ROX RESOURCES LIMITED — Interim / Quarterly Report 2007

Feb 19, 2007

ROX RESOURCES LIMITED ABN 53 107 202 602

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REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

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Contents

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Half-Year Report	Page No.
Directors' Report
Financial Statements	3
Declaration by Directors	13.
Independent Review Report	14

ABN 53 107 202 602

DIRECTORS REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

Your directors submit the financial report of the Company for the half-year ended 31 December 2006.

DIRECTORS

The names of the Company's directors in office during the financial period and until the date of this report are:

Dr Alistair Cowden (resigned 1 October 2006) Mr Michael Blakiston Mr Ian Mulholland Mr Jeffrey Gresham (appointed 1 October 2006)

Directors have been in office since the start of the financial period to the date of the report unless otherwise stated.

REVIEW OF OPERATIONS

The loss for the half-year ended 31 December 2006 was \$1,401,782 (2005: \$1,119,026)

During the half year the company continued its transformation into an emerging base metals explorer in Laos. It settled on the sale of its Menzies gold project in Western Australia and reached agreement on terms for the sale of its South African diamond projects.

Over the last six months the Company has completed a number of soil sampling programmes which highlighted the Nam Yen, Switchback and Pha Sod prospects as particularly encouraging. A drilling programme to test these soil anomalies and follow up earlier drill intersections at Nam Yen commenced in December. Early results from that drill programme indicated that mineralisation at Nam Yen extends beyond previous known areas and have highlighted Pha Sod as an area of interest. A break in the drilling was undertaken in mid January to enable an assessment of results to date but is expected to recommence in March 2007.

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AUDITORS INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Ernst & Young, to provide the directors of Rox Resources Limited with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is attached to the Independent Review Report to Members.

Signed in accordance with a resolution of the Directors.

I GRESHAM

Director

Perth, Western Australia Dated this 20th day of February 2007

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ABN 53 107 202 602

CONDENSED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

CONSOLIDATED

	Nute	31 December 2006 $(\$)$	31 December 2005 (S)
Continuing operations
Revenue	2(a)	145,968	45,362
Other income	2(b)	8,303
Depreciation and amortisation expense	2(c)	(6,091)	(3,690)
Other expenses	2(d)	(1,573,819)	(774, 526)
Loss from continuing operations before income tax expense		(1, 425, 639)	(732, 854)
Income tax expense
Loss from continuing operations after income tax		(1,425,639)	(732, 854)
Discontinued operations
Profit/(loss) from discontinued operations after income tax	3	23,857	(386, 172)
Net Loss attributable to members		(1,401,782)	(1, 119, 026)
Loss per share (cents per share)
- basic, for loss for the year attributable to ordinary equity holders		(2.5)	(3.4)
- basic, for loss from continuing operations attributable to ordinary equity holders		(2.5)	(2.2)
- diluted, for loss for the year attributable to ordinary equity holders		(2.5)	(3.4)
- diluted, for loss from continuing operations attributable to ordinary equity holders		(2.5)	(2.2)

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ABN 53 107 202 602

CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

CONSOLIDATED

	Issued Share Capital	Share Option Reserve	Accumulated (Losses)	Total
	$($ \$)	$($ \$)	(3)	(5)
Balance at 1 July 2005	4,626,327		(1,653,516)	2,972,811
Total income/expense recognised directly in equity
(Loss) for period			(1, 119, 026)	(1,119,026)
Total recognised income and expense for the period			(1, 119, 026)	(1,119,026)
Shares issued during the period	1,000,000			1,000,000
Capital raising costs	(65,000)			(65,000)
Balance as at 31 December 2005	5,561,327		(2,772,542)	2,788,785
Balance as at 1 July 2006	8,439,777	123,828	(3,996,765)	4,566,840
Total income/expense recognised directly in equity
Loss for the period			(1,401,782)	(1,401,782)
Total recognised income and expense for the period			(1,401,782)	(1, 401, 782)
Shares issued during the period	2,436,667			2,436,667
Options & employee options		399,177		399,177
Capital raising costs	(333,084)			(333,084)
Balance as at 31 December 2006	10,543,360	523,005	(5,398,547)	5,667,818

The accompanying Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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ABN 53 107 202 602

CONDENSED BALANCE SHEET AS AT 31 DECEMBER 2006

CONSOLIDATED

Note	31 December 2006	30 June 2006 (\$)
	4,528,490	4,294,432
	201,838	7,442
	30,895	1,014
	4,761,223	4,302,888
	261,278	261,278
	5,022,501	4,564,166
	607,500
	136,452	104,500
	64,504	12,295
		1,077,938
	808,456	1,194,733
	5,830,957	5,758,899
		1,176,534
	8,530	15,525
	163,139	1,192,059
	163,139	1,192,059
	5,667,818	4,566,840
4	10,543,360	8,439,777
4	523,005	123,828
		(3,996,765)
	5,667,818	4,566,840
		(3) 154,609 (5,398,547)

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الترابيد والتر

المساري الموارد المتمور

ABN 53 107 202 602

CONDENSED CASH FLOW STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

	CONSOLIDATED
	31 December 2006 \$	31 December 2005 \$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees	(555,772)	(409, 163)
Interest received	145,968	45,362
Payments for exploration	(932, 605)	(780, 464)
Net cash used in operating activities	(1,342,409)	(1, 144, 265)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments - purchase of listed securities	(7,500)
Proceeds from sale of non-current assets	363,303
Purchase of non-current assets	(62,718)
Net cash used in investing activities	293,085
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares	1,315,334	1,000,000
Security bonds paid	(31,952)
Net cash provided by financing activities	1,283,382	1,000,000
Net increase (decrease) in cash held	234,058	(144, 265)
Cash at 1 July	4,294,432	1,891,384
Cash at 31 December	4,528,490	1,747,119

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ROX RESOURCES LIMITED ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Company as the full financial report.

The half-year financial report should be read in conjunction with the Annual Financial Report of Rox Resources Limited as at 30 June 2006. It is also recommended that the half-year financial report be considered together with any public announcements made by Rox Resources Limited during the half-year ended 31 December 2006 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

(a) Basis of Preparation

The half-year financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and applicable Australian Accounting Standards, including AASB134 Interim Financial Reporting and other mandatory professional reporting requirements. The half-year financial report has also been prepared on a historical cost basis except for available for sale investments that have been measured at fair value. The financial report is presented in Australian dollars

As a result of the uncertainties inherent in business and other activities, certain items in a financial report cannot be measured with precision but can only be estimated. The estimation process involves best estimates based on the latest information available.

(b) Summary of Significant Accounting Policies

The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2006, except for the adoption of amending standards mandatory for annual periods beginning on or after 1 January 2006, as described in Note $1(c)$ .

In addition, the financial statements for the year ended 30 June 2006 did not contain accounting policies for the following:

AASB.	2004-3	Amendments to Australian Accounting Standards
AASB	$2005 - 1$	Amendments to Australian Accounting Standard
AASB	2005-3	Amendments to Australian Accounting Standard [AASB 119]
AASB	2005-4	Amendments to Australian Accounting Standards [AASB 139, AASB 132,
		AASB 1, ASB1023 & AASB 1038}
AASB 2005-5		Amendments to Australian Accounting Standards [AASB 1 & AASB 139]
AASB 2005-6		Amendments to Australian Accounting Standards [AASB 3]
AASB 2005-9		Amendments to Australian Accounting Standards [AASB 4, AASB 1023, AASB
		AASB 139 & AASB 132)
AASB 2006-1		Amendments to Australian Accounting Standards [AASB 121]
AASB2006-3		Amendments to Australian Accounting Standards [AASB 1045]
AASB 119 (revised)		Employee Benefits (revised December 2004)
Interpretation 4		Determining whether an Arrangement contains a Lease
Interpretation 5		Rights to Interests arising from Decommissioning, Restoration and

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Environmental Rehabilitation Funds

ROX RESOURCES LIMITED ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (Con't)

Interpretation 6-	Liabilities arising from Participating in a Specific Market - Waste Electrical
	and Electronic Equipment
Interpretation 7–	Applying the Restatement Approach under AASB 129 Financial Reporting in
	Hyperinflationary Economies
Interpretation 8	Scope of AASB 2
Interpretation 9-	Reassessment of Embedded Derivatives

(c) Available-for-sale investments

Investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

The fair value of investments that are actively traded in organised financial markets is determined by referring to market bid prices at the close of business on the balance sheet date.

CONSOLIDATED

		31 December 2006	31 December 2005
	NOTE 2: LOSS FROM CONTINUING OPERATIONS	\$	\$
entity:	Loss from ordinary activities before income tax expense includes the following revenue and expenses whose discussion is relevant in explaining the financial performance of the
(a)	Revenues
	Interest revenue	145,968	45,362
(b)	Other Income
	Foreign currency gain	8,303
(c)	Expenses
	Depreciation	6,091	3,690
$\left( d\right)$	Other
	Staff expenses	402,246	179,010
	Office operating	88,423	48,528
	Corporate expenses	97,644	73,105
	Travel expenses	64.889	28,038
	Consultants	4,000	22,353
	Exploration expenditure	859,907	362,712
	Other	56,710	60,780

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ROX RESOURCES LIMITED ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 3: DISCONTINUED OPERATIONS

On 11 August 2006, the company completed the sale of the Menzies gold project.

In addition to the sale of the Menzies gold project in Western Australia on the 15 August 2006 the company reached agreement for the sale of its South African diamond projects.

The sale of the two geographically diverse projects was undertaken to enable the company to concentrate on its Pha Luang lead-zinc project in Laos.

The disposal of the South African diamond projects is expected to be completed in the first half of 2007 and as at 31 December 2006 arrangements were being put in place to meet a number of preconditions to the sale. As at 31 December 2006 the South African diamond projects were classified as a disposal group held for sale.

The results of the discontinued operations for the period until disposal are presented below:

		2006 S			2005
	Menzies	South Africa Diamonds	Total	Menzies	South Africa Diamonds	Total
Revenue
Expenses		(48, 786)	(48, 786)		(386, 172)	(386, 172)
Gross profit (loss)		(48, 786)	(48,786)		(386, 172)	(386, 172)
Gain from sale of non current assets	72,643	÷	72,643
Profit(Loss) before tax from discontinued operations Related income tax	72,643	(48, 786)	23,857		(386, 172)	(386, 172)
Profit(Loss) for the year from discontinued operations	72,643	(48,786)	23,857		(386,172)	(386,172)

The major classes of assets and liabilities of the South African diamond projects at 31 December 2006 are as follows:

	2006
	S
Assets
Other-capitalised exploration expenditure	261,278
Liabilities
Trade creditors and payables	(18,500)
Net assets attributable to discontinued operations	242,778

ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 3: DISCONTINUED OPERATIONS (Con't)

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The net cash flows of the South African diamond projects are as follows:

Operating activities Investing activities Finance activities	31,886
Net cash outflows	31,886
Details of the disposal of the Menzies project are as follows:
Assets
Plant and equipment	4,419
Other-capitalised exploration expenditure	1,072,938
Net assets attributable to discontinued operations	1,077,357
Consideration received or receivable:
Cash	350,000
Present value of deferred sales proceeds	200,000
Available for sale investments	600,000
Total disposal consideration	1,150,000
Less net assets disposed of	(1,077,357)
Gain on disposal before income tax	72,643
Income tax expense
Gain on disposal after income tax	72,643
The proceeds on the sale exceeded the book value of the related net assets and accordingly no impairment
losses were recognised on the reclassification of those operations held for sale.

Net cash inflow on disposed
Cash		350,000
Less cash and cash equivalents balance disposed of
Reflected in the cash flow statement		350.000
	2006	2005
	\$	\$
Earnings per share (cents per share)
Basic from discontinued operations	0.04	(1.2)
Diluted from discontinued operations	0.04	(1.2)

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ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

CONSOLIDATED

	NOTE 4: ISSUED CAPITAL	31 December 2006 \$	30 June 2006 (\$)
(a)	Issued and paid up capital: 56,425,333 fully paid ordinary shares $(30 \text{ June } 2006; 49,442,000)$	10,543,360	8,439,777
(b)	Option reserve:	523,005	123,828
		11,066,365	8,563,605

(c) Movements in issued and paid up capital during the past six months were as follows:

Date	Details	Notes	Number of Shares	Issue Price (Cents)	\$
1 July 2006	Opening Balance		49,442,000		8,439,777
5 July 2006	Issue of Shares	$_{\rm (i)}$	6,933,333	35	2,426,667
	Cost of Issue			$\overline{\phantom{0}}$	(333,084)
4 Oct 2006	Issue of Shares	(ii)	50,000	20	10,000
31 Dec 2005	Closing Balance		56,425,333		10,543,360

Securities issued in accordance with Section 708 of the Corporations Act 2001 Notes (i) $(ii)$ Exercise of employee options

(d) Movements in Option Reserve during the past six months were as follows:

Date	Details.	Notes	Number of Options	\$
1 July 2006	Opening Balance		10,050,000	123,828
12 July 2006	Issue		2,500,000	211,750
4 Oct 2006	Options exercised		(50,000)
27 Nov 2006	Director options issued		1,000,000	174,700
27 Nov 2006	Employee options issued		600,000	12,727
31 Dec 2005	Closing Balance		14,100,000	523,005

ABN 53 107 202 602

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2006

NOTE 4: ISSUED CAPITAL (Con't)

Assumptions used in valuation of options:

	Issued on 12 July 2006	Issued on 27 November 2006
Option valuation methodology	Binomial	Binomial
Date of valuation	28 June 2006	27 November 2006
Closing market of company securities	28.5 cents	$39.5$ cents
Exercise price of option	67.5 cents	$35.0$ cents
Basic free interest rate	5.8%	5.8%
Volatility	72%	-67%
Option term	3 Years	3 Years

NOTE 5: CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

NOTE 6: SEGMENT INFORMATION

The Company operates as a mineral exploration company in Western Australia, South Africa and Laos

	Australia		Laos		Discontinued Operations		Total
	31 Dec 2006	31 Dec 2005	31 Dec 2006	31 Dec 2005	31 Dec 2006	31 Dec 2005	31 Dec 2006	31 Dec 2005
Revenue	145.968	45,362	MA				145.968	45,362
. Other income	٠	۰	8.303		72.643		80.946
Result	(572.882)	(370.142)	(859.907)	(362.712).	23,857	(386, 172)	(1.408.932)	(1.119.026)

NOTE 7: SUBSEQUENT EVENTS

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No matter or circumstance has arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial periods.

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ABN 53 107 202 602

DECLARATION

In accordance with a resolution of the directors of Rox Resources Limited, I state that:

In the opinion of the directors

• $(a)$ The financial statements and notes of the Company:
• give a true and fair view of the financial position as at 31^st December 2006 and the performance $(i)$ for the half year ended on that date of the Company; and
• $(ii)$ comply with Accounting Standard AASB 134 "Interim Financial Reporting" and the Corporations Regulations 2001; and
• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

$\mathbb{Z}$ GAESHAM

Director

Perth, Western Australia Dated this 20th day of February 2007

College

ELERNST & VOLING

The Ernst & Young Building 11 Mounts Bay Road Pedb WA 6000 Australia

GPO Box M939 Perth WA 6843

Report on the Half-Year Condensed Financial Report to the members of Rox Resources Limited

We have reviewed the accompanying half year financial report of Rox Resources Limited and the entities it controlled during the half year, which comprises the condensed balance sheet as at 31 December 2006, and the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the six months ended on that date, other selected explanatory notes and the directors' declaration.

Directors' Responsibility for the Half Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and its performance for the six months ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory financial reporting requirements in Australia. As the auditor of Rox Resources Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor's Independence Declaration, a copy of which is included in the Directors' Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Rox Resources Limited and the entities it controlled during the half year, is not in accordance with:

• the Corporations Act 2001, including: $(a)$
• giving a true and fair view of the consolidated entity's financial position as at 31 December $(i)$ 2006 and of its performance for the six months ended on that date; and
• complying with Accounting Standard AASB 134 Interim Financial Reporting and the $(ii)$ Corporations Regulations 2001; and
• $(b)$ other mandatory financial reporting requirements in Australia.

$\mathcal{W}$ Ernst & Young

V W Tidyl Partner Perth 20 February 2007

EN ERNST & YOUNG

The Ernst & Young Building 11 Mounts Bay Road Penh WA 6000 Australia

Tel 61 8 9429 2222 Tax 61 8 9429 2436

GPO Box M939 Perth WA 6843

Auditor's Independence Declaration to the Directors of Rox Resources Limited

In relation to our review of the financial report of Rox Resources Limited for the half-year ended 31 December 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

V W Tidy Partner Perth 20 February 2007