) amounted to $529,380 (2010: $496,008).

Commentary

The Company is seeking to establish itself as an operating gold producer in China through strategic joint ventures. The Company is focused on acquiring advanced gold projects and underperforming mining operations in China which can be upgraded using modern Australian mining methods or converted into producing assets through advanced exploration techniques and modern mine designs.

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Consistent with the Company’s focus it has two binding Framework Agreements in place with Lingbao Xuanrui Mineral Resources Company Limited (“Xuanrui“). The first agreement is to acquire 51% of the operating gold mine and infrastructure at Zhongqu, which is 100% owned by Xuanrui and two individuals. The infrastructure includes an operating CIL gold plant with 400,000 tonne per annum capacity. The plant is currently operating below this capacity because of suboptimal mine production. The second agreement is to acquire 90% of three granted exploration licences at Diebu, which Xuanrui has the right to acquire 100% from existing owners. Diebu is an advanced exploration project. Both projects are located in the endowed gold producing Qinling Belt in Gansu Province in western China.

Xuanrui is a private mainland Chinese company which is a contributor to the development of minerals in Gansu Province. Xuanrui have been nominated by the Bureau of Land and Resources in Diebu county in Gansu as a significant party which enables the company to preferentially acquire additional licences adjacent to its existing operations. By partnering with Xuanrui, Red Mountain Mining Ltd is positioned to expand the mining and exploration tenement licences in these areas and to deploy its objective of building a significant portfolio of gold assets.

At Zhongqu, Red Mountain has initiated a near-term strategy to undertake exploration activities to bring the current Chinese gold mineralisation estimate into JORC compliance, and to expand the existing mineralisation through underground exploration using modern Australian exploration methodologies. The potential quantity and grade of the Exploration Targets are conceptual in nature and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

The Company has completed an initial 2,352 metre underground diamond drilling programme which started on 5 May 2011 and is funded by pre-IPO monies. Results released in September 2011 from this drilling, indicate gold resources extend below the lowest level of the operating mine. Following this successful drilling programme, the Company intends to undertake a further drilling programme commencing in October. The company will also commence an initial prefeasibility study for the development and mining of the mineralisation using modern mechanised mining techniques at Zhongqu with a view to significantly increasing the mining production rates and more fully utilise the existing gold plant production capacity.

At Diebu, the Company has an Exploration Target estimate range of between 400,000 to 550,000 tonnes at 3.5 to 4.5 grams per tonne of gold. The potential quantity and grade of the Exploration Targets are conceptual in nature and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. The Company’s intention is to utilise modern Australian exploration practices to focus on determining a JORC Code Mineral Resource. Assuming a Resource determination, the Company intends to undertake additional exploration and mineralisation studies and more fully evaluate the scale of the any gold mineralisation present at Diebu and its production potential.

Red Mountain‘s strategy for long term growth includes expansion of existing gold mineralisation to JORC Resources by extensive drilling programmes within the JORC standards. The Company also intends to continue to evaluate and where possible acquire majority interests in other gold projects including operating mines located in Qinling precinct including the provinces of Shaanxi, Gansu and Sichuan.

The Company is aware of the risks inherent in operating in foreign jurisdictions and has been mindful to develop strong relationships with its Chinese partners and to maintain an experienced team of advisors to assist the Company to meet its objectives.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

During November and December 2010 the Company secured $2.1 million in seed funding in order to commence underground diamond drilling, fund the IPO process and for general working capital.

Other than those matters shown above, no significant changes in the state of affairs of the consolidated entity occurred during the financial year.

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D I R E C TO R S’ R E P O R T

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

On 4 July 2011 the Company’s prospectus was signed off by the Directors.

On 13 July 2011 the Company entered into an initial public offering which was aimed to obtain official listing on the Australian Stock Exchange by issuing 40,000,000 shares to raise a gross total of $8,000,000 in capital in order to advance the transactions with Xuanrui as described above, to further enhance the Group’s ability to raise funds in future years to advance its strategic and operational plan, and to increase the tradability of the equity instruments of the Company.

On 12 August 2011 the Group advanced USD2 million to an Hong Kong trust account to satisfy its obligation under the Diebu Framework Agreement to be held in escrow until such time as certain regulatory and other conditions has been met with Lingbao Xuanrui. The Group is working with Xuanrui to achieve these conditions.

On 30 August 2011 the Company issued 10,000,000 unlisted options to brokers as lead manager options at a price of 20 cents per option with expiry date on 30 June 2014.

On 30 August 2011 the Company issued 909,110 unlisted options to Directors at a price of 25 cents per option with expiry date on 31 July 2014.

On 30 August 2011 the Company issued 909,110 unlisted options to Directors at a price of 35 cents per option with expiry date on 31 July 2016.

On 30 August 2011 the Company was admitted to the Official List of ASX Limited.

On 1 September 2011 the Company was listed on the Australian Stock Exchange.

On 2 September 2011 the Company appointed Andrew Richards as Chief Executive Officer.

No matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect:

a. the consolidated entity’s operations in future financial years, or
b. the results of those operations in future financial years, or
c. the consolidated entity’s state of affairs in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Further information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

INFORMATION ON DIRECTORS

Michael Wolley Non-Executive Chairman, BE, MM, MAICD

Michael Wolley was appointed as Non-Executive Chairman for Red Mountain Mining Ltd in April 2011.

Michael has a depth of experience in the resources and industrial sectors in both Australia and internationally. Michael was recently Managing Director of a junior gold development business, Golden Iron Resources, and prior to that was Chief Operating Officer for Lynas Corporation, an ASX 100 company that is a vertically integrated mining and minerals business with mining and processing facilities in Western Australia and downstream processing in Malaysia. Prior to Lynas Corporation, Michael held senior executive roles with industrial and construction services businesses across Asia Pacific including the position of Managing Director Asia Pacific for a refrigeration and climate control business and as President BlueScope Steel China. Prior to joining BlueScope Steel, Michael was General Manger Operations for Dexion, a business servicing the logistics industry across Asia Pacific. He began his career with Mobil Oil Australia and over a 15 year period held senior roles in engineering, production and planning across Australia and New Zealand.

Michael holds a first class honours degree in Chemical and Materials Engineering from Auckland University and a Masters of Management from Macquarie Graduate School of Management. Michael is a Member of the Australian Institute of Company Directors.

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Keith Rowe Executive Director, B App Sci (Pt), Grad Dip (Mt), MAICD

Keith Rowe is a Consultant to mining operations in the development, delivery and management of occupational health and safety systems, and prior to accepting the Executive role at Red Mountain Mining Ltd was Senior Safety Advisor to Ausdrill Ltd. He has over 20 years experience in the mining industry and has delivered safety programmes at over 40 mine sites throughout Australia.

Keith’s involvement with China began with a university study tour in 1977. He has broad experience as a business manager in a variety of fields and in recent years he has developed business interests in China. He brings valuable experience to the Board in dealing with Chinese affairs and mining safety systems.

Keith is a founding Director of the Finding Sydney Foundation which managed the successful search for the HMAS Sydney II which was sunk off the Western Australian Coast in 1941 and located in 2008, and received the Gold Swan Award at the 2010 Western Australia Citizen of the Year Awards.

Keith qualified as a physiotherapist at Curtin University and has a B.App.Sci (PT) and Grad.Dip (Manip. Th.) and is a Member of the Australian Institute of Company Directors.

Neil Warburton Non-Executive Director, MAusIMM, FAICD

Neil Warburton is Chief Executive Officer of Barminco, Australia’s largest domestic underground mining contractor with operations in Australia and Africa. Barminco mines (under contract) over 800,000 oz of gold per annum in Australia alone. Neil has successfully guided and grown the company with annual revenues having more than doubled during his tenure. Before joining Barminco he was Managing Director of Coolgardie Gold NL.

Neil is also a Non-Executive Director of Australian Mines Limited (22 April 2003 to current), a company publicly listed on the ASX. Neil has over 30 years experience in gold and base metal mining.

Neil is a Member of the Australian Institute of Mining and Metalurgy and is a Fellow of the Australian Institute of Company Directors.

Bo Zhou Non-Executive Director, BSc, PhD, MBA, MAusIMM

Bo Zhou is currently Managing Director of Qzcorp Pty Ltd, a resource consultancy business, and is General Manager China Operations for Griffin Mining Ltd, a UK listed company with operations in China.

Over the last 16 years Bo has worked on various resource projects covering many projects in China in both senior geological and management banking roles. Bo previously worked as Managing Director of Sinovus Mining Ltd and as General Manager for Guangxi Golden Tiger Mining Joint Venture, a Sino-Australian Joint Venture gold company focused in Guangxi, China. He has also worked as Senior Geologist for Silk Road Resources and as an exploration geologist and programme manager for Turnbull and Partners (Mr Malcolm Turnbull’s mining ventures in China in the 1990s).

Bo holds a Bachelor of Science degree in geology from the Peking University and a PhD in exploration geology from the University of Sydney. He also has an MBA from the Australian Graduate School of Management. He is a member of the Australian Institute of Mining and Metallurgy.

Desmond Kelly Company Secretary, B Comm, CPA, MAICD

Desmond Kelly is a commerce graduate from the University of Western Australia and is a member of CPA Australia and the Australian Institute of Company Directors. Desmond has over 35 years experience in the mining industry and accounting profession. He has been an accountant in public practice and currently is consulting to various companies as a company secretary and management consultant. He has held the positions of Director, Managing Director and Company Secretary with a number of public listed mining and industrial companies.

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D I R E C TO R S’ R E P O R T

DIRECTORS’ INTERESTS IN SHARES AND OPTIONS

As at the date of this report the interests of the Directors in the shares and options of the Company were:

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Ordinary Shares Options over Ordinary Shares
Direct Indirect Direct Indirect
M B Wolley - - - -
N F Warburton 125,000 6,540,625 923,500 3,774,375
B Zhou 625,000 1,793,750 859,860 1,076,250
K B Rowe 312,500 5,040,625 672,360 3,024,375
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DIRECTORS’ REMUNERATION

Please refer to the Remuneration Report on page 13 to 15 for information relating to the Directors’ remuneration for the financial year.

MEETINGS OF DIRECTORS

The number of meetings of the Company’s Board of Directors and of each Board Committee held during the financial year ended 30 June 2011 and the number of meetings attended by each Director were:

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Held Attended
M B Wolley 4 4
N F Warburton 13 11
B Zhou 13 8
K B Rowe 13 13
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Held – denoted the number of meetings held during the time the director held office or was a member of the committee during the year.

INSURANCE OF OFFICERS

The Company has agreed to pay a Premium for a policy covering the Insurance of Officers.

SHARES OPTIONS

There are currently 19,446,558 unlisted options on issue with a strike price of 20 cents per share of which 17,728,125 have an expiry dates of 30 June 2014 and 1,718,433 an expiry date of 12 September 2013. In addition, there are 909,110 unlisted options exercisable at 25 cents per share with expiry date 31 July 2014 and 909,110 unlisted options exercisable at 35 cents per cent with expiry date 31 July 2016.

DIVIDENDS

No dividends were paid to members during the financial period and the Directors do not recommend the payment of a dividend.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001 .

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REMUNERATION REPORT

The Directors of Red Mountain Mining Ltd (‘the Group’) present the Remuneration Report prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001.

The remuneration report is set out under the following main headings:

a. Principles used to determine the nature and amount of remuneration
b. Details of remuneration
c. Service agreements
d. Share-based remuneration
e. Other information.

(a) Principles used to determine the nature and amount of remuneration

The principles of the Group’s executive strategy and supporting incentive programs and frameworks are:

motivating senior executives to pursue the long-term growth and success of the Company; and
demonstrating a clear relationship between senior executives’ performance and remuneration.
attracting and retaining senior executives and directors; and
not paying excessive remuneration.

Red Mountain Mining Ltd has structured a remuneration framework that is market competitive and complementary to the reward strategy of the Group.

The Company believes it is not of a size to justify having a Remuneration Committee and that it has Board processes in place which raise the issues which would otherwise be considered by a committee.

The remuneration structure that has been adopted by the Group consists of the following components:

Fixed remuneration being annual salary; and
Short term incentives, being employee share schemes and bonuses.

Executive Directors’ remuneration has been structured to reflect short and long-term performance objectives appropriate to the Company’s circumstances and goals.

Executive Directors’ and senior executives’ remuneration packages involve a balance between fixed and incentive-based pay, reflecting short and long-term performance objectives appropriate to the Company’s circumstances and goals.

Non-executive Directors’ remuneration has been formulated with regard to the following guidelines:

Non-executive Directors will be remunerated by way of fees, in the form of cash, non-cash benefits, superannuation contributions or equity, usually without participating in schemes designed for the remuneration of executives;
Non-executive Directors will not be provided with retirement benefits other than superannuation.

No director is involved in setting their own remuneration or terms and conditions and in such a case relevant Directors are required to be absent from the full Board discussion.

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D I R E C TO R S’ R E P O R T

Consequences of performance on shareholder wealth

In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years:

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2011 2010 2009 2008 2007
EPS (cents) (5.18) (1.59) (0.76) (4.32) (0.48)
- - - - -
Dividends (cents per share)
Net profit/loss ($000) (1,617,692) (628,165) (282,629) (1,537,928) (73,216)
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(b) Details of remuneration

Details of the nature and amount of each element of the remuneration of each key management personnel (‘KMP’) of Red Mountain Mining Ltd are shown in the table below:

Director and other Key Management Personnel Remuneration

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Short term employee benefits Share-based payments % of remuneration that
Name Cash salary and fees ($) Options ($) Total ($) is performance based
Executive Directors
K Rowe 95,863 40,000 135,863 -
Non-Executive Directors
N Warburton - 70,000 70,000 -
B Zhou - 40,000 40,000 -
Non-Executive Chairman
M Wolley 62,500 - 62,500 -
Other key management personnel
D Kelly 57,658 - 57,658 -
2011 Total 216,021 150,000 366,021 -
2010 Total 298,000 - 298,000 -
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Options were issued on 1 July 2011 in lieu of Director fees for the period ending 30 June 2011. All options expire on the earlier of their expiry date or termination of the individual’s employment.

(c) Service agreements

Subsequent to year end, remuneration and other terms of employment for the Executive Director and Chief Executive Officer were formalised in service agreements. The major provisions of the agreements relating to remuneration are set out below:

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Name Base salary Term of agreement Notice period
Keith Rowe $218,000/annum Full time. Remuneration to be reviewed on 30 June 6 months written notice
2012 and every 12 after.
Andrew Richards $168,000/annum 10 days service per month. The days worked to be 2 months written notice
reviewed on a quarterly basis and if average is greater
than 10 days/month during that period, then the
additional days will be paid at $1,500 per day.
Remuneration to be reviewed in 6 months time.
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(d) Share based remuneration

All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements.

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Options

Options granted over unissued shares.

Details of options over ordinary shares in the Company that were granted as remuneration to each key management personnel are set out in the following table.

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Name Number Grant date Value per Number Number Exercise First Last %
granted option vested lapsed price exercise exercise remuneration
at grant ($) date date which is
date ($) options
Keith Rowe 242,430 30/08/2011 0.075 242,430 - 0.25 30/08/2011 31/07/2014 18
Keith Rowe 242,430 30/08/2011 0.09 242,430 - 0.35 30/08/2011 31/07/2016 18
Neil Warburton 424,250 30/08/2011 0.075 424,250 - 0.25 30/08/2011 31/07/2014 100
Neil Warburton 424,250 30/08/2011 0.09 424,250 - 0.35 30/08/2011 31/07/2016 100
Bo Zhou 242,430 30/08/2011 0.075 242,430 - 0.25 30/08/2011 31/07/2014 100
Bo Zhou 242,430 30/08/2011 0.09 242,430 - 0.35 30/08/2011 31/07/2016 100
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The options were provided in lieu of Director fees for the period ending 30 June 2011. All options expire on the earlier of their expiry date or termination of the individual’s employment.

(e) Other information

Hedging of securities

In accordance with the Group’s general share trading policy and employee share plan rules, participants are prohibited from engaging in hedging arrangements over unvested securities issued pursuant to any employee or director share plan.

Environmental regulations

The operations of the Group are not subject to any particular and significant environmental regulations under a law of the commonwealth or state. There have been no known significant breaches of any other environmental requirement.

Indemnities given and insurance premiums paid to officers and auditors

During the year, Red Mountain Mining Ltd paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all Directors.

Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited under the terms of the contract.

The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnity any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor.

Non-audit services

During the financial year the Group did not procure any non-audit services from their auditors.

Auditors’ Independence Declaration

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.

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

Keith Rowe

Director

Perth, Western Australia 29 September 2011

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AU D I TO R S’ I N D E P E N D E N C E D E C L A R AT I O N

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CO R P O R AT E G O V E R N A N C E S TAT E M E N T

The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Red Mountain Mining Ltd and its controlled entities (‘the Group’) have adopted a corporate governance framework and practices to ensure they meet the interests of shareholders.

To fulfil this role the Board is responsible for the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

The responsibilities of the Board include:

Protection and enhancement of Shareholder value;
Formulation, review and approval of the objectives and strategic direction of the Company;
Approving all significant business transactions including acquisitions, divestments and capital expenditure;
Monitoring the financial performance of the Company by reviewing and approving budgets and monitoring results;
Ensuring that adequate internal control systems and procedures exist and that compliance with these systems and procedures is maintained;
The identification of significant business risks and ensuring that such risks are adequately managed;
The review and performance and remuneration of executive directors and key staff;
The establishment and maintenance of appropriate ethical standards; and
Evaluating and, where appropriate, adopting with or without modification, the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.

The Board recognises the need for the Group to operate with the highest standards of behaviour and accountability. The aim of the Corporate Government Statement is to ensure that the Group is effectively directed and managed, that risks are identified, monitored and assessed and that appropriate disclosures are made.

Subject to the exceptions outlined below the Group has adopted the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations 2nd Edition” (ASX Principles) to determine an appropriate system of control and accountability to best fit its business and operations commensurate with these guidelines. All of these practices have been put in place from April 2011 when the Company began preparation for its Listing on the Australian Securities Exchange.

Further information on the Group’s corporate governance policies and practices can be found on Red Mountain Mining Ltd’s website at http://www.redmm.com.au.

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CO R P O R AT E G O V E R N A N C E S TAT E M E N T

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ASX Corporate Governance Principle Company Comments
1 Lay solid foundations for management and oversight
1.1 Companies should establish the functions The Board has adopted a Corporate Governance Statement (set
reserved to the board and those delegated to out on the Company’s website) which discloses the specific
senior executives and disclose those functions. responsibilities of the Board and provides that the Managing
Director or Chief Executive Officer is responsible for running the
affairs of the Company under delegated authority from the Board.
1.2 Companies should disclose the process for The Chairperson and/or the Managing Director are responsible
evaluating the performance of senior executives. for reviewing the performance of each executive at least once
every calendar year with reference to the terms of their
employment contract.
1.3 Companies should provide the information The Company has not as yet had a performance evaluation for
indicated in the Guide to reporting on Principle 1. senior executives due to its start up nature.
The Corporate Governance Statement which is available on the
Company’s website discloses the specific responsibility of the
Board. The Corporate Governance Statement also specifically
outlines the role of the Company’s Chairperson and Company
Secretary as well as the Board Charter.
2 Structure the board to add value
2.1 A majority of the board should be independent The Board takes the view that Mr Warburton is not independent
directors. in terms of the ASX Corporate Governance Council’s discussion
of independent status as he is a substantial shareholder. Mr
Rowe as an executive director is not independent. Despite these
relationships, the Board believes that Mr Warburton and Mr
Rowe are able, and do make, quality and independent
judgement in the best interests of the Company on all relevant
issues before the Board.
The Board considers that the Company is not currently of a size,
nor are its affairs of such complexity to justify the expense of the
appointment of a majority of independent non executive
Directors.
Directors having a conflict of interest in relation to a particular
item of business must absent themselves from the Board
meeting before commencement of discussion on the topic.
2.2 The chair should be an independent director The current chair is Mr Wolley who is an independent director.
2.3 The roles of chair and chief executive officer The role of chief executive officer is currently being fulfilled by
should not be exercised by the same individual. Mr Richards. The current chair is Mr Wolley.
2.4 The Board should establish a nomination The Board considers that the Company is not currently of a size
committee. to justify the formation of a nomination committee.
The Board as a whole undertakes the process of reviewing the
skill base and experience of existing Directors to enable
identification or attributes required in new Directors. Where
appropriate, independent consultants will be engaged to
identify possible new candidates for the Board.
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ASX Corporate Governance Principle Company Comments
2.5 Companies should disclose the process for The Chairperson and/or the Managing Director are responsible
evaluating the performance of the board, its for reviewing the performance of each executive at least once
committees and individual directors. every calendar year with reference to the terms of their
employment contract.
2.6 Companies should provide the information A description of the skills and experience of each of the current
indicated in the Guide to reporting on Principle 2. Directors is contained in the Directors’ Report.
Based on the Company’s early stages of development and given
the current size and structure of the Board, it has not fully
complied with Principle 2 of the ASX Principles. However, it will
seek to do so as it develops and the Board grows.
To facilitate independent decision making, the Board and any
committees it convenes from time to time may seek advice from
independent experts whenever it is considered appropriate.
With the consent of the Chairperson, individual directors may
seek independent professional advice, at the expense of the
Company, on any matter connected with the discharge of their
responsibilities.
The policy for the appointment of new directors is set out on
the Corporate Governance
Statement on the Company’s website. Directors are appointed
for a term of 3 years before rotation by retirement. Directors may
seek shareholder approval for a further term.
Due to the start up nature of the Company, not all Directors are
considered Independent due to the Founding shareholdings
and consulting nature of their services provided to the
Company.
3 Promote ethical and responsible decision making
3.1 Companies should establish a code of conduct The Company has adopted a Code of Conduct which provides a
and disclose the code or a summary of the code framework for decisions and actions in relation to ethical
as to: conduct in employment.
• the practices necessary to maintain The Code of Conduct is set out in Appendix A of the Corporate
confidence in the company’s integrity; Governance Statement on the Company’s website.
• the practices necessary to take into account
their legal obligations and the reasonable
expectations of their stakeholders; and
• the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
3.2 Companies should establish a policy concerning The Board supports workplace diversity but considers that
diversity and disclose the policy or a summary of the Company is not of a size or maturity to justify a formal
that policy. diversity policy.
The policy should include requirements for the The Company has only recently been listed.
board to establish measureable objectives for
The Board’s priority has been to ensure that its members have
achieving gender diversity and for the board to
the appropriate level of experience and skills to manage the
assess annually both the objectives and progress
Company at its early stages of operation rather than focussing
in achieving them.
on gender and other diversity factors.
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CO R P O R AT E G O V E R N A N C E S TAT E M E N T

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ASX Corporate Governance Principle Company Comments
3.3 Companies should disclose in each annual report The Company has not yet set the measurable objectives
the measureable objectives for achieving gender however these will be considered by the Board during its
diversity set by the board in accordance with the current term. In addition, the Board will review progress against
diversity policy and progress towards achieving any objectives identified on an annual basis.
them.
3.4 The Board should establish a nomination Due to the Company’s size and start up nature it currently has
committee. Companies should disclose in each no women in its organizational structure and has not established
annual report the proportion of women a Nomination Committee.
employees in the whole organisation, women in
senior executive positions and women on the
board.
3.5 Companies should provide the information Due to its start up nature the Board has not yet set
indicated in the Guide to reporting on Principle 3.
• measurable objectives, or
• reported progress against those objectives.
4 Safeguard integrity in financial reporting
4.1 The board should establish an audit committee. The Board considers that the Company is not of a size, nor are its
financial affairs of such complexity to justify the formation of an
4.2 The audit committee should be structured so
audit committee.
that it:
The Board as a whole undertakes the selection and proper
• consists only of non-executive directors;
application of accounting policies, the integrity of financial
• consists of a majority of independent reporting, the identification and management of risk and review
directors; of the operation of the internal control systems.
• is chaired by an independent chair, who is
not chair of the board; and
• has at least three members.
4.3 The audit committee should have a formal
charter.
4.4 Companies should provide the information When the Company has grown to a sufficient size to warrant it,
indicated in the Guide to reporting on Principle 4. the Board will establish an audit and risk committee to assist the
Board in monitoring and reviewing any matters of significance
affecting financial reporting and compliance.
5 Make timely and balanced disclosure
5.1 Companies should establish written policies The Company has a continuous disclosure program in place
designed to ensure compliance with ASX Listing designed to ensure compliance with ASX Listing Rule
Rule disclosure requirements and to ensure continuous disclosure and to ensure accountability at a senior
accountability at a senior executive level for that executive level for compliance and factual presentation of the
compliance and disclose those policies or a Company’s financial position.
summary of those policies.
5.2 Companies should provide the information A summary of this policy is set out in the Company’s Corporate
indicated in Guide to reporting on Principle 5. Governance statement on the web site.
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ASX Corporate Governance Principle Company Comments
6 Respect the rights of shareholders
6.1 Companies should design a communications The Board is committed to open and accessible communication
policy for promoting effective communication with holders of the Company’s shares and other securities.
with shareholders and encouraging their Disclosure of information and other communication will be
participation at general meetings and disclose made as appropriate by mail or email.
their policy or a summary of that policy.
6.2 Companies should provide the information The Company’s website will also be used to provide additional
indicated in the Guide to reporting on Principle 6. relevant information to security holders.
7 Recognise and manage risk
7.1 Companies should establish policies for the The Company has adopted polices for the management of
oversight and management of material business business risks and a summary of these policies is available on the
risks and disclose a summary of those policies. Company’s website.
7.2 The board should require management to It is the responsibility of the Chief Executive Officer (or
design and implement the risk management and equivalent) to create, maintain and implement risk
internal control system to manage the management and internal control policies for the Company,
company’s material business risks and report to it subject to review by the Board.
on whether those risks are being managed
The Board will review the effectiveness of implementation of
effectively. The board should disclose that
the risk management system and internal control system at
management has reported to it as to the
least annually.
effectiveness of the company’s management of
its material business risks.
7.3 The board should disclose whether it has The Company has a continuous disclosure program in place
received assurance from the chief executive designed to ensure compliance with ASX Listing Rule
officer (or equivalent) and the chief financial continuous disclosure and to ensure accountability at a senior
officer (or equivalent) that the declaration executive level for compliance and factual presentation of the
provided in accordance with section 295A of the Company’s financial position.
Corporations Act is founded on a sound system
The Board has received assurance from the chief executive
of risk management and internal control and
officer.
that the system is operating effectively in all
material respects in relation to financial reporting
risks.
7.4 Companies should establish written policies The Chief Executive Officer (or equivalent) is required annually to
designed to ensure compliance with ASX Listing state in writing to the Board that the Company has a sound
Rule disclosure requirements and to ensure system of risk management, that internal compliance and
accountability at a senior executive level for that control systems are in place to ensure the implementation of
compliance and disclose those policies or a Board policies, and that those systems are operating efficiently
summary of those policies. and effectively in all material respects.
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CO R P O R AT E G O V E R N A N C E S TAT E M E N T

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ASX Corporate Governance Principle Company Comments
8 Remunerate fairly and responsibly
8.1 The board should establish a remuneration The Board considers that the Company is not currently of a size,
committee. nor are its affairs of such complexity to justify the formation of a
remuneration committee.
8.2 The remuneration committee should be
structured so that it: The Board as a whole is responsible for the remuneration
arrangements for Directors and executives of the Company and
• consists of a majority of independent
considers it more appropriate to set aside time at Board
directors;
meetings each year to specifically address matters that would
• is chaired by an independent director; and ordinarily fall to a remuneration committee.
• has at least three members.
8.3 Companies should clearly distinguish the The Board will distinguish the structure of non-executive
structure of non-executive directors’ director’s remuneration from that of executive directors and
remuneration from that of executive directors senior executives.
and senior executives.
The Company’s Constitution also provides that the remuneration
of non-executive Directors will not be more than the aggregate
fixed sum determined by shareholders in general meeting.
8.4 Companies should provide the information When the Company has grown to a sufficient size to warrant it,
indicated in the Guide to reporting on Principle 8. the Board will establish a remuneration committee for the
purposes of reviewing and approving the executive
remuneration policy. The remuneration committee shall
comprise at least three directors, with a majority of those
directors being independent non-executive directors. As at the
date of this statement, there are no schemes for retirement
benefits for non-executive Directors.
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In relation to the above, the Directors believe that, notwithstanding the Company’s departures from the ASX Principles 2.1, 2.4, 3.2, 3.3, 4.1, 4.2, 4.3, 8.1 and 8.2 the Board has implemented suitable practices and procedures with respect to corporate governance, considering the size of the Board and the size and maturity of the Company. The Board wishes to acknowledge that nothing has come to its attention that would lead it to conclude that its current practices and procedures are not appropriate for an organisation of the size and maturity of the Company.

APPENDIX A – CODE OF CONDUCT

Introduction

This Code of Conduct sets out the standards which the Board, management and employees of the Company are encouraged to comply with when dealing with each other, the Company’s shareholders and the broader community.

Responsibilities to shareholders

The Company aims:

2.1 to increase shareholder value within an appropriate framework which safeguards the rights and interests of shareholders; and

2.2 to comply with systems of control and accountability which the Company has in place as part of its corporate governance with openness and integrity.

Responsibilities to clients, employees, suppliers, creditors, customers and consumers

The Company will comply with all legislative and common law requirements which affect its business.

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Employment practices

The Company will employ the best available staff with skills required to carry out the role for which they are employed. The Company will ensure a safe workplace and maintain proper occupational health and safety practices.

Responsibility to the community

The Company will recognise, consider and respect environmental, native title and cultural heritage issues which arise in relation to the Company’s activities and comply with all applicable legal requirements.

Responsibility to the individual

The Company recognises and respects the rights of individuals and will comply with the applicable laws regarding privacy and confidential information.

Obligations relative to fair trading and dealing

The Company will deal with others in a way that is fair and will not engage in deceptive practices business courtesies, bribes, facilitation payments, inducements and commissions
Corrupt practices are unacceptable to the Company. It is prohibited for the Company or its directors, managers or employees to directly or indirectly offer, pay, solicit or accept bribes or any other corrupt arrangements.

Conflicts of interest

The Board, management and employees must report any situations where there is a real or apparent conflict of interest between them as individuals and the interest of the Company. Where a real or apparent conflict of interest arises, the matter must be brought to the attention of the Chairperson in the case of a Board member, the Managing Director or Chief Executive Officer (or equivalent) in the case of a member of management and a supervisor in the case of an employee, so that it may be considered and dealt with in an appropriate manner.

Compliance with the Code of Conduct

Any breach of compliance with this Code of Conduct is to be reported directly to the Chairperson.

Periodic review of Code

The Company will monitor compliance with this Code of Conduct periodically by liaising with the Board, management and staff. Suggestions for improvements or amendments to this Code of Conduct can be made at any time to the Chairperson.

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F I N A N C I A L R E P O R T

CONTENTS -------------------------------------------------------------------------------------------------------------------------------------------- PAGE

Financial report Consolidated Statement of Comprehensive Income ------------------------------------------------------------------------------------------------------------------------------------25 Consolidated Statement of Financial Position -----------------------------------------------------------------------------------------------------------------------------------------------26 Consolidated Statement of Changes in Equity -----------------------------------------------------------------------------------------------------------------------------------------------27 Consolidated Statement of Cash Flows -------------------------------------------------------------------------------------------------------------------------------------------------------------28 Notes to the Consolidated Financial Statements ------------------------------------------------------------------------------------------------------------------------------------------29 Directors’ Declaration ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------49 Independent Audit Report to the Members ----------------------------------------------------------------------------------------------------------------------------------------------------50

This financial report covers the Consolidated Entity consisting of Red Mountain Mining Ltd and its controlled entities.

This financial report is presented in Australian dollars.

Red Mountain Mining Ltd is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Red Mountain Mining Ltd Unit 2, 2 Richardson Street West Perth WA 6005

A description of the nature of the Consolidated Entity’s operations and its principal activities is included in the Directors’ Report, which is not part of this Financial Report.

The financial report was authorised for issue by the directors on 29 September 2011. The Company has the power to amend and reissue the financial report.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

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2011 2010
Notes
$ $
Revenue 5 9,722 196
Professional fees (91,392) (59,764)
Consultancy costs (710,694) (407,429)
-
Depreciation (802)
-
Employee costs (4,755)
-
Exploration consulting costs (474,352)
Legal fees (166,708) (48,657)
Travel costs (32,336) (15,161)
Interest paid (7,545) (13,151)
Net foreign exchange gains/(losses) 14,096 (68,022)
Other expenses (152,926) (16,177)
Loss before income tax (1,617,692) (628,165)
Income tax expense 6 - -
Loss for the year attributable to members of Red
Mountain Mining Ltd (1,617,692) (628,165)
Other comprehensive income:
Exchange differences on translation of foreign controlled
entities (133,199) 63,794
Total comprehensive income for the year attributable to
members of Red Mountain Mining Ltd (1,750,891) (564,371)
Cents Cents
Basic and diluted loss per share 22 (5.18) (1.59)
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The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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F I N A N C I A L R E P O R T

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

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2011 2010
Notes $ $
Current assets
Cash and cash equivalents 7 446,894 145,561
Trade and other receivables 8 126,275 11,795
Total current assets 573,169 157,356
Non-current assets
Property, plant and equipment 9 4,221 -
Total non-current assets 4,221 -
Total assets 577,390 157,356
Current liabilities
Trade and other payables 10 529,380 392,258
Borrowings 11 - 103,750
Total current liabilities 529,380 496,008
Total liabilities 529,380 496,008
Net assets / (liabilities) 48,010 (338,652)
Equity
Contributed equity 12 4,139,848 1,974,665
Reserves 13 (a) 47,792 208,621
Accumulated losses 13 (b) (4,139,630) (2,521,938)
Total equity/(deficiency) 48,010 (338,652)
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The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

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Foreign
Currency
Accumulated Translation Option
Share Capital Loss Reserve Reserve Total
$ $ $ $ $
Consolidated Group
-
Balance at 1 July 2009 1,663,635 (1,893,773) (32,007) (262,145)
Total comprehensive income for the - -
(628,165) 63,794 (564,371)
year
Transactions with owners in their
capacity as owners:
- -
Contributions of equity 311,030 176,834 487,864
Balance at 30 June 2010 1,974,665 (2,521,938) 31,787 176,834 (338,652)
Total comprehensive income for the - -
(1,617,692) (133,199) (1,750,891)
year
Transactions with owners in their
capacity as owners:
- -
Contribution of equity 2,165,183 (27,630) 2,137,553
Balance at 30 June 2011 4,139,848 (4,139,630) (101,412) 149,204 48,010
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The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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F I N A N C I A L R E P O R T

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

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Notes 2011 2010
$ $
Cash flows from operating activities
Payments to suppliers (inclusive of goods and services tax) (1,610,521) (157,562)
Interest received 9,722 196
Interest paid (7,545) (13,151)
Net cash outflow from operating activities 21 (1,608,344) (170,517)
Cash flows from investing activities
-
Payment for property, plant and equipment (5,023)
-
Net cash outflow from investing activities (5,023)
Cash flows from financing activities
Repayment of borrowings (103,750) (25,720)
Proceeds from issues of securities 2,249,573 275,000
Share issue costs (112,020) (13,970)
Net cash inflow from financing activities 2,033,803 235,310
Net increase in cash held 420,436 64,793
Cash at the beginning of the year 145,561 84,997
Net foreign exchange gains (119,103) (4,229)
Cash at the end of the year 7 446,894 145,561
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The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

Note 1. 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 contains the financial statements of the consolidated entity consisting of Red Mountain Mining Ltd and its subsidiary.

a. Basis of preparation of the financial report

This general purpose financial report has been prepared in accordance with Australian Equivalents to International Financial Accounting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Historical cost convention

These financial statements have been prepared under the historical cost convention.

b. Critical accounting judgments and the key sources of estimation uncertainty

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects both current and future periods. Refer to note 3 for further details.

c. Principles of consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Red Mountain Mining Ltd (”Company” or ”parent entity’’) as at 30 June 2011 and the results of all subsidiaries for the financial year then ended. Red Mountain Mining Ltd and its subsidiaries together are referred to in this financial report as the Group or the Consolidated Entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

d. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Director.

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F I N A N C I A L R E P O R T

e. Revenue recognition

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

Interest income

Interest revenue is recognised on a time proportionate basis using the effective interest method.

All revenue stated is net of goods and services tax (“GST”).

f. Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

g. Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

h. Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 120 days from the date of recognition.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

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i. Investments and other financial assets

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

(i) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.

(ii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

j. Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are carried at amortised cost, using the effective interest method.

k. Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

l. Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

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F I N A N C I A L R E P O R T

m. Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the Australian Taxation Office, are presented as operating cash flow.

n. Foreign exchange

Both the functional and the presentation currency of Red Mountain Mining Limited is the Australian Dollar.

Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange of the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange at the balance sheet date. Resulting exchange differences are brought to account in determining the result for the period.

The functional currency of Red Mountain Mining (Hong Kong) Holdings Ltd is the Hong Kong Dollar. The functional currency of Red Mountain Mining Consulting (Shenyang) Co Ltd is the Chinese Yuan.

At the reporting date the assets and liabilities of the overseas subsidiary are translated into presentation currency of Red Mountain Mining Limited at the rate of exchange ruling at balance date and the statement of comprehensive income are translated at the weighted average exchange rates for the period. Resulting exchange differences are recognised in equity.

o. Impairment of assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an 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 flows (cash generating units).

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.

A reversal of an impairment loss is recognised in the profit or loss immediately.

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p. Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets, excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the company commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

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Class of Fixed Asset Depreciation Rate
Plant and equipment 18.75% – 50%
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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

q. Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

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F I N A N C I A L R E P O R T

r. Mineral exploration, evaluation and development expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest where we have the right of tenure. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

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

When production commences, the accumulated costs for the relevant area of interest are transferred to Mine Properties and amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

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

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

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

s. Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to fund investment opportunities and develop or secure access to a producing mining asset.

Consistently with others in the industry, the Group and parent entity monitor capital on the basis of working capital requirements.

During 2011, the Group’s strategy - which was unchanged from 2010 - was to maintain a current account balance sufficient to meet the Group’s day to day expenses with the balance held in commercial paper investments or term deposits.

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2011 2010
$ $
Cash and cash equivalents 446,894 145,561
Trade and other receivables 126,275 11,795
Trade and other payables (529,380) (392,258)
-
Borrowings (103,750)
Working capital position 43,789 (338,652)
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34 R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

t. Changes in accounting policies

(i) Overall considerations

The Group has adopted the following revisions and amendments to AASB’s issued by the Australian Accounting Standards Board and IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group’s financial statements for the annual period beginning 1 July 2010:

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project- AASB 2009-5
Improvements to IFRSs- AASB 2010-03.

Significant effects on current, prior or future periods arising from the first-time application of these new requirements in respect of presentation, recognition and measurement are described in notes (ii) to (iii). An overview of standards, amendments and interpretations to IFRSs and AASBs issued but not yet effective is given in note (iv).

(ii) Adoption of improvements to IFRSs 2009 – AASB 2009-5

The Improvements to IFRSs 2009 (issued as AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements Project ) made several minor amendments to IFRSs. The only amendment relevant to the Group relates to AASB 117 Leases . The amendment requires that leases of land are classified as finance or operating by applying the general principles of AASB 117. Prior to this amendment, AASB 117 generally required a lease of land to be classified as an operating lease. This change did not have a material impact on the Group’s financial statements.

(iii) Adoption of Improvements to IFRSs 2010 - AASB 2010-3

The IASB has issued Improvements to IFRS 2010 (2010 Improvements) which was issued in Australia as AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvement Project . Most of these amendments become effective in annual periods beginning on or after 1 July 2010 or 1 January 2011. The 2010 Improvements amend certain provisions of AASB 3, clarify presentation of the reconciliation of each of the components of other comprehensive income and clarify certain disclosure requirements for financial instruments. The 2010 Improvements did not have a material impact on the Group’s financial statements.

(iv) Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.

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F I N A N C I A L R E P O R T

IFRS 9 / AASB 9 Financial Instruments (effective from 1 January 2013)

The IASB aims to replace IAS 39 (AASB 139) Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed.

Management have yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of AASB 9 have been published and they can comprehensively assess the impact of all changes.

AASB 10 Consolidated Financial Statements (effective from 1 January 2013)

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 SIC-12 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. This will not have a material impact on the Group’s financial statements.

AASB 11 Joint Arrangements (effective from 1 January 2013)

AASB 11 replaces AASB 131 Interests in Joint Ventures and SIC-13 Jointly- controlled Entities – Nonmonetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangements held by the group.

AASB 12 Disclosure of Interests in Other Entities (effective from 1 January 2013)

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 judgements 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.

IFRS 13 Fair Value Measurement (effective from 1 January 2013)

IFRS 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this definition may result in different fair values being determined for the relevant assets. IFRS 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.

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Note 2. Financial risk management

The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.

Risk management is carried out by the full Board of Directors. The Board identifies and evaluates financial risks in close co-operation with management and provides written principles for overall risk management.

(i) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, prudent oversight of future funding requirements and maintaining ongoing contact to facilitators of further funding.

It is the Group’s policy to review the Group’s liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.

The remaining contractual maturities of the Group’s financial liabilities are:

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2011 2010
$ $
Three months or less 529,380 392,258
Greater than three months - 103,750
529,380 496,008
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The Group funds its activities through capital raising in order to limit its liquidity risk.

(ii) Cash flow and fair value interest rate risk

As the Group’s major assets are cash deposits held in fixed and variable interest rate deposits, the Consolidated Entity’s income and operating cash flows are materially exposed to changes in market interest rates. The Consolidated Entity manages this risk by only investing in AAA rated institutions.

At balance date, the Group had the following exposure to Australian variable interest rate risk.

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2011 2010
$ $
Financial assets
Cash and cash equivalents 446,894 145,561
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At 30 June 2011, if interest rates had moved, as illustrated in the following table, with all other variables held constant, post-tax profit would have been affected as follows:

Judgments of reasonably possible movements:

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Higher/(Lower)
2011 2010
$ $
Post tax profit
+1.0% (100 basis points) 4,469 1,456
-1.0% (100 basis points) (4,469) (1,456)
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The Group deals with financial institutions that have a AAA rating.

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F I N A N C I A L R E P O R T

(iii) Market Risk

Price risk - The Group is not exposed to equity securities price risk as it holds no investments in securities classified on the statement of financial position either as available-for-sale or at fair value through profit or loss. The Group is not exposed directly to commodity price risk.

(iv) Credit Risk

The Group’s maximum exposures to credit risk at the reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the statement of financial position.

The Group trades only with recognised, credit worthy third parties. The Group has no significant concentrations of credit risk.

(v) Currency risk

The Company’s subsidiary is based in Hong Kong and its sustainability is dependent on the provision of cash from the parent entity. Cash funds in Hong Kong are held in Hong Kong dollars and US dollars thus the Company is exposed to diminution of cash balances through currency exchange risk.

The Group’s subsidiary is based in China and its sustainability is dependent on the provision of cash from its parent entity. Cash funds in China are held in Chinese Yuan and US dollars thus the Group is exposed to diminution of cash balances through currency exchange risk.

(vi) Fair value of financial assets and financial liabilities

The carrying value approximates the fair value of the financial assets and financial liabilities.

Note 3. Critical accounting estimates and judgments

(i) Significant accounting judgments

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

(ii) Exploration and evaluation assets

The Group’s accounting policy for exploration and evaluation expenditure is set out in note 1(q). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves are found. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under this policy, the Directors conclude that the Group is unlikely to recover the expenditure by future exploration or sale, then the relevant capitalised amount will be written off to the statement of comprehensive income.

(iii) Principles of going concern

The Consolidated Entity recorded a loss of $1,617,692 (2010: 628,165) for the year ended 30 June 2011 and had a net asset position of $48,010 (2010: ($338,652)). The directors reviewed the working capital requirements of the company for a relevant period of two years from the date of the directors’ report, and determined that because of a successful initial public offering, listing and capital raising, the Group will be able to continue to pay its debts as and when they fall due.

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Note 4. Segment information

Activities in the operating segments are identified by management based on the manner in which resources are allocated, the nature of the resources provided and the identity of service line manager and country of expenditure. Discrete financial information about each of these areas is reported to the executive management team on a monthly basis.

Based on these criteria, management has determined that the Group has one operating segment being mineral exploration in China. As the Group is focused on mineral exploration, the Board monitors the Group based on actual versus budgeted exploration expenditure incurred by area of interest. These areas of interest meet aggregating criteria and are aggregated into one reporting sector. This internal reporting framework is the most relevant to assist the Board with making decisions regarding the company and its ongoing exploration activities, while also taking into consideration the results of exploration work that has been performed to date.

Note 5. Revenue

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2011 2010
$ $
Other revenue
Interest received 9,722 196
9,722 196
Note 6. Income tax
a. Income tax expense
2011 2010
$ $
Current tax - -
Deferred tax - -
- -
b. Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense (1,617,692) (748,165)
Tax at the Australian tax rate of 30% (485,308) (224,449)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
-
Legal fees 30,162
Other 98,085 24,400
Difference in tax rates 80,251 20,027
(276,810) (180,022)
Current year tax assets not recognised 276,810 180,022
- -
Income tax expense
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F I N A N C I A L R E P O R T

c. The estimated potential deferred tax benefits not brought to account at 30%

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2011 2010
$ $
Revenue losses - Australia 552,032 256,567
Temporary differences - Australia 100,289 118,944
Temporary differences – Overseas 204,039 204,039
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The potential future income tax benefit will only be obtained if:

(i) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised;
(ii) the Company continues to comply with the conditions for deductibility imposed by law; and
(iii) no changes in tax legislation adversely affect the Company in realising the benefit.

No deferred tax assets have been recognised due to the fact that it is not probable that future taxable profit will be available against which the unused tax losses can be utilised.

The franking account balance at year end was nil.

Note 7. Current assets – Cash assets

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2011 2010
$ $
Cash at bank and on hand 446,894 145,561
Note 8. Current assets – Receivables
Other receivables 126,275 11,795
Note 9. Non Current assets – Property, Plant and Equipment
-
Plant and equipment at cost 5,023
-
Less accumulated depreciation (802)
-
Total plant and equipment 4,221
Note 10. Current liabilities – Payables
Trade and other creditors 529,380 392,258
Note 11. Current liabilities – Borrowings
-
Loan from related party 103,750
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There are $10,000 of unused credit facilities.

Note 12. Contributed equity

a. Share capital

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Parent Entity
2011 2010
Notes Shares $ Shares $
Ordinary shares fully paid 12(b) 39,060,026 4,139,848 41,275,000 1,974,665
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b. Movements in ordinary share capital

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Shares Issue Price
Date Details Notes No. $ $
1 July 2009 Balance 38,025,000 1,663,635
15 September 2009 Placement to consultant (d)(i) 500,000 0.10 50,000
24 December 2009 Placement to seed capitalist (d)(ii) 750,000 0.10 75,000
14 January 2010 Placement to sophisticated investors (d)(iii) 300,000 0.10 30,000
10 March 2010 Placement to sophisticated investors (d)(iv) 1,700,000 0.10 170,000
Share issue expenses (13,970)
30 June 2010 41,275,000 1,974,665
15 November 2010 Placement to sophisticated investors (d)(v) 6,000,000 0.10 600,000
4 March 2011 Consolidation (d)(vi) (17,728,125) - -
5 March 2011 New share issues post consolidation (d(vii) 9,375,000 0.16 1,500,000
31 March 2011 Issue of options for consideration (d(viii) - - 163,621
22 June 2011 Issue of shares in lieu of services (d)(ix) 138,151 0.20 27,630
-
Share issue expenses (126,068)
30 June 2011 39,060,026 4,139,848
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c. Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Effective 1 July 1998, the corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly the Company does not have authorised capital nor par value in respect of its issued capital.

d. Ordinary share issues

i. On 15 September 2009 a placement of 500,000 ordinary shares was made to a consultant for services.
ii. On 24 December 2009 a placement of 750,000 ordinary shares was made to a seed capitalist.
iii. On 14 January 2010 a placement of 300,000 ordinary shares was made to sophisticated investors.
iv. On 10 March 2010 a placement of 1,700,000 ordinary shares was made to sophisticated investors.
v. On 15 November 2010 a placement of 6,000,000 ordinary shares was made to sophisticated investors.
vi. On 4 March 2011 the Company restructured its share capital and options on issue with a consolidation whereby share and option holders received 1 new share or option for every 1.6 share or option held before consolidation. As part of this consolidation process it was resolved to convert certain options as described into ordinary shares.
vii. On 5 March 2011 a placement of 9,375,000 ordinary shares was made to sophisticated investors.
viii. On 31 March 2011 the Company issued 17,728,125 options to participating shareholders at a price of 1 cent per option to increase working capital. These options carry a strike price of 20 cents per ordinary share and have a three and a half year term.
ix. On 22 June 2011, 138,151 shares were issued to capital raising consultant on cancellation of previously issued options.

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F I N A N C I A L R E P O R T

e. Options

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Parent entity
2011 2010
Notes Options $ Options $
Ordinary shares fully paid 12(f) 19,446,558 149,204 3,000,000 176,834
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f. Movement in options on issue

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Options
Date Details Notes No. $
1 July 2009 Balance - -
14 September 2009 Issue of options 3,000,000 176,834
30 June 2010 3,000,000 176,834
31 March 2011 Net of consolidation/expiry of options (1,281,567) (27,630)
31 March 2011 Issue of options 17,728,125 -
30 June 2011 19,446,558 149,204
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Note 13. Reserves and Accumulated Losses

a. Reserves

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2011 2010
$ $
Shares-based payments reserve 149,204 176,834
Foreign currency translation reserve (101,412) 31,787
Accumulated reserves at the end of the financial year 47,792 208,621
Movements:
Shares-based payments reserve
-
Balance at beginning of year 176,834
-
Option expense 176,834
-
Converted to ordinary shares during the year (27,630)
Balance at the end of the financial year 149,204 176,834
Movements:
Foreign currency translation reserve
Balance at beginning of year 31,787 (32,007)
Exchange differences on translation of foreign operation (133,199) 63,794
Balance at the end of the financial year (101,412) 31,787
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b. Accumulated losses

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2011 2010
$ $
Accumulated losses at the beginning of the financial period (2,521,938) (1,893,773)
Net loss attributable to members of Red Mountain Mining Ltd (1,617,692) (628,165)
Accumulated losses at the end of the financial year (4,139,630) (2,521,938)
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c. Nature and purpose of reserve

(i) Share-based payments reserve

The share-based payment reserve is used to recognize the value of equity benefits provided to either employees or directors as remuneration or to suppliers as payment for products and services.

(ii) Foreign currency translation reserve

Exchange differences arising from translation of the foreign controlled entities are taken to the foreign currency translation reserve, as prescribed in note 1(m). The reserve is recognised in the profit and loss when the net investment is disposed of.

Note 14. Key management personnel disclosures

a. Directors

The following persons were directors of Red Mountain Mining Ltd during the financial year:

M B Wolley N F Warburton B Zhou K B Rowe

b. Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, during the financial year:

Name	Position	Employer
D J Kelly	Company Secretary	Mosman Management Pty Ltd

c. Key management personnel compensation

All payments to key management personnel have been accrued only. No cash payments have been made since May 2008.

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2011 2010
Short Term Benefits $ $
Name
N F Warburton 70,000 120,000
K B Rowe 135,863 100,000
B Zhou 40,000 48,000
-
M B Wolley 62,500
D J Kelly 57,658 30,000
Total 366,021 298,000
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F I N A N C I A L R E P O R T

d. Equity instrument disclosures relating to key management personnel

Options provided as remuneration and shares issued on exercise of such options

Options were provided in lieu of Director fees for the period ending 30 June 2011. All options expire on the earlier of their expiry date or termination of the individual’s employment.

Share holdings

The numbers of shares in the Company held during the financial year by each director of Red Mountain Mining Ltd and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

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2011 Received during
Balance at the the year on the
start of the exercise of Other changes Balance at the
Name period options during the period end of the year
Directors of Red Mountain Mining Ltd
N F Warburton 10,065,000 - (3,774,375) 6,290,625
B Zhou 3,870,000 - (1,451,250) 2,418,750
K B Rowe 8,565,000 - (3,211,875) 5,353,125
Other key management personnel of the group
D J Kelly 1,000,000 - (375,000) 625,000
2010 Received during
Balance at the the year on the
start of the exercise of Other changes Balance at the
Name period options during the period end of the year
Directors of Red Mountain Mining Ltd
N F Warburton 10,065,000 - - 10,065,000
B Zhou 3,870,000 - - 3,870,000
K B Rowe 8,065,000 - 500,000 8,565,000
Other key management personnel of the group
D J Kelly 1,000,000 - - 1,000,000
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e. Loans to key management personnel

There are no loans made to directors or other key management personnel of Red Mountain Mining Ltd or the consolidated entity.

f. Other transactions with key management personnel

Directors of Red Mountain Mining Ltd

During 2008, Mr Warburton advanced the company a sum of $100,000. This was repaid during the 2011 year. The loan had an interest rate of 11.25% and was provided on normal commercial terms and conditions. During 2011 $7,466 in interest was paid to Mr Warburton.

44 R E D M O U N T A I N M I N I N G L T D A N N U A L R E P O R T 2 0 1 1

Note 15. Remuneration of auditors

During the year the following services were paid to the auditors of the Group:

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2011 2010
$ $
Assurance services
Audit services
Audit and review of financial report
- parent entity auditors 7,500 8,000
- controlled entities auditors 3,765 1,684
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Note 16. Contingent liabilities

The Group has no contingent liabilities at 30 June 2011.

Note 17. Commitments for expenditure

Remuneration commitments

Amounts disclosed as remuneration commitments include commitments arising from the service contracts of key management personnel referred to in the remuneration report on page 11 that are not recognised as liabilities and are not included in the key management personnel compensation.

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-
within one year 137,000
- -
later than one year but not later than five years
- -
later than five years
-
137,000
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The Group has no other commitments for expenditure at 30 June 2011.

Note 18. Related parties

Directors and specified executives

Disclosures relating to directors and other key management personnel are set out in Note 14.

Wholly-owned group

The wholly-owned group consists of Red Mountain Mining Ltd and its wholly-owned subsidiary: Red Mountain Mining (Hong Kong) Holdings Ltd as described in Note 19.

Aggregate amounts receivable from Red Mountain Mining (Hong Kong) Holdings Ltd at balance date:

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Parent
2011 2010
$ $
Non-current receivables 2,244,914 1,489,855
Less: Provision for non-recovery (2,244,914) (1,489,855)
- -
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Ownership interests in related parties

Interests held in the following classes of related parties are set out in the following note.

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F I N A N C I A L R E P O R T

Note 19. Investments in controlled entities

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Equity holding
2011
Name of entity Country of incorporation Class of shares %
Red Mountain Mining (Hong Kong) Holdings Ltd Hong Kong Ordinary 100
Red Mountain Mining Consulting (Shenyang) Co Ltd People’s Republic of China Ordinary 100
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Note 20. Events occurring after reporting date

On 4 July 2011 the Company’s prospectus was signed off by the Directors.

On 13 July 2011 the Company entered into an initial public offering which is aimed to obtain official listing on the Australian Stock Exchange to enhance the ability of the Company by issuing 40,000,000 shares to raise a total of $8,000,000 in capital in order to advance the transaction with Xuanrui as described above, to further enhance the Group’s ability to raise funds in future years to advance its strategic and operational plan, and to increase the tradability of the equity instruments of the Company.

On 30 August 2011 the Company issued 10,000,000 unlisted options to brokers as lead manager options at a price of 20 cents per option with expiry date on 30 June 2014.

On 30 August 2011 the Company issued 909,110 unlisted options to Directors at a price of 25 cents per option with expiry date on 31 July 2014.

On 30 August 2011 the Company issued 909,110 unlisted options to Directors at a price of 35 cents per option with expiry date on 31 July 2016.

On 30 August 2011 the Company was admitted to the Official List of ASX Limited.

On 1 September 2011 the Company was listed on the Australian Stock Exchange.

On 2 September 2011 the Company appointed Andrew Richards as Chief Executive Officer.

No other matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect:

a. the consolidated entity’s operations in future financial years, or
b. the results of those operations in future financial years, or
c. the consolidated entity’s state of affairs in future financial years.

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Note 21. Reconciliation of loss from ordinary activities after income tax to net cash outflow used in operating activities

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2011 2010
$ $
Operating loss after income tax (1,617,692) (628,165)
Depreciation 802 -
-
Share based payments 226,834
Net foreign exchange losses/(gains) (14,096) 68,022
Change in operating assets and liabilities
(Increase)/decrease in other
receivables (114,480) (3,220)
Increase in trade creditors 137,122 166,011
Net cash used in operating activities (1,608,344) (170,518)
Note 22. Loss per share
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2011 2010
Cents Cents
Basic and diluted loss per share (5.18) (1.59)
2011 2010
Number Number
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share. 31,204,984 39,340,753
Losses used in calculating losses per share
Net loss (1,617,692) (628,165)
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F I N A N C I A L R E P O R T

Note 23. Parent entity information

The following information relates to the parent entity, Red Mountain Mining Ltd, as at 30 June 2011. The information presented here has been prepared using accounting policies consistent with those presented in Note 1.

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Parent Entity
2011 2010
$ $
Current assets 458,665 63,923
Non-current assets 4,238 17
Total assets 462,903 63,940
Current liabilities 524,400 484,691
Total liabilities 524,400 484,691
Contributed equity 4,139,848 1,974,665
Reserves 149,204 176,834
Accumulated losses (4,350,549) (2,572,250)
Total deficiency (61,497) (420,751)
Loss for the year (1,778,299) (600,074)
- -
Other comprehensive income
Total comprehensive income for the year (1,778,299) (600,074)
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The parent entity has no contingent liabilities or capital commitment as at 30 June 2011.

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DIRECTORS’ DECLARATION

In the Directors’ opinion:

(a) The financial statements and notes set out on pages 24 to 48 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2011 and of their performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial period ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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

Keith Rowe

Director

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Perth, Western Australia 29 September 2011

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I N D E P E N D E N T AU D I T R E P O R T TO T H E M E M B E R S

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A D D I T I O N A L I N F O R M AT I O N

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. The information is effective as at 15 September 2011.

SUBSTANTIAL SHAREHOLDERS

The number of substantial shareholders and their associates are set out below:

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Shareholder Number of Shares
Neil Warburton 6,415,625
Keith Bowden Rowe 5,353,125
Voting Rights
Ordinary shares On a show of hands, every member present at a meeting in
person or by proxy shall have one vote and upon a poll
each share shall have one vote
Options No voting rights
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Distribution of equity security holders

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Ordinary Shares
Holding Number of Holders Shares
- -
1 – 1,000
1,001 – 5,000 2 7,311
5,001 – 10,000 68 672,040
10,001 – 100,000 279 13,726,083
1000,000 and over 128 64,654,592
477 79,060,026
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There were no holders of less than a marketable parcel of ordinary shares.

Distribution of equity security holders

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20 cent Options
Holding Number of holders Expiry 30 June 2014
10,001 – 100,000 11 652,500
100,000 and over 35 27,075,625
46 27,728,125
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Distribution of equity security holders

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25 cent Options
Holding Number of Holders Expiry 12 September 2013
100,000 and over 2 1,718,433
2 1,718,433
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Distribution of equity security holders

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25 cent Options
Holding Number of Holders Expiry 31 July 2014
100,000 and over 3 909,110
3 909,110
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Distribution of equity security holders

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35 cent Options
Holding Number of Holders Expiry Date 31 July 2016
100,000 and over 3 909,110
3 909,110
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A D D I T I O N A L I N F O R M AT I O N

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Ordinary Shares
Twenty largest shareholders Number Held % of Issued Shares
Michlange Pty Ltd 4,415,625 5.59
Mr Keith Bowden Rowe & Ms Lesley Ruth Rowe 4,415,625 5.59
National Nominess Limited 3,031,250 3.83
Lippo Securities Limited 2,151,949 2.72
Deck Chair Holdings Pty Ltd 2,000,000 2.53
HSBC Custody Nominees (Australia) Limited 2,000,000 2.53
Dr Ziad Jamal 1,999,955 2.53
QZCorp Australia Pty Ltd 1,793,750 2.27
Viv Mac Pty Limited (Vivienne MacMahon Super Fund) 1,500,000 1.90
Dr Paul Mark Halley 1,437,500 1.82
Michlange Pty Ltd (Warburton Super Fund) 1,250,000 1.58
National Nominees Limited 1,250,000 1.58
Mrs Susan Maree Mills 1,187,500 1.50
Australian Global Capital Pty Ltd 1,000,000 1.26
Ekirtson Nominees Pty Ltd 1,000,000 1.26
Viv Mac Pty Limited (Vivienne MacMahon Super Fund) 937,500 1.19
Vector Nominees Pty Ltd 900,000 1.14
Mr Julian Alfred Burnett 875,000 1.11
Mr Terrance McMahon & Mrs Beverley Anne McMahon
875,000 1.11
(McMahon Super Fund)
Mr Jaswinder Singh Takhar 875,000 1.11
34,895,654 44.14
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There was no holder holding greater than 20% of 20 cent unlisted options expiring 30 June 2014.

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20 Cent Unlisted Options Expiring 12 September 2013
Largest option holders Number Held % of Issued Options
Dominic Marinelli 1,145,622 66.67
Terrain Capital Limited 572,811 33.33
1,718,433 100.00
25 Cent Unlisted Options Expiring 31 July 2014
Largest option holders Number Held % of Issued Shares
Mr Neil Warburton 424,250 46.67
Mr Keith Bowden Rowe 242,430 26.67
Mr Bo Zhou 242,430 26.66
909,110 100.00
35 Cent Unlisted Options Expiring 31 July 2016
Largest option holders Number Held % of Issued Shares
Mr Neil Warburton 424,250 46.67
Mr Keith Bowden Rowe 242,430 26.67
Mr Bo Zhou 242,430 26.66
909,110 100.00
The following Securities are classified as Restricted Securities:
Shares Escrowed 24 months from date of quotation Fully Paid Shares 14,513,151
Unlisted Options expiry 12/09/2013 @$0.20
Escrowed 24 months from date of quotation Unlisted Options 1,718,433
Unlisted Options expiry 30/06/2014 @$0.20
Escrowed 12 months from date of issue (issued date 31/03/2011) Unlisted Options 9,300,000
Unlisted Options expiry 30/06/2014 @$0.20
Escrowed 24 months from date of quotation Unlisted Options 8,428,125
Unlisted directors options expiry 31/07/2014 @$0.25
Escrowed 24 months from date of quotation Unlisted Options 909,110
Unlisted directors options expiry 31/07/2016 @$0.35
Escrowed 24 months from date of quotation Unlisted Options 909,110
Unlisted lead manager options expiry 30/06/2014 @$0.20
Escrowed 24 months from date of quotation Unlisted Options 10,000,000
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There is no current on market buy back.

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A D D I T I O N A L I N F O R M AT I O N

SECURITIES EXCHANGE

The Company is listed on the Australian Securities Exchange.

TENEMENTS / EXPLORATION LICENCES AND MINING LICENCE

The following tenements are the subject of The Diebu and Zhongqu Option Agreements.

Part 1: Exploration Licence of No.3 Institute of Geological Survey of Gansu Mine Bureau

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No. Licence No. Location Name. Registered Size. Expiry Date.
Holder.
1. T62120090802036809 Qiaotou-Shari Third Brigade 36.99 Sq.km 25/08/2011
2. T6212008020203273 Heba Third Brigade 4.27 Sq.km 12/02/2012
3. T62120081002036800 Kama Third Brigade 2.8 Sq.km 07/10/2012
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Part 2. Mining Licence of Lingbao Xuanrui Mineral Resources Company Limited

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No. Licence No. Location Name. Registered Size. Expiry Date.
Holder.
1. 6200000710008 Zhongqu Xuanrui 7.1907 Sq.km 08/01/2013
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Red Mountain Mining Ltd Suite 2, 2 Richardson Street West Perth, Western Australia 6005 Web: www.redmm.com.au Email: [email protected] Tel: +61 8 9226 5668 Fax: +61 8 9322 1474

AI assistant

RED MOUNTAIN MINING LIMITED — AGM Information 2011

65719_rns_2011-10-20_2fe81a1d-4ef6-462c-b3d6-efc042bb8710.pdf

NOTICE OF ANNUAL GENERAL MEETING

EXPLANATORY STATEMENT

PROXY FORM

Place of Meeting

YOUR ANNUAL REPORT IS AVAILABLE ONLINE, SIMPLY VISIT

Venue

Voting Entitlement

How to Vote

Voting in Person

Voting by Proxy

Your Proxy Form is enclosed.

NOTICE OF ANNUAL GENERAL MEETING

AGENDA

GENERAL BUSINESS:

Financial Reports

Resolution 1 – Non Binding Resolution to adopt Remuneration Report

Voting Exclusion

Resolution 2 – Election of Director – Mr Michael Wolley

Resolution 3 – Re-election of Mr Neil Warburton as a Director

Resolution 4 – Issue of Options to Director – Mr Michael Wolley

Voting Exclusion

Resolution 5 – Issue of Options to Director – Mr Neil Warburton

Voting Exclusion

Resolution 6 – Issue of Options to Director – Mr Keith Rowe

Voting Exclusion

Resolution 7 – Issue of Options to Director – Mr Bo Zhou

Voting Exclusion

Resolution 8 – Issue of Options – Mr Des Kelly

Voting Exclusion

OTHER BUSINESS

BY ORDER OF THE BOARD

NOTES:

E X P L A N A T O R Y S T A T E M E N T

1. Financial Statements

2. Resolution 1 – Non Binding Resolution to adopt Remuneration Report

3. Resolution 2 – Election of Director – Mr Michael Wolley

3.1 Background

3.2 Biography

3.3

Directors’ Recommendation

4. Resolution 3 – Re-election of Mr Neil Warburton as a Director

4.1

Background

4.2 Biography

4.3 Directors’ Recommendation

5. Resolutions 4 - Issue of Options to Mr Michael Wolley

5.1 Background

5.2 Corporations Act

(a) Section 208 of the Corporations Act

 Directors’ recommendation or reasons for declining to make a recommendation

Directors’ interests in outcome of resolution

 Current Capital Structure

 Current Remuneration and Relevant Interest

 Dilution

 Exercise

 Trading History

 Opportunity costs to the Company

 Accounting

 Value of the Options

 Other relevant information

(b) Listing Rule 10.11

 The name of the allottee of the securities

 The maximum number of securities to be allotted and issued

 The date of allotment and issue of the securities

 The relationship that requires Shareholder approval

 The issue price of the securities

 The terms of the securities



The intended use of the funds

6. Resolutions 5 - Issue of Options to Mr Neil Warburton

6.1 Background

6.2 Corporations Act

(a) Section 208 of the Corporations Act

 Nature of financial benefits

 Directors’ recommendation or reasons for declining to make a recommendation

 Current Capital Structure

 Dilution

RED MOUNTAIN MINING LIMITED AGM Information 2011