SANDFIRE RESOURCES LIMITED — Annual Report 2008

Sep 29, 2008

ANNUAL FINANCIAL REPORT

30 JUNE 2008

CONTENTS

	PAGE
Directors' report	1
Lead auditor's independence declaration	13
Income statement	14
Balance sheet	15
Statement of changes in equity	16
Statement of cash flows	17
Notes to the financial statements	18
Directors' declaration	33
Independent auditor's report	34

FOR THE YEAR ENDED 30 JUNE 2008

The directors present their report together with the financial report of Sandfire Resources NL (Sandfire or the Company), for the financial year ended 30 June 2008 and the auditor's report thereon.

1 DIRECTORS

The directors of the Company at any time during or since the end of the financial year are as follows.

Miles A Kennedy - Independent Non-Executive Chairman and Director (59 years) B.Juris

Appointed 3 August 2007. Mr Kennedy has held directorships of Australian listed resource companies for the past 25 years. He is also the non-executive Chairman of Marine Produce Australia Limited since June 2008 and Resource & Investment NL since September 2006, a non-executive director of Pangea Diamondfields and a director of Lonrho Mining Limited since September 2008. Mr Kennedy was Executive Chairman of Kimberley Diamond Company NL from 1993 to 2007 and non-executive Chairman of Blina Diamonds NL from 2002 to 2007. Mr Kennedy has extensive experience in the management of public companies with specific emphasis in the resources industry. He is a Barrister and Solicitor of the Supreme Court of Western Australia and the High Court of Australia. He is also an Attorney of the Supreme Court of South Africa. He lives in Perth, Western Australia.

Karl M Simich - Executive Director (44 years) B.Comm, CA, F.Fin

Appointed 27 September 2007. Mr Simich has had considerable international business experience in the management and administration of publicly listed companies, specialising in resource finance and corporate management. Mr Simich was a director of Kimberley Diamond Company NL from 1993 to 2007, a non-executive director of Blina Diamonds NL from 2002 to 2007 and Executive Chairman of Resource and Investment NL from 2002 to 2006. Mr Simich is a Chartered Accountant and a Fellow of the Financial Services Institute of Australasia and has completed post-graduate studies in business and finance. He lives in Perth, Western Australia.

W John Evans - Executive Director (60 years) B.Sc

Appointed 2 October 2007. Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc. Major in geology. Between 1970 and 1987, he was employed by various divisions of CRA Limited, including being in charge of all field operations for iron ore in the Pilbara, Western Australia and gold and base metals in the Murchison, Western Australia. He was the managing director of Marymia Exploration NL for 12 years until 2002 and has been a geological consultant to numerous companies during and since. He lives in Perth, Western Australia.

John R Hutton - Non-executive Director (42 years)

Appointed 17 July 2007. Mr Hutton has a background in accounting and finance. He has experience in merchant banking, accounting, financial planning and tax matters. He is also a non-executive director of Marine Produce Australia Limited since August 2006, where he also held the position of managing director from 2003 to 2006, a non-executive director of Resource & Investment NL since 1999 and a director of Faustus Nominees Pty Ltd which is a substantial shareholder in the Company. Mr Hutton is a member of the Australian Institute of Company Directors. He lives in Perth, Western Australia.

Jonghun Jong - Non-executive Director (43 years) B.Bus

Appointed 24 July 2008. Mr Jong is a director of Posco Australia Pty Ltd (a wholly-owned subsidiary of the Korean steelmaker POSCO), which holds 19.9 percent of the Company's issued capital. In 1989 Mr Jong began his career with POSCO Korea and in 2007 moved to Posco Australia based in Sydney. He is a director of Posco Australia responsible as project manager for development of new business investment opportunities in the resource area and managing existing business ownership and partnerships of Posco. He lives in Sydney, New South Wales.

Graeme J Hutton - Executive Director - deceased 16 July 2007

Mr Hutton was a graduate of the University of Western Australia. Since graduating some 40 years ago, Mr Hutton established himself as a highly successful prospecting geologist. His early prospecting career was centred on the Hamersley Iron Province. Mr Hutton was a director of the Company since 2003 until his demise in July 2007.

Greg H Steemson - Executive Director - resigned 3 August 2007

Mr Steemson is a graduate of the University of Queensland and the University of Utah. He is a qualified geologist and geophysicist and has held senior positions within the mining industry during his 30 year career. Greg has been directly involved in successful exploration programs for gold, base metals, diamonds, iron ore, mineral sands and coal. He has professional work experience throughout Australia and internationally. He is also a director of Mineral Commodities Ltd and Allied Gold Ltd.

Brian RC Coppin - Non-executive Chairman - resigned 27 September 2007

Mr Coppin has had extensive experience as a director of various companies in Western Australia. He was the founder of Western Underwriters Pty Ltd which was subsequently taken over and continued to be operated by QBE Insurance Ltd. He is also non-executive chairman of Jardine Lloyd Thompson (Australia) Pty Ltd.

FOR THE YEAR ENDED 30 JUNE 2008

2 COMPANY SECRETARY

Ms Jean Mathie was appointed to the position of company secretary on 28 September 2007. Ms Mathie also holds the role of company secretary with other publicly listed companies. Mr Robert Lewis resigned as company secretary on 28 September 2007.

3 DIRECTORS' MEETINGS

The number of directors' meetings and number of meetings attended by each of the directors of the Company during the financial year are:

	Meetings Attended	Meetings Held
MA Kennedy	6	6
KM Simich	5	6
WJ Evans	4	6
JR Hutton	6	6
BRC Coppin	1	6
GJ Hutton	-	6
G Steemson	-	6

4 NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES

The principal activity of the Company during the period was the exploration and evaluation of mineral tenements in Western Australia and the Northern Territory.

5 OPERATING AND FINANCIAL REVIEW

5.1 Operating review

A. Introduction

During the year to June 2008, Sandfire has primarily focused its exploration activities on the Borroloola Project in the Northern Territory and Doolgunna Project in Western Australia. Field activities on the four other projects, Urandy, Yannarie, Mt Boggola and Sandfire have been relatively low key. Tenements on the other three projects, Glen Ross, Tangadee and Mount Anderson are yet to be granted.

The exploration emphasis at Borroloola and Doolgunna is for the discovery of ore deposits capable of sustaining future long-life mining operations. At Borroloola, Sandfire is carrying out programs of basemetal (zinc and lead), manganese and to a lesser extent, diamond exploration. At Doolgunna, the Company has continued reconnaissance and phased 'prospect evaluation' exploration programs for gold, and during 2008, commenced assessment of the Proterozoic banded iron formations of Robinson Range for iron ore.

B. Borroloola Project Northern Territory (Sandfire 100%)

The Borroloola Project comprises a 13,400 square kilometre continuous block of mining tenements or tenement applications, in the Northern Territory. The Project is located in the south western sector of the Gulf country, bordering the Gulf of Carpentaria. Sandfire is concentrating its 2008/2009 exploration activities towards discovering basemetal mineralisation, manganese and diamonds.

The Project covers the Paleoproterozoic Batten Fault Zone that hosts the world-class McArthur River lead, zinc and silver mine, 25km south of the Project area. This deposit is the second largest sedimentary exhalitive base metal deposit in the world. Formation of the McArthur River mineralisation is intimately associated with the Emu Fault Zone that trends northerly through the Project for 100 kilometres. This corridor is considered the most prospective area of the Project for the discovery of major sediment-hosted zinc and lead deposits. In addition, the near-coastal area has large residual tracts of the younger, overlying, Cretaceous, Carpentarian Basin sediments. These sediments are host to a number of occurrences of manganese mineralisation on the west and south western margins of the Gulf of Carpentaria. The largest of these is the giant Groote Eylandt manganese deposit, currently being mined by GEMCO, which supplies 10 percent of the world's annual requirements, mining 3.3 million tonnes in 2006/2007.

The Project lies between the three known Kimberlite fields of Merlin (a past producer), Abner Range and Roper River. The Project area is considered to have a high prospectivity for diamond exploration.

Basemetal Exploration

During the year ending June 2008, Sandfire has carried out a program of basemetal exploration, particularly for zinc and lead, throughout the Project.

FOR THE YEAR ENDED 30 JUNE 2008

During the northern wet season, that prohibits field work, Sandfire focused on reviewing and collating all previously recorded exploration data from within the Project. This included drilling, for which records totalling 88,000 meters are available, surface geochemical data, geological mapping and geophysical data sets for gravity, airborne magnetics and radiometrics and airborne electromagnetic (AEM) surveys. Processing of these various data sets has enabled Sandfire to prioritise its large holdings to zones around the Emu Fault corridor. The highest priority has been assigned to the Yalco and Warramana Prospects and these are the focus of the 2008 field program of AEM, detailed gravity surveys and a planned diamond drilling campaign.

During the 2007/2008 year, Sandfire completed diamond core drilling on the Yalco Prospect targeting a south-westerly trending AEM conductive conductor (a potential basemetal sulphide target) and a large deep conductive target in the southern sector of the Yalco Prospect. The AEM target was attributed to a zone of intense hydrothermal leaching with no economic basemetal sulphides. However, three of the holes intersected the pyritic HYC Member of the Barney Creek Formation, that hosts the giant McArthur Mine deposit, some 40 kilometres to the south. In the hole BD-21 (the hole closest to the Emu Fault) a zone of debris breccia was intersected within the pyritic black shale of the HYC Member. This is considered very significant as this rarely occurring 'talus' breccia is characteristic of the McArthur River Mine deposit mineralisation. Weakly elevated lead and zinc values were recorded in the sequence.

Drilling in hole BD-16 of a large AEM anomaly at Yalco was terminated at 293 metres having tested the primary AEM target. Subsequent reinterpretation indicates a deeper target and this hole will be deepened in the 2008 drilling campaign.

During June 2008, Sandfire carried out a detailed gravity survey over the Yalco (130.5 line kilometres) and Warramana Prospects (75.6 line kilometres), within the Emu Fault corridor.

The gravity data, whilst providing important structural and stratigraphic information, was also sufficiently detailed to be a direct 'ore search' tool and at least three targets have been identified for immediate drill testing in the 2008 field season.

Manganese Exploration

Manganese mineralisation in the Cretaceous Carpentarian Group sediments of the Gulf Country of the Northern Territory occurs as flat-lying horizons, overlying and on-lapping Proterozoic basement highs. Manganese mineralisation is generally conductive and accordingly AEM surveys can detect the mineralisation as flat-lying, shallow conductors.

Previous exploration for manganese over the near-coastal areas of the Borroloola Project has located a number of occurrences of manganese mineralisation, principally in the Rosie Creek catchment and at the Brumby Prospect in the northwest of the Project. For the field season in 2008, Sandfire has concentrated its search for manganese mineralisation in the upper Rosie Creek catchment, where the Company has completed AEM survey coverage. The Rosie Creek South Prospect is an occurrence of known manganese mineralisation over a substantial area and the catchment embayment also contains several other occurrences of Cretaceous manganese mineralisation. Interpretation of the AEM data has identified 11 flat-lying conductive areas at, or close to, the contact between the Cretaceous and basement. Sandfire has committed to a thorough program planned to drill test these targets in the third and fourth quarters of 2008. In addition to testing the Cretaceous targets, Sandfire will be conducting reconnaissance drilling of targets within the Mainoru Formation of the Roper Group rock sequence that overlay the McArthur Group. Historic records report 10 metre thick drill intersection of manganese mineralisation, within the Mainoru Formation, that assayed nearly 30 percent manganese.

At the Brumby manganese prospect, in the northwest area of the Project, previous reconnaissance exploration indicated a 1 metre thick interval of manganese mineralisation at the base of the Cretaceous sequence. Interpretation of the regional AEM surveys over this area has highlighted a number at large, flat-lying conductors. Further, a discrete conductive body, within the Mainoru Formation is also considered to be a target, prospective for manganese. Test reconnaissance drilling of these manganese targets, in the vicinity of the Brumby Prospect, will be undertaken in the 2009 dry season.

Diamond Exploration

The Borroloola Project lies between three known kimberlite fields, the Merlin (a past producer), Abner Range and Roper River fields. The most likely age of any kimberlite diatremes in the project area is Devonian or about 360 million years old. Historic records of diamond exploration within the Project report numerous macro-diamonds, micro-diamonds and other kimberlitic indicator minerals, many of which have not been followed up.

A review of the potential of the Borroloola Project for diamonds was completed during the year. This review highlighted five priority targets areas of high interest for Sandfire.

The review concluded:

• previous exploration in the area has been reconnaissance in nature and considered inadequate for an area of such high potential;
• this work has identified a number of areas where concentrations of macro and micro diamonds as well as kimberlitic indicator minerals have been recovered, with no explanation for the source;
• five priority targets have been identified within the overall project area;

FOR THE YEAR ENDED 30 JUNE 2008

– a combination of regional exploration to assess the true potential of the tenements and detailed follow-up on existing priority targets is recommended for the area.

Since the end of the year Sandfire has carried out limited field reconnaissance over one of the priority areas where two macro diamonds have previously been found. This program has identified seven targets, within an area of shallow Cretaceous cover, that warrant testing for concealed, older, kimberlite diatremes. The area is readily accessible and Sandfire can drill-test using the drilling rig mobilised to the Project for the manganese testwork.

C. Doolgunna Gold and Iron Projects Western Australia (Sandfire 100%)

The Doolgunna Project consists of four exploration licences, totalling 408 square kilometres located 135 kilometres north of Meekatharra or 930 kilometres north of Perth, Western Australia. The Project covers sections of the Paleoproterozoic, volcano sedimentary, Yerrida, Bryah and Padbury Groups and part of the underlying Archaean, Marymia Granite.

The Bryah and Padbury Groups host gold mineralisation in the Peak Hill, Labouchere and Fortnum Mining centres to the west of Doolgunna. No previous bedrock gold mineralisation, or gold production has been reported from within the Doolgunna Project area. Sandfire's discovery of primary bedrock gold in this eastern sector of this Proterozoic basin is a new discovery.

The Padbury Group of clastic and chemical sediments includes the Robinson Range Formation of shales, siltstones and banded iron formations. The banded iron formations form the Robinson Range which contains numerous outcrops of high grade iron deposits. The Doolgunna Project covers a 26 kilometre strike length of the iron formation.

Doolgunna Gold Project

The Doolgunna Project covers units of the Bryah and Padbury Paleoproterozoic Basins that are prospective for gold mineralisation. Total gold production from these basins is 62.2 tonnes or 2.0 million ounces and there are reported to be some 15.5 tonnes of remaining gold in-the-ground. Although gold production in the region dates back to the discovery of gold at Peak Hill at the turn of the twentieth century, most gold production has been since 1986, including a number of new discoveries. There has been no production from within Sandfire's Project and all of the Company's prospects are new discoveries.

Since commencement of exploration in the area, Sandfire has carried out programs of:

• mapping; aerial photography interpretation;
• acquisition of detailed aeromagnetic data, image processing and interpretation;
• surface soil geochemistry and where appropriate shallow vacuum drilling and sampling of the regolith, regolith mapping;
• extensive programs variously of rotary air blast drilling (RAB), air core drilling and reverse circulation drilling, testing gold-in-soil anomalies, and deeper regolith gold anomalies with phased programs of drilling.

Sandfire has located a number of primary shear hosted zones of gold mineralisation associated with series of southwesterly trending, upright shears, and possibly with a series of southerly dipping thrust faults along the northern, granite, contact with the Bryah Group.

During the year to June 2008, Sandfire has continued to focus upon drilling of the known prospects and preliminary testing of gold geochemical targets. This work included:

• reconnaissance RAB drilling programs, systematically testing previously located gold geochemical anomalies;
• in sections of the property where the transported cover sequences were deep or clay rich, air core drilling was used to test anomalies;
• during the March 2008 Quarter, Sandfire carried out a program of 16 holes of inclined reverse circulation (RC) drilling on the Old Highway gold prospect. This program reported a number of significant gold intersections, including:

Hole Number
DGRC 072	23m at 4.07g/t gold and
	22m at 3.01 g/t gold
DGRD 071	10m at 7.15 g/t gold
DGRC 075	7m at 7.28 g/t gold
DGRC 080	6m at 9.72 g/t gold

More importantly, the RC drilling program established the controls for and disposition of the gold -bearing quartz veins and quartz vein arrays within the broader shear zone.

Subsequent to the RC program, Sandfire carried out RAB drilling program on six of the remaining untested or partially tested geochemical anomalies. The most significant result from this work was the confirmation of primary gold mineralisation at the DeGrussa Prospect that appears to be unrelated to quartz veining.

FOR THE YEAR ENDED 30 JUNE 2008

The results of the DeGrussa drilling were as follows.

First Line
Hole 2272	2 to 10m (downhole) for 8 m at 8.8 g/t gold
Hole 2268	2 to 14 m (downhole) for 12m at 2.83 g/t gold
Second Line (40m to the west)
Hole 2283	5 to 14 m (downhole) or 9m at 2.8 g/t gold
Hole 2282	16 to 40 m (downhole) for 24m at 6.8 g/t gold

Since the end of the year under review, a further phase of RAB drilling has been completed testing for further south westerly extensions. The results of this test work are awaited, with unduly long delays in all laboratories impeding the Company's exploration.

Through the 2008 to 2009 year, Sandfire will be continuing phased campaigns of drilling particularly on the Old Highway, South West Old Highway and DeGrussa Prospects aiming to establish gold resources. Reconnaissance test work over the known prospects and residual geochemical targets will be continued.

Doolgunna Iron Ore Project

The Doolgunna Iron Ore Project is based on the banded iron formations of the Robinson Range Formation sequence of rocks that host numerous occurrences of hematite-goethite enrichment of the iron formation with direct shipping grade iron ore. The assays of iron mineralisation to date in rock chips and drilling have reported a low phosphorus grades.

The Robinson Range Formation hosts a 200 to 300 metre thick sequence of banded iron formation (BIF) and granular iron formation in a sedimentary sequence of ferruginous shales and siltstone. The iron formation forms a range of low hills, typically 20 to 30 metres above the plain. A total of some 26 kilometres strike length of the iron formation is present within Sandfire's Doolgunna Project.

The banded iron formation consists of alternating 1 to 5mm thick laminations of magnetite (hematite) and chert/quartz with interbedded hematitic siltstone. The granular iron formation is characterised by lenses of granular chert within a clastic-textured quartz-magnetite-hematite rock, often with an overall oolitic appearance.

Sandfire has carried out programs of reconnaissance, identifying the occurrence of iron ore enrichments within the BIF sequence. Concurrent collection of rock samples of iron mineralisation and analysis confirmed the high iron, low phosphorus, hematite-goethite character of this mineralisation. Further phases of reconnaissance geological mapping located all of the areas of surface iron enrichment, mapping the areas of enrichment in detail. A total of eight substantial occurrences of hematite-goethite mineralisation have been located, principally in the lower-most 60 metres thick laminated banded iron formation.

The eight occurrences of iron mineralisation cover a total exposed area of approximately 210,000 square metres. No drilling has been carried out on the outcropping iron deposits. Sandfire drilled six shallow RC holes during the year to test for concealed iron mineralisation at the extremities of an outcropping iron deposit. No significant mineralisation was intersected, the best being an interval of 12 metres from surface assaying 56.8 percent iron and 0.014 percent phosphorus. The near surface mineralisation was severely degraded by surface hydration and soil penetration down into the mineralisation.

Sandfire is seeking Aboriginal Heritage clearances of the iron deposits to facilitate drilling of the iron deposits in the future.

D. Urandy Gold Project Western Australia (Sandfire 100%)

The Urandy Project is located 80 kilometres south-easterly of Onslow in the Northwest of Western Australia. The Project, over 210 square kilometres, covers an area of the schistose Ashburton Formation near to the contact with an intrusive granite complex. In addition field work during the past year has located shelf-facies dolomite sequences.

During 2006 and 2007 extensive programs of shallow vacuum drilling have been used for geochemical sampling of soil and near-surface bedrock material. These programs have recorded widespread near- surface gold anomalism in the Ashburton Formation close, to the contact with the granite intrusions. In addition, zones of elevated basemetal, lead and zinc have been recorded in the areas of dolomite.

Since year end June 2008, Sandfire has commenced detailed soil geochemistry over both the gold and basemetal anomalous zones.

E. Yannarie Lead and Zinc Project Western Australia (Sandfire 100%)

The Yannarie Project is located 200 kilometres northeast of Carnarvon in Western Australia. The Project covers a faultbounded synclinal structure of the basal units of the Bangemall Basin, considered to be prospective for basemetal mineralisation.

Previous exploration by Sandfire has outlined two strong but separate basemetal anomalies, one zinc and the other lead, within a dolomite sequence. Both these targets were tested in 2007 by a program of 26 angled RAB holes. These holes failed to test the primary targets because of a thick siliceous capping on the dolomites that impeded drilling.

FOR THE YEAR ENDED 30 JUNE 2008

Sandfire will be carrying out an Induced Polarisation geophysical survey over the two separate targets in September 2008. This is directed to more precisely locating the concealed source of the strong geochemical anomalism, for deep reverse circulation drilling.

As previously reported, Sandfire has located uraniferous calcrete mineralisation near the confluence of creeks draining-off Proterozoic granites. Analysis of three surface calcrete samples recorded values between 250 and 540 grams per tonne uranium. No further work has been carried out on the uranium but there is potential for uranium enrichment deeper in the concealed creek channels.

F. Sandfire Zinc and Lead Project Western Australia (Sandfire 100%)

The Sandfire Project targets the Nita Formation that onlaps the Parda High, for MUT carbonate hosted lead and zinc mineralisation. The Project is 60 kilometres north-west of the very large Admiral Bay lead and zinc deposit held by Kagara.

No field work has been carried out on this Project during the year.

G. Mt Boggola Project Western Australia (Sandfire 100%)

Previous exploration activities by Sandfire on the Mt Boggola Project include an airborne electro-magnetic survey, soil and stream sediment geochemistry and drilling of a coincident electro-magnetic and soil geochemistry anomaly. The drilling indicated the target was a carbonaceous shale with weak copper lead and zinc values.

No field work has been carried out on this Project during the past year.

H. Other Projects Western Australia (Sandfire 100%)

Sandfire holds three projects, in Western Australia for which the tenements are applications, awaiting approval.

These projects are:

Glen Ross and Tangadee Projects. Both areas are within the Native Title area of the Jidi Jidi Aboriginal Corporation and grant of titles are pending, with negotiations on the terms of a heritage agreement continuing.

Mt Anderson Project. This Project consists of two exploration licence applications in the Western Kimberley District. The tenement applications are expected to be granted in 2009.

5.2 Financial Review

Financial performance

The Company expended \$4,472,270 on the exploration and evaluation of its mineral tenements in the period (2007: \$4,052,762). In accordance with its accounting policies, all of this expenditure was written off in the period.

The write off of exploration expenditure contributed to the Company's net loss from ordinary activities after tax for the year ended 30 June 2008 of \$5,416,027 (2007: \$5,365,172).

Financial position

The Company's net working capital position at 30 June 2008 was \$7,494,112 (2007: \$5,373,856), represented significantly by cash and cash equivalent assets of \$8,362,681 (2007: \$5,811,669). The Company's net asset position was \$7,812,369 (2007: \$5,653,821) with no value assigned to exploration and evaluation assets in the balance sheet.

Cash flows from operations

The Company's cash flows from operations for the year ended 30 June 2008 were a net outflow of \$326,278 (2007: \$429,790 inflow) represented by the payment of corporate costs offset by interest income on deposited funds.

6 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Significant changes in the state of affairs of the Company during the financial year were as follows.

Equity Issues

On 30 June 2008 the Company issued 16,498,339 fully paid ordinary shares and 2,535,327 ordinary contributing shares in the Company to Posco Australia Pty Ltd to raise \$7,233,168. The cost of this share issue was \$468,509. These funds will allow the Company to continue to actively explore and evaluate its mineral tenements. As a result of this placement Posco Australia Pty Ltd holds 19.9% of the issued capital of the Company.

Board of directors

There has been a significant change in the composition of the Board during the year. Details of changes of the Company's directors are provided in section 1 of this Directors' Report.

FOR THE YEAR ENDED 30 JUNE 2008

7 ENVIRONMENTAL REGULATION

The Company's operations are subject to significant environmental regulations under both Commonwealth and State legislation in relation to its activities.

The Company is committed to achieving a high standard of environmental performance. The Board is responsible for the regular monitoring of environmental exposures and compliance with environmental regulations.

The Board believes that the Company has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Company.

8 DIVIDENDS

The directors have not recommended the declaration of a dividend. No dividends were paid or declared by the Company since the end of the previous financial year.

9 EVENTS SUBSEQUENT TO REPORTING DATE

In accordance with the terms of a Commercial Agreement made between the Company and Posco Australia Pty Ltd, Mr Jonghun Jong (a director of Posco Australia Pty Ltd) was appointed a director of the Company on 24 July 2008.

10 LIKELY DEVELOPMENTS

The Company will continue to pursue and further the exploration and evaluation of its tenements in Western Australia and the Northern Territory.

11 DIRECTORS' INTERESTS

The relevant interest of each director in the shares and options over such instruments issued by the Company, as notified by the directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is set out below.

Director	Ordinary shares	Contributing shares	Options over
	fully paid	partly paid	ordinary shares
Mr MA Kennedy	206,268	753,134	900,000
Mr KM Simich	2,982,629	1,253,134	2,400,000
Mr WJ Evans	-	-	2,400,000
Mr JR Hutton	5,791,108	-	1,300,000
Mr JH Jong	-	-	-

12 SHARE OPTIONS

12.1 Equity instruments - audited

Options granted to directors and executive officers of the Company

During or since the end of the financial year, the Company granted options for no consideration over unissued ordinary shares in the Company to the following directors and to the following executive officer of the Company as part of their remuneration.

	Number of	Exercise	Expiry
	options granted	prices	date
Directors
Mr MA Kennedy	900,000	\$0.60/\$0.80/\$1.00(i)	12 July 2013
Mr K M Simich	2,400,000	\$0.60/\$0.80/\$1.00(i)	12 July 2013
Mr W J Evans	2,400,000	\$0.60/\$0.80/\$1.00(i)	12 July 2013
Mr J Hutton	300,000	\$0.60/\$0.80/\$1.00(i)	12 July 2013
Executive Officer
Mr G Street	400,000	\$0.35	7 February 2011
	600,000	\$0.40	8 August 2011

(1)The number of options granted to each director is exercisable in three equal tranches which have an exercise price of \$0.60, \$0.80 and \$1.00. The options in each of these tranches become exercisable when the market price of the Company's shares reaches the exercise price for that tranche.

Other than 600,000 options granted to Mr G Street on 14 August 2008, all options were granted and vested during the financial year. The options were provided at no cost to the recipients. None of the granted options were exercised during the period.

FOR THE YEAR ENDED 30 JUNE 2008

The fair value of the options granted is calculated at the date of grant using a Black-Scholes option pricing model. The entire calculated value of options issued has been disclosed and recognised in the reporting period. Market conditions have been taken into account within the valuation model.

The following factors and assumptions were used in determining the fair value of options issued during the period on grant date.

Grant date	No. of options	Option life Years	Fair value per option \$	Exercise price \$	Price of shares on grant date	Expected volatility	Risk free interest rate
5 February 2008	400,000	3.0	0.073	0.35	0.25	50%	6.75%
20 June 2008	2,000,000	5.1	0.113	0.60	0.32	50%	7.25%
20 June 2008	2,000,000	5.1	0.089	0.80	0.32	50%	7.25%
20 June 2008	2,000,000	5.1	0.071	1.00	0.32	50%	7.25%

All options were valued using an assumed dividend yield of nil.

50,000 contributing shares were issued to executive officer Greg Street on 9 July 2007 with a deemed value of \$0.05 per contributing share. The value of contributing shares issued is based on the Company's share price on date of grant.

Unissued shares under option

At the date of this report unissued ordinary shares of the Company under option are:

Expiry date	Exercise price (\$)	Number of options
30 September 2008	0.20	525,000
31 December 2008	0.25	2,372,000
7 February 2011	0.35	1,170,000
8 August 2011	0.40	1,420,000
30 September 2011	0.50	3,000,000
12 July 2013	0.60	2,000,000
12 July 2013	0.80	2,000,000
12 July 2013	1.00	2,000,000

These options do not entitle the holder to participate in any share issues of the Company.

Shares issued on exercise of options

During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows (there are no amounts unpaid on the shares issued).

Expiry Date	Exercise Price (\$)	Number of Options
31 December 2008	0.25	20,000

Number of options expiring close to the date of this report

The number of options over ordinary shares which are due to expire close to the date of this report:

Expiry Date	Exercise Price (\$)	Number of Options
30 September 2008	0.20	525,000

13 REMUNERATION REPORT

13.1 Principles of compensation - audited

Remuneration is referred to as compensation throughout this report.

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Key management personnel comprise the directors and executives of the Company. The Company had one executive officer, other than executive directors during the financial year.

Compensation levels for key management personnel and the secretary of the Company are competitively set to attract and retain appropriately qualified and experienced directors and executives. The Board may seek independent advice on the appropriateness of compensation packages, given trends in comparative companies both locally and internationally and the objectives of the Company's compensation strategy.

The compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. Compensation packages include a mix of fixed compensation, equity-based compensation, as well as employer contributions to superannuation funds.

Shares and options may only be issued to directors subject to approval by shareholders in general meeting.

FOR THE YEAR ENDED 30 JUNE 2008

The Board has no established retirement or redundancy schemes.

13.1.1 Fixed compensation

Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the Board through a process that considers individual and overall performance of the Company. In addition, external consultants provide analysis and advice to ensure the directors' and senior executives' compensation is competitive in the market place. A senior executive's compensation is also reviewed on promotion.

13.1.2 Equity-based compensation (Long-term incentive bonus)

The Board has introduced the Sandfire Resources Incentive Option Scheme, an equity-based long-term incentive (LTI), to promote continuity of employment and to provide additional incentive to increase shareholder wealth. LTIs are provided as options over ordinary shares of the Company and provided to key management personnel and staff based on their level of seniority and position within the Company.

As a result of the above scheme, during the financial year the Company announced the issue of 1,170,000 unlisted options to subscribe for ordinary fully paid shares in the Company at any time on or before 7 February 2008 at an exercise price of \$0.35 each. A further 1,420,000 options were issued on 14 August 2008. These options have an exercise price of \$0.40 and an expiry date of 8 August 2011. Each option is convertible to one fully paid ordinary share. No options were granted to directors under the plan.

There are no voting or dividend rights attached to the options. The directors have the rights under the employee option plan to issue any new options on terms and conditions they determine appropriate.

The directors have been issued 6,000,000 unlisted options in the Company. Details of this issue are included in Note 18 to this report. The Board believes this will provide strong incentives to the directors and further increase the value of the Company and shareholder wealth.

Short-term and long-term incentive structure

Given the Company's principal activity during the course of the financial year consisted of exploration and evaluation, the Board has given more significance to service criteria instead of market related criteria in setting the Company's incentive schemes. Accordingly, at this stage the Board does not consider the Company's earnings or earnings related measures to be an appropriate key performance indicator. In considering the relationship between the Company's remuneration policy and the consequences for the Company's shareholder wealth, changes in share price are analysed.

13.1.3 Service contracts

Compensation and other terms of employment for the directors, key management personnel and the company secretary are formalised in contracts of employment. The major provisions of the agreements relating to compensation are set out below.

Mr WJ Evans – Executive Technical Director

Mr Evans has a contract of employment with the Company under which Mr. Evans has agreed to provide his services as Executive Technical Director of the Company for a gross compensation package, which includes a base salary plus superannuation contributions. Mr. Evans' salary is reviewed on an annual basis by the Board and the Company has agreed to reimburse Mr. Evans for reasonable expenses incurred by him in the course of providing his services as a director of the Company. The agreement can be terminated by either party on not less than one month's written notice to the other party or summarily by the Company in the case of material breach of contract by Mr. Evans.

Mr KM Simich – Executive Director

Mr Simich has entered into an agreement with the Company whereby he charges the Company on a monthly fixed fee basis for corporate services. This commenced on 1 April 2008.

Mr G Street - General Manager

Mr Street has a contract of employment with the Company under which Mr Street has agreed to provide his services as General Manager of the Company for a gross compensation package, which includes a base salary plus superannuation contributions. Mr. Street's salary is reviewed on an annual basis by the Board and the Company has agreed to reimburse Mr Street for reasonable expenses incurred by him in the course of providing his services. The agreement can be terminated by either party on not less than one month's written notice to the other party or summarily by the Company in the case of material breach of contract by Mr Street.

Ms J Mathie - Company Secretary

Ms Mathie has a contract of employment with the Company under which Ms Mathie has agreed to provide her services as Company Secretary of the Company for a gross compensation package, which includes a base salary plus superannuation contributions. Ms Mathie's salary is reviewed on an annual basis by the Board and the Company has agreed to reimburse Ms Mathie for reasonable expenses incurred by her in the course of providing her services. The agreement can be

FOR THE YEAR ENDED 30 JUNE 2008

terminated by either party on not less than one month's written notice to the other party or summarily by the Company in the case of material breach of contract by Ms Mathie.

13.1.4 Non-executive directors

Total compensation for directors is set based on advice from external advisors with reference to fees paid to other directors of comparable companies. Directors' fees are presently limited to a total of \$250,000 per annum, excluding the fair value of any options or rights granted to them.

Directors' fees cover all main Board activities and membership of any committee. The Board has no established retirement or redundancy schemes in relation to non-executive directors.

FOR THE YEAR ENDED 30 JUNE 2008

13.2 Directors' and executive officers' remuneration – audited

Details of the nature and amount of each major element of remuneration of each director of the Company are listed below. The Company had one executive officer, other than executive directors, during the financial year.

			Sh ort -te rm		Pos loy t e nt mp me	Sha bas ed re nts pay me		Pro ion of t por ion rat rem une
		Sa & lary Fee s \$ ( )	Ma ent nag em tra ct con \$ ( )	Tot al \$ ( )	Su ion uat per ann (iii) ef its ben \$ ( )	Op ion nd t s a ig hts r \$ ( )	Tot al \$ ( )	for per ma nce rel d ate ( %)	Va lue of ion t op s ion of t as pro por ion ( %) rat rem une
Exe ive D ire t tor cu c s Mr W J Ev an s (ap in te d 2 Oc t 2 0 0 7 ) p o	2 0 0 8 2 0 0 7	7 0, 5 0 3 -	- -	7 0, 5 0 3 -	5 2, 8 7 6 -	2 1 7, 4 4 3 -	3 4 0, 8 2 2 -	- -	6 3. 8 % -
Mr K M S im ic h (ap in d 2 7 Se 2 0 0 7 ) te t p o p	2 0 0 8 2 0 0 7	2 0, 1 8 5 -	(i)3 6, 0 0 0 -	5 6, 1 8 5 -	1, 8 1 7 -	2 1 7, 4 4 3 -	2 7 5, 4 4 5 -	- -	7 8. 9 % -
Mr G S tee ms on (re ig d 3 Au 2 0 0 7 ) s ne g	2 0 0 8 2 0 0 7	- -	(ii)2 7, 5 0 0 (ii)3 4 1, 4 8 7	2 7, 5 0 0 3 4 1, 4 8 7	- -	- 4 4 7, 0 0 0	2 7, 5 0 0 7 8 8, 4 8 7	- -	- 5 6. 7 %
G Mr Hu t ton ( de d 1 6 Ju l 2 0 0 7 ) ce as e	2 0 0 8 2 0 0 7	3, 3 3 3 9 1, 7 4 4	- -	3, 3 3 3 9 1, 7 4 4	0 0 0 5, 8, 2 5 6	- 4 4 7, 0 0 0	8, 3 3 3 5 4 7, 0 0 0	- -	- 8 1. 7 %
ive ire No Exe D t tor n- cu c s Mr M A Ke dy nn e (ap in d 3 Au 2 0 0 7 ) te p o g	2 0 0 8 2 0 0 7	3 3, 6 4 2 -	- -	3 3, 6 4 2 -	3, 0 2 8 -	8 1, 5 4 1 -	1 1 8, 2 1 1 -	- -	6 9. 0 % -
Mr J R Hu t ton (ap in 1 2 0 0 ) te d 7 Ju l 7 p o	2 0 0 8 2 0 0 7	2 0, 1 8 5 -	- -	2 0, 1 8 5 -	1, 8 1 7 -	2 7, 1 8 0 -	4 9, 1 8 2 -	- -	5 5. 3 % -
Mr B Co in p p (ap in te d 1 9 De 2 0 0 6 ) p o c (re ig 2 Se 2 0 0 ) d 7 t 7 s ne p	2 0 0 8 2 0 0 7	1 2, 0 8 3 2 6, 6 4 4	- -	1 2, 0 8 3 2 6, 6 4 4	- -	- -	1 2, 0 8 3 2 6, 6 4 4	- -	- -
Mr P T ho ma s (re ig 1 9 2 0 0 6 ) d De s ne c	2 0 0 8 2 0 0 7	- 2 0 0 0 5,	- -	- 2 0 0 0 5,	- -	- 0 0 0 4 4 7,	- 2, 0 0 0 4 7	- -	- 9 % 4. 7
Exe ive O f f ice t cu r Mr G S tre t e (ap in te d 2 6 Ma 2 0 0 7 ) p o r (re ig 2 Se 2 0 0 8 ) d 4 t s ne p	2 0 0 8 2 0 0 7	1 1 7, 8 3 4 3 1, 3 9 2	- -	1 1 7, 8 3 4 3 1, 3 9 2	5 0, 0 0 0 6, 7 3 1	3 1, 6 9 6 -	1 9 9, 5 3 0 3 8, 1 2 3	- -	1 5. 9 % -
T O T A L K M P C O M P E N S A T I O N	2 0 0 8 2 0 0 7	2 7 7, 7 6 5 1 7 4, 7 8 0	6 3, 5 0 0 3 4 1, 4 8 7	3 4 1, 2 6 5 5 1 6, 2 6 7	1 1 4, 5 3 8 1 4, 9 8 7	5 7 5, 3 0 3 1, 3 4 1, 0 0 0	1, 0 3 1, 1 0 6 1, 8 7 2, 2 5 4	- -	5 5. 8 % 7 1. 6 %

(i) \$36,000 was paid to Resource Development Company Pty Ltd for consulting services provided by Mr KM Simich.

(ii) Remuneration payments to Mr G Steemson were paid to Steemson Geoscience Pty Ltd. (iii) Superannuation payments to WJ Evans, G Hutton and G Street include amounts paid as salary sacrifice.

FOR THE YEAR ENDED 30 JUNE 2008

14 INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

Indemnification

The Company indemnifies each of its directors, officers and company secretary. The Company indemnifies each director or officer to the maximum extent permitted by the Corporations Act 2001 from liability to third parties, except where the liability arises out of conduct involving lack of good faith, and in defending legal and administrative proceedings and applications for such proceedings.

The Company must use its best endeavours to insure a director or officer against any liability, which does not arise out of a conduct constituting a wilful breach of duty or a contravention of the Corporations Act 2001. The Company must also use its best endeavour to insure a director or officer against liability for costs and expenses incurred in defending proceedings whether civil or criminal.

The Company has not entered into any agreement with its current auditors indemnifying them against any claims by third parties arising from their report on the financial report.

Insurance Premiums

Insurance premiums in respect of directors' and officers' liability and legal expenses insurance contracts for current and former directors, executive officers and secretaries have been paid by the Company.

The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the above insurances as such disclosure is prohibited under the terms of the contract.

15 NON-AUDIT SERVICES

During the year Somes and Cooke, the Company's auditor, has performed certain other services in addition to their statutory duties.

The board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and
• non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor's own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Company, Somes and Cooke, for audit and non-audit services provided during the year are set out in note 7 of this financial report.

16 LEAD AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration is set out on page 13 and forms part of the directors' report for the financial year ended 30 June 2008.

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

MILES A KENNEDY CHAIRMAN

Dated at West Perth this 30th day of September 2008.

INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

	Note	2008 \$	2007 \$
Other income		13,869	15,408
Exploration and evaluation expenses	13	(4,472,270)	(4,052,762)
Administrative expenses		(519,844)	(377,272)
Share based payments	18	(661,666)	(1,341,000)
Loss from operating activities		(5,639,911)	(5,755,626)
Finance income		223,884	390,454
Loss before income tax		(5,416,027)	(5,365,172)
Income tax expense	8	-	-
Net loss for the period		(5,416,027)	(5,365,172)
Loss per share
Basic and diluted loss per share (cents)	9	(8.24)	(8.78)

BALANCE SHEET

AS AT 30 JUNE 2008

	2008	2007
Note	\$	\$
Assets
Cash and cash equivalents 10	8,362,681	5,811,669
Receivables 11	35,104	262,274
Prepayments for current assets	46,227	46,065
Total current assets	8,444,012	6,120,008
Receivables 11	37,247	29,220
Property, plant and equipment 12	281,010	250,745
Exploration and evaluation assets 13	-	-
Total non-current assets	318,257	279,965
Total assets	8,762,269	6,399,973
Liabilities
Trade and other payables 15	890,699	722,007
Employee benefits 16	59,201	24,145
Total current liabilities	949,900	746,152
Net assets	7,812,369	5,653,821
Equity
Share capital 17	22,007,569	15,094,660
Reserves 17	2,025,229	1,363,563
Retained losses	(16,220,429)	(10,804,402)
Total equity	7,812,369	5,653,821

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2008

		Share-based Payments	Retained
	Share Capital \$	Reserve \$	Losses \$	Total Equity \$
Balance 1 July 2006	10,108,660	22,563	(5,439,230)	4,691,993
Loss for the period	-	-	(5,365,172)	(5,365,172)
Total recognised income and expense for the year	-	-	(5,365,172)	(5,365,172)
Share issues for cash	4,400,000	-	-	4,400,000
Share issues for tenement acquisitions	402,000	-	-	402,000
Contributing shares paid to fully paid	277,950	-	-	277,950
Exercise of options	197,000	-	-	197,000
Share transaction costs	(290,950)	-	-	(290,950)
Share based payments	-	1,341,000	-	1,341,000
Balance at 30 June 2007	15,094,660	1,363,563	(10,804,402)	5,653,821
Balance at 1 July 2007	15,094,660	1,363,563	(10,804,402)	5,653,821
Loss for the period	-	-	(5,416,027)	(5,416,027)
Total recognised income and expense for the year	-	-	(5,416,027)	(5,416,027)
Share issues for cash	6,599,336	-	-	6,599,336
Contributing share issues for cash	633,832	-	-	633,832
Contributing shares paid to fully paid	143,250	-	-	143,250
Exercise of options	5,000	-	-	5,000
Share transaction costs	(468,509)	-	-	(468,509)
Share based payments	-	661,666	-	661,666
Balance at 30 June 2008	22,007,569	2,025,229	(16,220,429)	7,812,369

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2008

	Note	2008 \$	2007 \$
Cash flows from operating activities
Cash receipts		13,869	343,229
Cash paid to suppliers and employees		(564,031)	(303,010)
Cash from (used in) operations		(550,162)	40,219
Interest received		223,884	389,571
Net cash from (used in) operating activities	23	(326,278)	429,790
Cash flows from investing activities
Payments for exploration and evaluation		(4,407,934)	(3,630,091)
Payment for tenement security bond		-	(5,000)
Acquisitions of property, plant and equipment		(130,761)	(175,500)
Proceeds from sale of plant and equipment		34,567	-
Net cash from (used in) investing activities		(4,504,128)	(3,810,591)
Cash flows from financing activities
Proceeds from issue of share capital		7,238,168	4,597,000
Proceeds from contributing shares paid to fully paid		143,250	277,950
Payment of transaction costs		-	(290,950)
Net cash from (used in) financing activities		7,381,418	4,584,000
Net increase/(decrease) in cash and cash equivalents		2,551,012	1,203,199
Cash and cash equivalents at 1 July		5,811,669	4,608,470
Cash and cash equivalents at 30 June	10	8,362,681	5,811,669

FOR THE YEAR ENDED 30 JUNE 2008

1 REPORTING ENTITY

Sandfire Resources NL (the Company) is a company domiciled in Australia. The address of the Company's registered office is 1 Ventnor Avenue, West Perth 6005, Western Australia. The financial statements of the Company as at and for the year ended 30 June 2008 comprises only the Company. The Company is primarily involved in the evaluation and exploration of mineral tenements in Western Australia and the Northern Territory.

2 BASIS OF PREPARATION

(a) Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standard Board (AASB) and the Corporations Act 2001. The financial report of the Company complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were approved and authorised for issue by the Board of Directors on 30 September 2008.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for share based payments which are measured at fair value. The method used to measure the fair value is discussed further in note 18.

(c) Functional and presentation currency

These financial statements are presented in Australian dollars, which is the Company's functional currency.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Judgements made by management in the application of Australian Accounting Standards that have a significant effect on the financial statements are described in note 18 which details the measurement of share based payments.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Certain comparative amounts have been reclassified to conform to the current year's presentation.

(a) Cash and cash equivalents

Current cash and cash equivalents comprise cash balances, funds in transit, call deposits and commercial bills with an original maturity of three months or less.

(b) Exploration and evaluation assets

Exploration and evaluation costs, including the costs of acquiring licenses, are expensed in the Income Statement in the year in which they are incurred.

(c) Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within "other income" in profit or loss.

FOR THE YEAR ENDED 30 JUNE 2008

Depreciation

Depreciation is recognised in profit or loss on a diminishing value basis over the estimated useful lives of each part of an item of property, plant and equipment.

The estimated useful lives for the current and comparative periods are as follows:

	2008	2007
Office furniture and computer equipment	3-10 years	3-10 years
Plant and equipment	3-5 years	3-5 years
Motor vehicles	3-5 years	3-5 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

(d) Impairment

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect to an available-for-sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

(ii) Non-financial assets

The carrying amounts of the Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated.

Impairment losses are recognised in the income statement, unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised.

(e) Share capital

Ordinary shares and contributing shares are recorded at consideration received and are classified as equity. Incremental costs directly attributable to the issue of ordinary, contributing shares and share options are recognised as a deduction from equity, net of any tax effects.

(f) Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in profit or loss as and when they fall due.

(ii) Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees' services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Company expects to pay as at reporting date including related on-costs, such as workers' compensation insurance and payroll tax.

FOR THE YEAR ENDED 30 JUNE 2008

(iii) Share-based payment transactions

The grant date fair value of options and contributing shares granted to directors and employees is recognised as an expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market conditions not being met.

(g) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid and stated at their amortised cost. The amounts are unsecured and are generally settled on 30 day terms.

(h) Finance income

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

(i) Loss per share

The Company presents basic and diluted loss per share for its ordinary and contributing shares. Basic loss per share is calculated by dividing the net loss attributable to the ordinary and contributing shareholders of the Company by the weighted average number of ordinary and contributing shares of the Company during the period.

Diluted loss per share is determined by adjusting the net loss attributable to the ordinary and contributing shareholders and the number of shares outstanding for the effects of all dilutive potential shares, which comprise contributing shares and share options.

(j) Income tax

Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(k) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

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

(l) Segment reporting

A segment is a distinguishable component of the Company that is engaged whether in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

The Company operates within one business (mineral exploration and evaluation) and one geographic segment (Australia).

(m) New accounting standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the Company in the period of initial application. They are available for early adoption at 30 June 2008, but have not been applied in preparing this financial report:

• AASB 8 Operating Segments introduces the "management approach" to segment reporting. AASB 8, which becomes mandatory for the Company's 30 June 2010 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Company's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them. Currently the Company presents segment information in respect of its business and geographical segments (see note 3(l).

FOR THE YEAR ENDED 30 JUNE 2008

• Revised AASB 101 Presentation of Financial Statements introduces as a financial statement (formerly "primary" statement) the "statement of comprehensive income". The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the Company's 30 June 2010 financial statements. The Company has not yet determined the potential effect of the revised standard on the Company's disclosures.
• AASB 2008-1 Amendments to Australian Accounting Standard Share-based Payment: Vesting Conditions and Cancellations changes the measurement of share-based payments that contain non-vesting conditions. AASB 2008-1 becomes mandatory for the Company's 30 June 2010 financial statements. The Company has not yet determined the potential effect of the amending standard on the Company's financial report.

(n) Determination of fair values

A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values of assets and liabilities are disclosed in the notes specific to that asset or liability.

(i) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

(ii) Share based payment transactions

The fair value of employee and director share options is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historical volatility adjusted for changes expected due to publically available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the riskfree interest rate (based on government bonds). Service and non-market performance conditions attaching to the transactions are not taken into account in determining fair value.

		2008 \$	2007 \$
5	EXPENSES
	Included in income statement
	Depreciation of:
	Office furniture and computer equipment	15,949	16,033
	Plant and equipment	6,647	4,639
	Motor vehicles	43,335	44,972
	Buildings and infrastructure	-	8,618
		65,931	74,262
	Depreciation capitalised to exploration and evaluation assets	(64,336)	(71,797)
		1,595	2,465
6	PERSONNEL EXPENSES
	Wages and salaries	990,082	555,534
	Management contract payments	97,983	405,131
	Other associated personnel expenses	36,142	-
	Superannuation costs	200,132	52,368
	Increase in liability for annual leave	10,413	18,128
	Share-based payments	661,666	1,341,000
		1,996,418	2,372,161
	Personnel expenses capitalised to exploration and evaluation assets	(1,112,522) 883,896	(798,757) 1,573,404
7	AUDITORS' REMUNERATION
	Audit services:
	Auditors of the Company – Somes and Cooke	20,769	35,500
	Other services:
	Auditors of the Company – Somes and Cooke
	Taxation services Tenement audit services	5,894 1,750	3,183 -
	Other services	-	300
		28,413	38,983

FOR THE YEAR ENDED 30 JUNE 2008

		2008 \$	2007 \$
8	INCOME TAX EXPENSE
	Loss before tax	(5,416,027)	(5,365,172)
	Income tax expense/(benefit) using the domestic corporation tax rate of 30% (2007: 30%)	(1,624,808)	(1,609,552)
	Increase in income tax due to: Share based payments	198,500	402,300
	Other Effect of tax losses not recognised	- 1,426,308	321 1,206,931
	Income tax expense/(benefit)	-	-
	Unbooked deferred tax benefits The potential deferred tax benefit of losses will only be realised if: (i) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the losses and deductions to be released; (ii) the Company continues to comply with the conditions for deductibility imposed by the law; and (iii) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.
9	LOSS PER SHARE
	Basic and diluted loss per share	(\$0.0824)	(\$0.0878)
	Net loss for the period	(5,416,027)	(5,365,172)
	Issued ordinary shares and contributing shares (proportional to the amount paid up) at 1 July Effect of share options exercised Effect of shares issued Effect of contributing shares issued Effect of contributing shares paid up Weighted average number of ordinary shares and proportion of contributing shares at 30 June	No of Shares 65,060,693 12,623 45,077 36 613,288 65,731,717	No of Shares 53,724,879 461,985 5,743,562 - 1,150,486 61,080,912
	The Company is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital in respect of potential ordinary shares would lead to a diluted earnings per share that shows an inferior view of the earnings per share. For this reason, the diluted loss per share for the year ended 30 June 2008 is the same as basic loss per share.	2008 \$	2007 \$
10	CASH AND CASH EQUIVALENTS
	Bank balances (i) Call deposits Term deposits Cash and cash equivalents in the statement of cash flows (i) \$7,233,168 was received from the issue of shares and contributing shares at the end of the financial period and is included in current bank balances.	7,364,938 197,743 800,000 8,362,681	192,366 319,303 5,300,000 5,811,669
	A significant portion of these funds have since been placed into call and term deposits. The Company's exposure to interest rate risk and a sensitivity analysis for

The Company's exposure to interest rate risk and a sensitivity analysis for financial assets are disclosed in note 20.

FOR THE YEAR ENDED 30 JUNE 2008

		2008 \$	2007 \$
11	RECEIVABLES
	Current
	Receivables	2,156	11,556
	Accrued interest	2,828	-
	GST receivable	30,120	250,718
		35,104	262,274
	Non-Current Security and bond rental deposits (i)	37,247	29,220
	(i) Bond rental deposits are secured by bank guarantees which have been given
	as a condition of the rental of two properties used by the Company. The Company's exposure to credit risks and impairment losses related to other receivables is disclosed in note 20.
12	PROPERTY, PLANT AND EQUIPMENT
	Office furniture and computer equipment
	At cost	120,879	80,526
	Accumulated depreciation	(59,158)	(43,209)
	Plant and equipment	61,721	37,317
	At cost	61,441	31,665
	Accumulated depreciation	(16,087)	(9,440)
		45,354	22,225
	Motor vehicles
	At cost Accumulated depreciation	293,965 (120,030)	320,648 (129,445)
		173,935	191,203
	Buildings and infrastructure
	At cost	-	-
	Accumulated depreciation	- -	- -
	Total property, plant and equipment	281,010	250,745
	Reconciliation
	A reconciliation of the carrying amounts for each class of property, plant and
	equipment is set out below.
	Office furniture and computer equipment
	Carrying amounts at the beginning of the year Additions	37,318 40,352	29,686 23,664
	Depreciation	(15,949)	(16,033)
	Carrying amount at the end of the year	61,721	37,317
	Plant and equipment
	Carrying amounts at the beginning of the year	22,225	6,094
	Additions Depreciation	29,776 (6,647)	20,770 (4,639)
	Carrying amount at the end of the year	45,354	22,225
	Motor vehicles
	Carrying amounts at the beginning of the year	191,204	105,109
	Additions	60,633	131,066
	Disposals Depreciation	(34,567) (43,335)	- (44,972)
	Carrying amount at the end of the year	173,935	191,203
	Buildings and infrastructure
	Carrying amounts at the beginning of the year	-	29,632
	Depreciation	-	(8,618)
	Disposals	-	(21,014)
	Carrying amount at the end of the year Total property, plant and equipment	- 281,010	- 250,745

FOR THE YEAR ENDED 30 JUNE 2008

		2008 \$	2007 \$
13	EXPLORATION AND EVALUATION ASSETS
	Carrying amount at the beginning of the year	-	-
	Expenditure incurred during the year	4,472,270	4,052,762
	Expenditure written off	(4,472,270)	(4,052,762)
	Carrying amount at the end of the year	-	-
	In accordance with the Company's accounting policy all exploration and evaluation expenditure incurred during the period was written off in the financial year.
14	DEFERRED TAX ASSETS AND LIABILITIES
	The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise the benefits from. Refer note 8 for further information.
15	TRADE AND OTHER PAYABLES
	Current
	Trade creditors	212,404	682,987
	Other creditors and accruals (a) Other creditors and accruals due to related parties (b)	642,295 36,000	39,020 -
		890,699	722,007
	(a) Other creditors and accruals for 2008 include \$468,509 accrued costs on the issue of shares to POSCO. (b) Amounts due to related parties are payable to Resource Development Company Pty Ltd (RDC) for corporate consulting provided by Karl Simich. K Simich and M Kennedy are directors of RDC. The Company's exposure to liquidity risk related to trade and other payables is disclosed in note 20.
16	EMPLOYEE BENEFITS
	Salaries and wages accrued	14,852	-
	Liability for annual leave	44,349	24,145
	With the exception of employee share-based payments listed in note 18, the Company does not provide for any	59,201	24,145
	employee benefits beyond normal statutory requirements.
17	SHARE CAPITAL AND RESERVES
	Share capital comprises ordinary shares and contributing shares.
	Ordinary shares	2008 No.	2007 No.
	On issue at 1 July	65,059,626	53,723,626
	Contributing shares paid up in full	955,000	1,853,000
	Placement to POSCO Share Placement	16,498,339 -	- 8,000,000
	Issue as consideration for tenement acquisition	-	600,000
	Exercise of options expiring 30 September 2008	-	475,000
	Exercise of options expiring 31 December 2008	20,000	408,000
	On issue at 30 June	82,532,965	65,059,626

Terms and conditions

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets. Ordinary shares have no par value.

FOR THE YEAR ENDED 30 JUNE 2008

17 SHARE CAPITAL AND RESERVES / CONTD.

Contributing shares	2008	2007
	No.	No.
On issue at 1 July	10,672,652	12,525,652
Issued to employees as share based payment	430,000	-
Contributing shares paid up in full	(955,000)	(1,853,000)
Placement to POSCO	2,535,327	-
On issue at 30 June	12,682,979	10,672,652

Terms and conditions

Contributing shares are partly paid up to \$0.0001. The holders of contributing shares are required to make a further payment of \$0.15 for their shares to be fully paid. The contributing shares have a vote which is proportional to the amount actually paid thereon and relative to the aggregate amount paid on that share when it is fully paid.

Options over shares	2008		2007
	Options	Exercise Price (\$)	Options	Exercise Price (\$)
On or before 30 September 2008	525,000	0.20	525,000	0.20
On or before 31 December 2008	2,372,000	0.25	2,392,000	0.25
On or before 30 September 2011	3,000,000	0.50	3,000,000	0.50
On or before 7 February 2011	1,170,000	0.35	-	-
On or before 12 July 2013	2,000,000	0.60	-	-
On or before 12 July 2013	2,000,000	0.80	-	-
On or before 12 July 2013	2,000,000	1.00	-	-
	13,067,000		5,917,000	-

Movement in options over shares

The following options were issued during the period.

• 1,170,000 options were issued to employees under the Sandfire Resources Incentive Option Scheme (exercise price of \$0.35, expiring 7 February 2011).
• 6,000,000 options were issued to directors (expiring 12 July 2013). One third of these options have an exercise price of \$0.60, one third have an exercise price of \$0.80 and the remaining third have an exercise price of \$1.00. The issue of options to directors was approved by shareholders at a General Meeting on 19 June 2008. Further details on the issue of options to directors are disclosed in the Directors' Report.

The following options were exercised during the period.

• 20,000 options at an exercise price of \$0.25 expiring 31 December 2008. No options expired during the period.

Share-based payments reserve

The share-based payments reserve represents the fair value of equity instruments issued to employees, selected contractors and directors as compensation for their services. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Company's own equity instruments.

18 SHARE BASED PAYMENTS

The Board has introduced a number of equity-based long-term incentives (LTIs), to promote continuity of employment and to provide additional incentive to increase shareholder wealth.

These LTIs comprise:

• Issue of contributory shares in the Company to employees and contractors;
• Issue of options over ordinary shares in the Company to employees and contractors;
• Issue of options over ordinary shares in the Company issued to directors (subject to shareholder approval).

Employee and contractor contributing shares

• In July 2007, 430,000 contributory shares were issued to selected employees.

The contributory shares had the same rights as the other contributory shares on issue by the Company. The fair value of these contributory shares was estimated by the directors based on the share price at the date of grant. Contributory shares were granted with a fair value of \$0.05 per share.

FOR THE YEAR ENDED 30 JUNE 2008

18 SHARE BASED PAYMENTS / CONTD.

Employee and contractor options

The employee option plan provides for selected employees (including executives) and contractors to be offered the opportunity to subscribe for options over ordinary fully paid shares each year for no consideration.

Each option carries the right to subscribe for one fully paid ordinary share.

If the holder ceases to be a participant during the Qualifying Period for any reason (other than death or disability), the holder may only exercise the Exercisable Interest within 60 days from the date the holder ceases to be a participant, and thereafter the options will expire. There are no voting or dividend rights attached to the options. Voting rights will be attached to the ordinary issued shares when the options have been exercised. The directors have the rights under the employee option plan to issue any new options on terms and conditions they determine appropriate.

As a result of the above plan, the Company announced during the financial year the issue of 1,170,000 unlisted options to subscribe for ordinary fully paid shares in the Company at any time on or before 7 February 2011 at an exercise price of \$0.35 each. Each option is convertible to one fully paid ordinary share.

The fair value of the options is estimated at the date of grant using the Black-Scholes model. The following table sets out the assumptions made in determining the fair value of the options granted.

	Date of Grant
	5 Feb 2008	7 May 2008	27 May 2008	27 Jun 2008
Number of options granted	970,000	75,000	100,000	25,000
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	50.00%	50.00%	50.00%	50.00%
Risk-free interest rate	6.75%	7.25%	7.25%	7.25%
Expected life of option (years)	3.0 years	2.8 years	2.7 years	2.6 years
Option exercise price	\$0.35	\$0.35	\$0.35	\$0.35
Share price at date of grant	\$0.25	\$0.43	\$0.28	\$0.28

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility assumes a volatility that is indicative of future periods which may also not necessarily be the actual outcome.

Director options

6,000,000 options were issued to directors (expiring 12 July 2013). A third of these options have an exercise price of \$0.60, one third have an exercise price of \$0.80 and another third have an exercise price of \$1.00. The issue of options to directors was approved by shareholders at a General Meeting on 19 June 2008. Further details on the issue of options to directors are disclosed in the Directors' Report.

The following table illustrates the number and weighted average exercise prices (WAEP) of share options issued to directors, employees and contractors under the option plan.

Number	WAEP
	-
	\$0.50
	-
-	-
-	-
3,000,000	\$0.50
	- 3,000,000 -

19 FINANCIAL RISK MANAGEMENT

The Company has exposure to the following risks from their use of financial instruments.

• Credit risk
• Liquidity risk
• Market risk

The Board of Directors regularly review the risks faced by the Company in the light of current market conditions. The measures taken to manage the risks that the Company may face are detailed below.

FOR THE YEAR ENDED 30 JUNE 2008

19 FINANCIAL RISK MANAGEMENT / CONTD.

Credit risk

As the Company is involved in mineral exploration, it has minimal trade debtors or other receivables. The Company therefore does not have any significant exposure to credit risk. The Company's maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. As a result of the share placement to POSCO (detailed in note 6 to the directors' report) the Company does not have any significant concerns that it will be unable to meet its financial obligations over the coming financial year.

The funds received by the Company on the share placement have been put into a major bank's call and term deposits with varying maturity dates. These deposits are monitored closely to ensure that there is sufficient cash available so that operational obligations are met (on average within 30 days), whilst also ensuring that interest income is maximised.

Market risk

Market risk is the risk that changes in market prices will affect the Company's income or the value of its holdings of financial instruments. For the Company this is the risk from movements in interest rates. The Company has no exposure to currency risk. The objective of market risk management is to manage and control interest risk exposures within acceptable parameters, while optimising the return to the Company.

The Company makes sure that it has sufficient funds at call to manage its operations. The interest on call accounts is variable. Funds are also placed on longer term deposits and these are currently on fixed interest rates.

Whilst the Company aims to maximise its interest returns on money held on call and deposit at its bank, it does not rely on this income to finance its operations. The Company does not have any financial borrowings.

Capital management

The company is engaged in mineral exploration and does not have operating income. It is therefore not relevant to measure the company's performance by earnings per share or dividends paid.

The Company has an Employee Option Scheme and has issued options to directors. This encourages the performance of the Company's employees and directors, which in turn is beneficial to the Company's shareholders.

There were no changes in the Company's approach to capital management during the year.

The Company is not subject to externally imposed capital requirements.

20 FINANCIAL INSTRUMENTS

Credit risk

Exposure to credit risk

The carrying amount of the Company's financial assets represents the maximum credit exposure. The Company's maximum exposure to credit risk at the reporting date is set out below.

		Carrying Amount
	Note	2008 \$	2007 \$
Cash and cash equivalents	10	8,362,681	5,811,669
Trade and receivables	11	35,104	262,274
Receivables – non current	11	37,247	29,220

Impairment losses

The majority of the Company's receivables are for GST. None of the Company's receivables are past due (2007: nil). The Company does not believe that any provision needs to be made for impairment against the Company's receivables.

Liquidity risk

The following is the contractual maturity of financial liabilities.

	Carrying amount \$	Contractual cash flows \$	2 months or less \$
Non-derivative financial liabilities
Trade and other payables	890,699	890,699	890,699

FOR THE YEAR ENDED 30 JUNE 2008

20 FINANCIAL INSTRUMENTS / CONTD.

Interest rate risk

Profile

At the reporting date the interest profile of the Company's interest-bearing financial instruments was:

	Carrying amount 2008 \$	Carrying amount 2007 \$
Fixed rate instruments Financial assets	800,000	5,300,000
Variable rate instruments Financial assets	7,562,681	511,669

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit and loss.

A change of 100 basis points (1%) in interest rates would not have had a material impact on equity.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (1%) in interest rates at the reporting date would not have had a material impact on equity.

Fair value

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows.

		Carrying		Carrying
		Amount	Fair value	Amount	Fair value
In AUD	Note	2008	2008	2007	2007
Financial assets
Cash and cash equivalents	10	8,362,681	8,362,681	5,811,669	5,811,669
Trade and other receivables	11	35,104	35,104	262,274	262,274
Bonds and security deposits	11	37,247	37,247	29,220	29,220
Total financial assets		8,435,032	8,435,032	6,103,163	6,103,163
Financial liabilities
Trade and other payables	15	890,699	890,699	722,007	722,007
Employee benefits	16	59,201	59,201	24,145	24,145
Total financial liabilities		949,900	949,900	746,152	746,152

Estimation of fair values

The methods and assumptions used in determining the fair values of financial instruments are disclosed in the accounting policy notes specific to the asset or liability.

21 CAPITAL AND OTHER COMMITMENTS

Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the Company is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments. These obligations are subject to renegotiation when application for a mining lease is made and at other times. These obligations are not provided for in the financial report and are payable:

	2008	2007
Exploration expenditure commitments	\$	\$
Within one year	1,891,500	1,849,615

22 CONTINGENCIES

The Company's Exploration and Mining tenements are subject to Native Title Claims. At this stage it is not possible to quantify the impact (if any) that Native Title may have on the operations of the Company.

FOR THE YEAR ENDED 30 JUNE 2008

		2008 \$	2007 \$
23	RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
	Loss for the period Adjustments for:	(5,416,027)	(5,365,172)
	Depreciation	1,595	2,465
	Exploration and evaluation expenses	4,472,270	4,052,762
	Share-based payments	661,666	1,341,000
	Operating profit before changes in working capital and provisions	(280,496)	31,055
	(Increase)/decrease in receivables	219,143	(198,300)
	(Increase)/decrease in prepayments	(162)	(27,779)
	(Decrease)/increase in payables and provisions	(264,763)	624,814
	Net cash from/(used in) operating activities	(326,278)	429,790
	Non-cash investing and financing activities
	Purchase of mining tenements – Issue of shares	-	402,000

24 RELATED PARTIES

The following were key management personnel of the Company at any time during the reporting period and unless otherwise indicated in the Directors' Report were key management personnel for the entire period.

Executive directors	Non-executive directors
Mr KM Simich	Mr MA Kennedy
Mr WJ Evans	Mr J Hutton
Mr G Steemson	Mr B Coppin
Mr G Hutton	Executive officer
	Mr G Street

Key management personnel compensation

The key management personnel compensation included in 'personnel expenses' (see note 6) are as follows.

	2008	2007
	\$	\$
Short-term employee benefits	341,265	516,266
Post-employment benefits	114,538	14,987
Share-based payments	575,303	1,341,000
	1,031,106	1,872,253

Individual directors and executives compensation disclosures

Information regarding individual directors' and executives' compensation and some equity instruments disclosure as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors' Report.

Apart from the details disclosed in this note, no director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving directors' interests existing at year-end.

Other key management personnel transactions

A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company in the reporting period. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm's length basis.

The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows.

FOR THE YEAR ENDED 30 JUNE 2008

24 RELATED PARTIES / CONTD.

			Transactions value year ended 30 June		Balance outstanding as at 30 June
in AUD		Note	2008	2007	2008	2007
Key management person and their related parties	Transaction
MA Kennedy and JR Hutton Resource and Investment NL	Sale of motor vehicle	(i)	34,567	-	-	-
KM Simich Resource Development Company Pty Ltd (RDC)	Consulting fee re KM Simich	(ii)	36,000	-	36,000	-
KM Simich Tongaat Pty Ltd	Lease of offices	(iii)	39,325	-	-	-
G Street Geoag Pty Ltd	Equipment hire and use of vehicle	(iv)	2,275	-	-	-
PS Thomas	Legal services	(v)	-	2,287	-	-

(i) Resource and Investment NL purchased a motor vehicle from Sandfire Resources during the financial year. The sale value of the vehicle was at the written down value of the vehicle in Sandfire accounts. Mr MA Kennedy and Mr JR Hutton are both directors of Resource and Investment NL.

(ii) Resource Development Company Pty Ltd (RDC) charged the Company for the corporate services of Mr KM Simich at the rate of \$12,000 per month. This charge was agreed to in a directors' resolution and commenced on 1 April 2008. Mr MA Kennedy and Mr KM Simich are both directors of RDC.

(iii) \$39,325 was charged by Tongaat Pty Ltd for the lease of office premises to the Company. The amount of rent charged under the lease agreement was set by an independent valuer and approved by the Board.

(iv) During the financial year, Geoag Pty Ltd, a company of which Mr G Street is a director, charged the Company for the use of a scintillometer and for the use of a vehicle to transport exploration equipment.

(v) Mr P Thomas provided legal services to the Company on terms and conditions which were more favourable to the Company than Mr Thomas otherwise provides to clients generally. He was paid \$2,287 up to the date of his resignation for legal services not connected with the management of the Company.

Amounts payable to key management personnel and other related parties at reporting date arising from these transactions were as follows.

	2008	2007
	\$	\$
Current liabilities – trade payables	36,000	-
Total payables/total liabilities	36,000	-

From time to time, key management personnel purchase goods from the Company. These purchases are on the same terms and conditions as those entered into by other Company employees or customers and are trivial or domestic in nature.

Options and rights over equity instruments

The movement during the reporting period in the number of options and rights over ordinary shares in Sandfire Resources NL held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows.

	Held at 1 July 2007	Granted as compen sation	Exercised	Other changes(i)	Held at 30 June 2008	Vested during the year	Vested and exercisable 30 June 2008
Directors
Mr G Steemson	1,000,000	-	-	(1,000,000)	N/A	-	N/A
Mr G Hutton	1,000,000	-	-	(1,000,000)	N/A	-	N/A
Mr KM Simich	-	2,400,000	-	-	2,400,000	2,400,000	(ii) -
Mr WJ Evans	-	2,400,000	-	-	2,400,000	2,400,000	(ii) -
Mr MA Kennedy	-	900,000	-	-	900,000	900,000	- (ii)
Mr J Hutton	-	300,000	-	1,000,000	1,300,000	300,000	1,000,000(ii)

FOR THE YEAR ENDED 30 JUNE 2008

Executives Mr G Street	-	400,000	-	-	400,000	400,000	400,000
	Held at 1 July 2006	Granted as compen sation	Exercised	Other changes	Held at 30 June 2007	Vested during the year	Vested and exercisable 30 June 2007
Directors
Mr PS Thomas	-	1,000,000	-	(1,000,000)	N/A	1,000,000	N/A
Mr G Steemson	-	1,000,000	-	-	1,000,000	1,000,000	1,000,000
Mr G Hutton	-	1,000,000	-	-	1,000,000	1,000,000	1,000,000
Executives
Mr G Street	-	-	-	-	-	-	-

(i)Other changes represent options held by directors who cease to be directors during the year or options held by directors on appointment.

(ii)6 million options granted as compensation to directors vested during the period but are not exercisable until the share price exceeds the exercise price.

Movements in ordinary fully paid shares

The movement during the reporting period in the number of ordinary shares in Sandfire Resources NL held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows.

	Held at 1 July 2007	Held on appointment	Purchases	Other changes(i)	Sales	Held at 30 June 2008
Directors
MA Kennedy
(appointed 3.8.07)		206,268	-		-	206,268
KM Simich
(appointed 27.9.07)		2,766,268	120,000		-	2,886,268
WJ Evans
(appointed 2.10.07)	-	-	-		-	-
JR Hutton
(appointed 17.7.07)	-	5,791,108	-		-	5,791,108
JH Jong
(appointed 24.7.08)	-	-	-		-	-
B Coppin
(resigned 27.9.07) G Steemson	150,000	-	-	(150,000)	-	N/A
(resigned 3.8.07)	1,373,286	-	-	(1,373,286)	-	N/A
G Hutton
(deceased 16.7.07)	5,676,822	-	-	(5,676,822)	-	N/A
Executive Officer
G Street	85,000	-	55,000	-	-	140,000
	Held at 1 July	Held on		Other		Held at 30
	2006	appointment	Purchases	changes(i)	Sales	June 2007
Directors
PS Thomas
(resigned 19.12.06)	400,000	-	-	(294,000)	(106,000)	N/A
B Coppin
(appointed 19.12.06)	-	-	150,000		-	150,000
G Steemson	1,414,286	-	-		(41,000)	1,373,286
G Hutton	5,676,822	-	-		-	5,676,822
Executive Officer G Street
(appointed 26.3.07)	-	-	85,000		-	85,000

FOR THE YEAR ENDED 30 JUNE 2008

24 RELATED PARTIES / CONTD.

Movements in contributing shares

The movement during the reporting period in the number of contributing shares in Sandfire Resources NL held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows.

	Held at 1 July	Held on	Granted as	Other		Held at 30
	2007	appointment	compensation	changes(i)	Sales	June 2008
Directors
MA Kennedy	-	753,134	-	-	-	753,134
KM Simich	-	1,253,134	-	-	-	1,253,134
WJ Evans	-	-	-		-	-
JR Hutton	-	-	-	-	-	-
JH Jong	-	-	-	-	-	-
B Coppin	-	-	-	-	-	N/A
G Steemson	20,000	-	-	(20,000)	-	N/A
G Hutton	-	-	-		-	N/A
Executive Officer
G Street	-	-	50,000		-	50,000
	Held at 1 July		Granted as	Other		Held at 30
	2006	Purchases	compensation	changes(i)	Sales	June 2007
Directors
PS Thomas	1,000,000	-	-	(1,000,000)	-	N/A
B Coppin	-	-	-		-	-
G Steemson	20,000	-	-		-	20,000
G Hutton	-	-	-		-	-
Executive Officer
G Street	-	-	-	-	-	-

(i)Other changes represent shares held by directors who ceased to be directors during the year.

Changes in key management personnel in the period after reporting date and prior to the date when the financial report is authorised for issue:

Mr JH Jong – appointed 24 July 2008

Mr G Street – resigned 24 September 2008

25 SUBSEQUENT EVENTS

In accordance with the terms of a Commercial Agreement made between Company and Posco Australia Pty Ltd, Mr JH Jong (a director of Posco Australia Pty Ltd) was appointed a director of the Company on 24 July 2008.

DIRECTORS' DECLARATION

FOR THE YEAR ENDED 30 JUNE 2008

• 1. In the opinion of the directors of Sandfire Resources NL (the Company):
• (a) the financial statements and notes and the remuneration disclosures that are contained in the Remuneration Report in the Directors' Report, set out on pages 14 to 32, are in accordance with the Corporations Act 2001, including:
• (i) giving a true and fair view of the Company's financial position as at 30 June 2008 and of its performance, for the financial year ended on that date; and
• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
• (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a);
• (c) the remuneration disclosures that are contained in the Remuneration Report in the Directors' Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001; and
• (d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
• 1. The directors have been given the declarations required by Section 295A of Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2008.

Dated at West Perth this 30th day of September 2008 Signed in accordance with a resolution of the directors.

MILES KENNEDY CHAIRMAN