SANDFIRE RESOURCES LIMITED — Annual Report 2009

Sep 24, 2009

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Financial Report For the year ended 30 June 2009

ASX Code: SFR [Ordinary shares fully paid] SFRCA [Ordinary contributing shares] ABN: 55 105 154 185

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

CONTENTS PAGE

Directors’ Report	1
Lead Auditor’s Independence Declaration	15
Income Statement	16
Balance Sheet	17
Statement Of Changes In Equity	18
Statement Of Cash Flows	19
Notes To The Financial Statements	20
Directors’ Declaration	38
Auditor’s Independent Audit Report	39

SANDFIRE RESOURCES NL ABN 55 105 154 185

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

The directors present their report together with the financial report of Sandfire Resources NL (Sandfire or the Company) for the year ended 30 June 2009 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.

Name	Period of Directorship
Mr Miles A Kennedy	Director since 3 August 2007
Non-Executive Chairman
Mr Karl M Simich	Director since 27 September 2007, Managing Director since 1 July 2009
Managing Director
Mr W John Evans	Director since 2 October 2007
Executive Director
Mr John R Hutton	Director since 17 July 2007
Non-executive Director
Mr Jonghun Jong	Director since 24 July 2008
Non-executive Director
The qualifications, experience and other directorships of the directors in office at the date of this report are:
Mr Miles A Kennedy	Non-Executive Chairman
Qualifications	B.Juris
Age	60 years
Experience and other directorships	Mr Kennedy has held directorships of Australian listed resource companies for the past 26
	years. He is the non-executive Chairman of Marine Produce Australia Limited since June
	2008, is the non-executive Chairman of Resource & Investment NL since August 2007, is
	a non-executive director of Lonhro Mining Limited since September 2008 and is a non-
	executive director of Pangea Diamondfields, which has diamond interests in four African
	countries. Mr Kennedy was also the executive chairman of Kimberley Diamond Company
	NL from September 1993 to November 2007, the non-executive chairman of Blina
	Diamonds NL from November 2002 to December 2007and the non-executive chairman of
	Indago Resources Limited from August 2009 to September 2009. He was the founding
	Chairman of Macraes Mining Company Ltd and has extensive experience in the
	management of public companies. He lives in Perth, Western Australia.
Mr Karl M Simich	Managing Director
Qualifications	B.Comm, FCA, F.Fin
Age	45 years
Experience and other directorships	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 is the non-executive Chairman of Blue Capital Limited,
	formerly Goldlink Incomeplus Limited, since March 2009, and is a non-executive director
	of Indago Resources Limited since 7 August 2009. He was also the Chairman of
	Resource & Investment NL from January 1999 to June 2006, a director of Kimberley
	Diamond Company NL from November 1993 to November 2007, a non-executive director
	of Blina Diamonds NL from November 2002 to December 2007, and a non-executive
	director of Marine Produce Australia Limited from August 2002 to June 2006. Mr Simich is
	a Fellow of the Institute of Chartered Accountants 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
Mr W John Evans	Executive Director
Qualifications	B.Sc
Age	61 years
Experience and other directorships	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.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

1. Directors (continued)

Mr John R Hutton Non-Executive Director Age 43 years Experience and other directorships Mr Hutton is a non-executive director of Sandfire Resource NL since July 2007 and is a non-executive director of Marine Produce Australia Limited since August 2006, where he also held the position of Managing Director from October 2003 to February 2006. With a background in accounting, Mr Hutton has experience in merchant banking, financial planning and tax matters. He is a director of a number of successful private companies involved in the resources, pearling and tourism industries and is a member of the Australian Institute of Company Directors. He lives in Perth, Western Australia.

Mr Jonghun Jong Non-executive Director Qualifications B.Bus Age 44 years Experience and other directorships 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.

2. Company secretary

Ms Jean Mathie holds the position of Company Secretary and was appointed to the position in September 2007. Ms Mathie also holds the position of Company Secretary for other listed entities, including Resource & Investment NL, Lonrho Mining Limited and Marine Produce Australia Limited.

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:

financial year are:
	Board Meetings
	A B
Mr Miles A Kennedy Mr Karl M Simich Mr W John Evans Mr John R Hutton Mr Jonghun Jong	3 3 3 3 3 3 2 3 2 3

A – Number of meetings attended.

B – Number of meetings held during the time the director held office during the year.

4. Principal activities and review of operations

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

Project review, strategies and future prospects

The second half of the 2009 financial year was the most significant period of exploration activity in the Company’s history as a listed company. The discovery of high-grade copper-gold mineralisation at the 100%-owned Doolgunna Project in Western Australia in April/May 2009 has rapidly transformed the Company and immediately elevated Doolgunna as the principal focus of our exploration attention.

Drilling has so far defined at least two overlying high-grade copper-gold (Cu-Au) deposits at Doolgunna, DeGrussa and Conductor 1, which appear to comprise typical, steeply-dipping volcanogenic massive sulphide (VMS) mineralisation. A major program of diamond drilling is currently underway with three drilling rigs working around the clock to fully assess the lateral and depth extent of the high-grade mineralisation, which remains open in most directions.

The results received to date are very encouraging, indicating a significant discovery at Doolgunna which may well emerge as one of the more spectacular mineral discoveries seen in Western Australia in the past two decades.

Intensive drilling is continuing with the objective of defining an initial JORC compliant Mineral Resource for the DeGrussa/Conductor 1 Deposits before the end of 2009. Given the size of our tenement position at Doolgunna, which covers a 22km strike length of the prospective volcanic sequence which hosts the mineralisation (known as the Narracoota Volcanics), the directors of the Company are very optimistic about the future of this Project.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

An additional Reverse Circulation (RC) drilling rig is scheduled to commence testing a series of priority regional VTEM targets within the Doolgunna tenements in October 2009.

While the Company is excited by the potential of the Doolgunna discovery, the Company retains an outstanding portfolio of exploration assets in Western Australia and the Northern Territory. The Company continued to work on these projects during the year, in particular focusing on the base metal and manganese potential of the Borroloola Project in the Northern Territory.

The summary below highlights the material progress the Company has made with respect to the Doolgunna and Borroloola projects, with a more detailed review, including the Company’s complete project portfolio, to be made available as part of the Company’s ‘Operations Review’ section of the Company’s 2009 annual report.

DOOLGUNNA PROJECT, WESTERN AUSTRALIA (Sandfire 100%)

The Doolgunna Project is located 900km north of Perth and approximately 150km north of Meekatharra in the North Murchison Goldfield of Western Australia. The project area is close to a number of existing and historical gold mines and infrastructure including the Goldfields Gas Pipeline and Great Northern Highway. The Company has recently discovered at least two zones of high-grade volcanogenic massive sulphide (VMS)-style copper-gold sulphide mineralisation at DeGrussa and Conductor 1.

Gold Exploration

The original focus of the Company’s exploration at the Doolgunna Project was on the potential for near-surface, oxide gold deposits which would be amenable to extraction via open cut.

The Company had previously discovered seven such gold prospects, with the two most advanced prospects identified at Old Highway and DeGrussa. Previously reported high-grade gold intersections from these prospects included 10m @ 7.15g/t gold and 23m @ 4.07g/t gold at Old Highway; and 8m @ 8.80 g/t gold, 12m @ 2.83g/t gold and 24m @ 6.80g/t gold at DeGrussa.

During the second half of 2008, the Company carried out an initial program of close-spaced, inclined RAB drilling (57 shallow holes for 2,662 metres) testing for strike extensions of the previously reported gold mineralisation at DeGrussa. All drilling was restricted to the near surface, strongly weathered and oxidised saprolitic basalt that hosts the gold mineralisation.

Five drill holes recorded significant intervals of gold mineralisation with a best intersection of 10m @ 3.9 g/t Au from 18m depth recorded in hole DGRB2470. This program of drilling extended the gold-bearing strike length of the DeGrussa zone to 220 metres with potential for further extensions.

- DeGrussa VMS Copper Gold Discovery

In late April 2009, The Company commenced an RC drilling program designed to test at depth for extensions of the previously discovered gold zone at DeGrussa, which is located in the north-eastern portion of the Doolgunna Project tenements.

This program was immediately successful with a series of inclined and vertical RC drill holes intersecting significant widths of gold and copper mineralisation within the oxide zone. Significant intersections from this drilling included 19m @ 4.2 g/t Au from 40m including 12m @ 6.2g/t Au, 23m @ 2.4% Cu and 3.1g/t Ag including 10m @ 2.6% Cu, 11m @ 5.2g/t Au from 46m, 7m @ 4.3% Cu from 66m and 17m @ 4.1g/t Au from 53m .

Of more importance, several of the deeper vertical holes intersected high-grade copper sulphide mineralisation at depth below the oxide zone, often associated with other metals including gold, silver, zinc and lead – indicating the presence of a potentially substantial body of sulphide mineralisation below the oxide gold zone.

Amongst several significant intersections, hole DGRC 109 returned 35m @ 6.9% Cu, 1.4g/t Au and 10.5g/t Ag from 115m . These were the discovery holes of a sulphide body which is interpreted to dip steeply to the south-west. The drill holes are therefore oblique to the mineralisation and the intersections do not reflect true widths. The mineralisation style, chemistry and regional setting are consistent with a volcanogenic massive sulphide (VMS) copper-gold deposit.

The results of hole DGRC104 were considered to be particularly significant, with the hole intersecting over 100 metres of copper sulphide mineralisation. In summary, five of the holes – all of which were located near the south-western end of the oxide gold zone – were deep enough to intersect massive sulphide mineralisation.

A further six holes intersected shallow zones of oxide copper and, variously, gold, silver and zinc-enriched mineralisation considered to be derived from the primary sulphide mineralisation.

Conductor 1 Discovery

Following the encouraging results received from this program, the Company completed a ground electromagnetic (EM) survey and downhole EM surveys of five of the RC drill holes in order to determine the orientation and potential scale of the sulphide mineralisation. This work partially outlined an EM conductor coinciding with the known DeGrussa mineralisation.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

The fixed loop ground EM survey over an 800 metre strike length was completed over the main DeGrussa Prospect. This ground survey identified a second, much larger and significantly strong conductor immediately north of the known DeGrussa mineralisation.

A new program of RC drilling commenced at Doolgunna on 9 June to test for the presence of sulphide mineralisation at Conductor 1. This program comprised four vertical deep RC drill holes with the first hole, DGRC 114, centred approximately 160 metres to the north-west of the known DeGrussa mineralisation, and the other holes located to the east, west and south of DGRC 114.

Three of these four holes returned outstanding high-grade intersections as summarised below:

DGRC 114: 39m @ 5.2% Cu, 1.6g/t Au and 10.5g/t Ag from 135m DGRC 115: 32m @ 4.6% Cu, 1.7g/t Au and 7.9g/t Ag from 90m DGRC 117: 32m @ 2.9% Cu, 1.3g/t Au and 6.8g/t Ag from 294m

Preliminary geological interpretation of these results indicated that DeGrussa and Conductor 1 are overlying bodies of high-grade sulphide mineralisation with a vertical or steep southerly dip.

2009 Diamond Drilling Program

The Company commenced a major program of diamond core drilling at the Doolgunna Project on 4 July 2009 designed to test the overall scale and dimensions of the mineralisation at Conductor 1 and DeGrussa and help determine the next steps in the exploration of this exciting discovery.

All holes drilled as part of this program were inclined at 60 degrees to the north to provide a more accurate indication of the true width of the massive sulphide body given the interpreted southerly or south-easterly dip of the Conductor 1 body.

This drilling program has proved to be outstandingly successful, resulting in the rapid delineation of two significant deposits of high-grade copper-gold mineralisation in DeGrussa and Conductor 1.

The first diamond drillhole, DGDD-001, returned some of the best intersections seen in the Western Australian mining industry in recent times, intersecting a total of 78.3 metres of high-grade copper-gold mineralisation across both zones, including 53.2m @ 17.3% Cu and 2.5g/t Au in the DeGrussa Deposit and 25.1m @ 3.4% Cu, 3.4g/t Au and 1.6% Zn from 319.0m in the Conductor 1 Deposit.

The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:

SUMMARY OF ALL ASSAY RESULTS TO DATE FOR DIAMOND CORE DRILLING

The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:	The flow of excellent drilling results has continued. At the time of writing this report, a total of 21 diamond core holes had been completed, with diamond holes DGDD-022, -023 and -24 in progress. Nine of the completed holes intersected high-grade copper-gold mineralization in both the Conductor 1 and DeGrussa Deposits, while 10 holes intersected Conductor 1 only. Only two holes were unmineralised, intersecting a gabbro intrusion to the south of the Deposits. Results of the all the diamond core drilling completed to the date of this Report are summarised below:
SUMMARY OF ALL ASSAY RESULTS TO DATE FOR DIAMOND CORE DRILLING
		DOOLGUNNA PROJECT
		Interval (down hole)			Copper	Gold	Zinc	Silver
Hole Number	Deposit	From (m)	To (m)	Total (m)	(Cu) (%)	(Au) (g/t)	(Zn) (%)	(Ag) (g/t)
DGDD-001	DeGrussa Conductor 1	146.1 319.0	207.8 356.3	53.2 25.1	17.3 3.4	2.5 1.6	- 1.5	- 16.7
DGDD-003	Conductor 1	322.2	344.1	21.9	5.0	2.0	1.8	14.9
DGDD-004	Conductor 1	267.8	281.5	13.7	6.7	2.6	2.2	26.2
DGDD-005	Footwall Footwall	481.9 502.5	484.0 506	2.1 3.5	4.5 5.1	1.3 1.1	0.5 0.3	18.6 13.8
DGDD-006	Conductor 1	283.0	323.7	40.7	4.6	3.0	0.9	18.8
DGDD-007	DeGrussa Conductor 1	242.5 378.1	292.6 387	50.1 8.9	8.4 5.0	2.9 1.5	1.6 1.4	30.8 26.8
DGDD-008	Conductor 1 DeGrussa	347.4 245.0	363.0 287.0	15.6 42.0	3.1 6.6	2.5 2.4	3.6 1.4	24.3 20.5
DGDD-010	Conductor 1	370.8	383.0	12.2	2.3	1.4	2.4	21.0
DGDD-011	DeGrussa Conductor 1	279.2 335.0	281.0 338.0	1.8 3.0	3.1 1.8	1.6 0.4	0.9 -	9.0 4.9
DGDD-013	DeGrussa Conductor 1	202.3 358.0	212.6 363.0	10.3 5.0	5.9 1.2	1.8 3.6	2.4 0.3	34.9 12.2

(Note: all intervals are down-hole)

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

In addition, at the date of this report assay results are awaited for a number of holes for which the Company has been able to report significant mineralised intercepts based on the strong correlation between geological logging of the core and assay results.

Hole DGDD-011(7173000mN,	733800mE) – located 40 metres	733800mE) – located 40 metres	west of DGDD-001	west of DGDD-001
Deposit	From	To	Interval(m)	**Type **
DeGrussa	279.2	281.8	2.6	Massive sulphides
Conductor 1	332.4	339.5	7.1	Sulphides
Hole DGDD-012(7173080mN,	733880mE) – located 80 metres		north of DGDD-008
Deposit	From	To	Interval(m)	**Type **
DeGrussa	76.0	90.0	14.0	Oxide copper
Conductor 1	267.0	291.6	24.6	Massive sulphides
Hole DGDD-013(7172960mN,	733880mE) – located 40 metres		east of DGDD-001
Deposit	From	To	Interval(m)	**Type **
DeGrussa	202.8	212.6	9.8	Sulphides/Massive Sulphides
Conductor 1	357.0	363.0	6.0	Sulphides/Massive Sulphides
Hole DGDD-014(7173040mN,	733880mE) – located 40 metres		north of DGDD-008
Deposit	From	To	Interval(m)	**Type **
DeGrussa	122.4	125.4	3.0	Oxide copper
DeGrussa	125.4	216	90.6	Sulphides/Massive Sulphides
Conductor 1	306.5	332.6	26.1	Massive sulphides
Hole DGDD-015(7172920mN,	733800mE) – located 40 metres		west of DGDD-009
Deposit	From	To	Interval(m)	**Type **
DeGrussa	257.8	297.8	40.0	Massive Sulphides
Conductor 1	400.6	410.9	10.3	Sulphides/Massive Sulphides
Hole DGDD-016(7172920mN,	734000mE)
Deposit	From	To	Interval(m)	**Type **
Footwall Mineralisation	670.8	674.8	4.0	Massive sulphides
Hole DGDD-017(7173040mN,	733920mE)
Deposit	From	To	Interval(m)	**Type **
DeGrussa	238.9	243.8	4.9	Massive sulphides
Conductor 1	286.1	317.9	31.8	Massive sulphides
Conductor 1	319.8	323.0	3.2	Massive sulphides
Hole DGDD-018(7173080mN,	733920mE)
Deposit	From	To	Interval(m)	**Type **
DeGrussa	121.9	141.6	19.7	Oxide/clay cap of mineralisation
				Sulphides
Conductor 1	255.7	261.9	6.2	Sulphides
	261.9	281.8	19.9	Massive sulphides
Hole DGDD-019(7172840mN,	733720mE)
Deposit	From	To	Interval(m)	**Type **
Conductor 1	496.7	531.4	34.7	24.6m of massive sulphides, 3m of
				sulphide-bearingschist

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

Hole DGDD-020(7173200mN, 733880mE) Deposit From To	Interval(m) **Type **
Conductor 1 Conductor 1 71.7 102.3 102.3 105.9	30.6 3.6 Disseminated oxide copper and native copper Chalcocite(copper sulphide)in clay
Hole DGDD-021(7172920mN, 73364mE) Deposit From To	Interval(m) **Type **
Conductor 1 363.9 399.2	35.2 Massive sulphides

(Note: all intervals are downhole)

Whilst it is too early to draw definitive conclusions from these results, the Company notes the following key points in relation to the drilling.

• The DeGrussa Deposit comprises a steeply-dipping zone of very high-grade copper-gold mineralisation with associated zinc and silver lying above Conductor 1. This Deposit has delivered some remarkable grades and widths including the results seen in DGDD-001 (see above), DGDD-007 (50.1m @ 8.4% Cu and 2.9g/t Au) and hole DGDD-014 (93.6 metres of continuous mineralisation including 90.6 metres of sulphides/massive sulphides – assays awaited).

• High-grade copper-gold mineralisation has so far been intersected over a lateral strike extent of approximately 400 metres within the underlying Conductor 1 mineralisation, which is open in both directions along strike and appears to comprise a much larger sulphide body. The highest value intercepts (eg, 21.9m true width grading 5.0% Cu and 2.0g/t Au in DGDD-003 and 13.7m true width grading 6.7% Cu and 2.6g/t Au) occur on the eastern side of the Conductor 1 Deposit.

• Recent drilling has extended the Conductor 1 Deposit to at least 475 metres below surface (24.6 metre intersection of massive sulphides in hole DGDD-019), confirming that it has a very steep (near-vertical dip) to the south-west, consistent with classic VMS-style deposits.

• The latest drilling has highlighted the potential for a new zone of copper-gold mineralisation on the north-eastern flank of the discovery. This zone, referred to as the Footwall Zone, has been intersected by DGDD-005 (2.1m @ 4.5% Cu, 1.3 g/t Au and 3.5m @ 5.1% Cu, 1.1g/t Au) and DGDD-016 (4.0 metres of massive sulphides – assays awaited).

• More recent drilling has provided growing evidence that the gabbo intrusion to the south of the Deposits has merely displaced the mineralisation, not cut it off at depth. Dolerite and gabbro intrusions are not uncommon within volcanogenic massive sulphide (VMS) systems.

The objectives of the current drilling program are as follows.

• To complete a close-spaced drill-out of the high-grade copper and gold mineralisation in the DeGrussa Deposit. This will increasingly involve deeper holes to test the steep, south-westerly plunging deposit. All holes in the current phase of drilling are being extended to depth to intersect the underlying Conductor 1 copper-gold deposit. This work is expected, over time, to result in the definition of JORC compliant Mineral Resources for both the DeGrussa and Conductor 1 deposits;

• To assess the Conductor 1 copper-gold deposit, defining the lateral limits of the mineralisation and determine the potential depth continuity of the deposit. Down hole EM surveys are being conducted on several completed diamond drill holes to locate off-hole conductors for follow-up drilling;

• To test the immediate surrounds of the DeGrussa Deposit for further copper-gold-zinc lodes. In particular the Footwall and Conductor 4 prospects will be tested by drilling; and

• To undertake reconnaissance testing of regional VTEM targets along the 22km strike length of the approximately 2km thick volcano-sedimentary sequence at the top of the Narracoota Volcanics, the prospective stratigraphy within The Company’s tenement holding which hosts the DeGrussa and Conductor 1 Deposits.

All of the drilling activities, core handling, sampling processing and analytical testwork, geological logging and down hole surveys at the Doolgunna Project are strictly compliant with industry best practice.

Geophysics and Regional Exploration

In June the Company also completed an extensive +1,000 line km regional airborne electromagnetic survey (VTEM) over the prospective volcanic rock sequences within the Doolgunna Project area. This survey covered a total area of approximately 150 square kilometres of the Narracoota Volcanics and surrounds, most of which are concealed below transported surficial cover.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

The results of this VTEM survey are considered to be strategically important in determining the broader prospectivity of the Company’s tenements. The mineralisation style, chemistry and regional setting at Conductor 1/DeGrussa are consistent with a VMS-style deposit. This type of mineralisation typically occurs in clusters of deposits or occurrences, often with multiple centres of mineralisation across a region or province.

This further opens up the potential of the Company’s tenement holdings at Doolgunna for possible large-scale VMS deposits, with DeGrussa located within a highly prospective geological setting. Most of the prospective stratigraphy is concealed by thick sequences of recent surficial sediments not readily explored by traditional prospecting techniques.

At the date of this report, the Company had commenced Ground EM Surveys over several airborne VTEM anomalies located to the east and south-west of the DeGrussa/Conductor 1 Deposits. So far, these surveys have confirmed two targets as priority areas for follow-up drilling. While the current focus of activity is on the resource in-fill and step-out drilling program at DeGrussa/Conductor 1, the Company intends to bring in a Reverse Circulation drilling rig to commence testing of these priority VTEM targets during October.

BORROLOOLA PROJECT: NORTHERN TERRITORY (SANDFIRE 100%)

The Borroloola Project comprises a total area of 14,400 square kilometres of granted tenements and tenements under application in the Northern Territory. The Project encloses a significant proportion of the Batten Fault Zone, host to the giant McArthur River lead and zinc deposit owned and mined by Xtrata. That deposit is the second largest SEDEX base metal deposit in the world. The Project also covers near-coastal areas of Cretaceous rocks considered to be highly prospective for sedimentary manganese mineralisation, similar to the world-class Groote Eylandt manganese deposits north of the Borroloola Project, in the Gulf of Carpentaria.

Manganese Exploration

While the initial focus of exploration at the Borroloola Project was for base metal deposits, the Company has since acquiring the Project recognized the potential of the area for Cretaceous-aged sedimentary manganese mineralisation, located typically at the base of Cretaceous succession that overlies the basement McArthur Basin rocks. The flat-lying Cretaceous inter-fingers around the hills that are formed from the ancient basement rocks.

During the second half of 2008, the Company completed a comprehensive program of RAB and Aircore drilling at six target areas considered prospective for manganese mineralisation in the Rosie Creek and Rosie Creek SW areas. Historical exploration, including by BHP, had located manganese mineralisation at Rosie Creek.

The drilling program commenced in August and was completed in early November 2008. A total of 435 holes were drilled in this period. During the December 2008 Quarter, the Company completed a total of 295 holes for 5,674 metres (an average of 19.2 metres per hole) – all of which was aircore drilling to bedrock.

This drilling has confirmed the presence of extensive areas of generally flat-lying, basal Cretaceous sedimentary manganese mineralisation at the Rosie Creek Deposit. Similar mineralisation has also been delineated at the Rosie Creek SW Reconnaissance area, located some 4km south west of the Rosie Creek deposit.

A total of 163 drill holes have intersected near-surface basal Cretaceous manganese mineralisation at Rosie Creek and the SW Reconnaissance deposits. This mineralisation, comprising distinctive black manganese nodules within sandy and clayey manganiferous sediments, occurs regionally within the middle reaches of the Rosie Creek catchment.

Aircore drilling at the two prospects was undertaken at intervals of 100m by 100m and 200m by 200m.

All 1 metre manganiferous drill intersections (a total of 456 samples) were submitted for analysis and assaying for manganese, iron, phosphorous, silica alumina and loss-on-ignition (LOI).

During the drilling program the Company hand-picked manganese nodules from a selection of 24 of the drill samples. Eight of the nodular concentrate samples returned encouraging assays of between 37.7% Mn and 45.6% Mn (average 40.6% Mn), with phosphorous of between 0.09% P and 0.25% P (average 0.157% P).

In the two known deposits at Rosie Creek and Rosie Creek SW Reconnaissance, the mineralisation is typically composed of manganiferous nodules in a poorly consolidated manganiferous and shale unit. Within the sequence, the ratio of nodules to sand and to shale is highly variable. This variability is also reflected in the overall assay grade of the raw manganese drill intersections and precludes a simple assessment of the two manganese deposits.

The Company has defined three separate areas in order to more accurately determine the potential manganese product resources and grades within this area.

Two of these have been identified within the Rosie Creek Deposit and one within the SW Reconnaissance Deposit. Drill cuttings from these areas have been composited into bulk samples for metallurgical test work, which is designed to determine the grade and content of the coarse and fine manganese nodules that can be separated from the in situ mineralisation.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

4. Principal activities and review of operations (continued)

Base Metal Exploration

The primary exploration targets within the Borroloola Project are sedimentary zinc and lead deposits similar to the giant McArthur River Mine deposit, located south of the Project. The Company has delineated an area of high lead, zinc and silver prospectivity flanking the Emu Fault Zone, which extends some 100 kilometres through the property.

During the year, the Company completed a diamond drilling program at the Yalco and Warramana Prospects, with four holes completed at the Yalco Project for a total of 1,146 metres of drilling and two holes completed at the Warramana Prospect for 747.7 metres of drilling. While no significant base metal mineralisation was intersected, ongoing exploration continues to confirm the prospectivity of this region for potentially world-class base metal deposits.

Results were also received and assessed from a detailed soil geochemistry program over the Alice Prospect. The Prospect covers an 800 metre length of the middle units of the Balbarini Dolomite of the Nathan Group.

Anomalous lead-in-soil results to a peak value of 514 parts per million (ppm) were reported from the soils, forming a discrete zone of anomalism. Further field work will be carried out on this target during the 2009 northern dry season.

Processing of the results of the airborne electromagnetic survey (VTEM) flown during August 2008 was also completed during the year. This 1,235 line km survey was flown over the Rosie Creek lower catchment area, north of the Warramana Prospect.

This sector of the McArthur Basin is underlain by the Barney Creek Formation, the host sequence to the McArthur River deposit, and is highly prospective for lead-zinc-silver mineralisation.

The Company also undertook an aircore and RAB drilling program testing five topographic features, surface depressions, in an area 30km north of Cape Crawford for potential diamond deposits. While no kimberlite rocks were intersected, the locality is still considered to be a high-priority diamond exploration area.

Uranium Potential

The Company has also identified a 40km strike length of the basal unit of the McArthur Basin which is prospective for uranium mineralisation within the Borroloola tenement package.

The Yiyintyi Sandstone is in unconformable contact with the underlying rhyolitic Scrutton Volcanics. This geological setting is comparable to that of the basal McArthur Basin, Paleoproterozoic unconformity related uranium deposits in the East Alligator Uranium field, some 420 kilometres to the northwest.

The unconformity occurs at shallow depths, typically under 20 to 50 metres of flat-lying Cretaceous cover which would have concealed any uranium mineralisation from ready detection by airborne radiometric surveys.

Interpretation of the Company’s airborne electromagnetic survey data over the prospective Scrutton Volcanics indicates conductive features in these basement rocks that intersect with the Yiyinti Sandstone and may have acted as focus localities for deposition of uranium.

Financial performance

The Company expended $4,776,900 (2008: $4,472,270) on the exploration and evaluation of mineral tenements during the financial year. In accordance with the Company’s accounting policies, all of this expenditure was expensed as incurred.

The expensing of exploration and evaluation expenditure contributed to the Company’s net loss for the period ended 30 June 2009 of $5,148,157 (2008: $5,416,027).

Financial position

As at 30 June 2009 the Company had a net working capital surplus of $2,415,621 (2008: $7,494,112), represented significantly by cash and cash equivalent assets of $2,645,110 (2008: $8,362,681). The Company’s net asset position was $2,789,598 (2008: $7,812,369), with no value assigned to exploration and evaluation assets in the balance sheet.

Pursuant to the Company’s 1 for 10 pro rata non-renounceable entitlements offer to existing shareholders, the Company issued 9,716,933 fully paid ordinary shares subsequent to period end to raise $11,660,320 before issue costs. These funds will allow the Company to continue to actively explore and evaluate its mineral tenements.

5. Significant changes in the state of affairs

In the opinion of the directors there were no significant changes in the state of affairs of the Company that occurred during the financial year under review, other than those described in section 4 of the directors’ report.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

DIRECTORS’ REPORT

6. Environmental regulations

The Company’s exploration activities are subject to significant environmental regulations under both Commonwealth and State legislation.

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.

The directors have considered the recently enacted National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which introduces a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations. At the current stage of development, the directors have determined that the NGER Act will have no effect on the Company for the current, nor subsequent financial year. The directors will reassess this position as and when the need arises.

7. Dividends

The directors have not recommended the declaration of a dividend. No dividends were paid or declared by the Company during the current or prior financial year.

8. Events subsequent to reporting date

Subsequent to 30 June 2009, the Company has announced the issue 1,120,000 unlisted employee options with an exercise price of $1.40, expiring 6 July 2012.

Subsequent to period end the Company has announced the following issue of ordinary shares:

• 1,400,000 from the exercise of 1,400,000 unlisted options at an exercise price of $0.50 expiring 30 September 2011, to raise $700,000;

• 568,570 from the exercise of 568,570 unlisted options at an exercise price of $0.35 expiring 7 February 2011, to raise $199,000;

• 120,000 from the exercise of 120,000 unlisted options at an exercise price of $0.60 expiring 12 July 2013, to raise $72,000;

• 718,373 issued on payment in full of contributing shares, to raise $107,754; and

• 9,716,933 at $1.20 per share, pursuant to the Company’s 1 for 10 pro rata non-renounceable entitlements offer to existing shareholders, to raise $11,660,320 before issue costs.

9. Likely developments

The Company will continue to pursue and further the exploration and evaluation of its tenements in Western Australia and the Northern Territory. Further comments on expected results of certain operations of the Company are included in this financial report under section 4, principal activities and review of operations.

10. 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.

			Options over	ordinary shares
	Ordinary	Contributing	Expiring	Expiring
	shares fully paid	sharespartly paid	12 Jul 2013	30 Sep 2011
Mr Miles A Kennedy	111,993	753,134	900,000	-
Mr Karl M Simich	3,296,204	1,253,134	2,400,000	-
Mr W John Evans	132,000	-	2,280,000	-
Mr John R Hutton	6,370,216	-	300,000	1,000,000
Mr Jonghun Jong	-	-	-	-

11. Share options

Options granted to directors and executives of the Company

The Company did not grant any options over unissued ordinary shares in Sandfire Resources NL to directors or officers during, or since the end of the financial year.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

11. Share options (continued)

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 shares
7 February 2011	$0.35	535,000
30 September 2011	$0.50	1,600,000
8 August 2011	$0.40	1,420,000
6 July 2012	$1.40	1,000,000
12 July 2013	$0.60	1,880,000
12 July 2013	$0.80	2,000,000
12 July 2013	$1.00	2,000,000

The options do not entitle the holder to participate in any share issue of the Company.

Share options issued

The following options over ordinary shares were issued by the Company during or since the end of the financial year.

Expiry date	Exercise Price	Number of shares
8 August 2011	$0.40	1,420,000
6 July 2012	$1.40	1,000,000

The options were issued to employees of the Company. Refer to note 17 of the financial report for further details.

Shares issued on exercise of options

The following number of ordinary shares were issued by the Company as a result of the exercise of options during or since the end of the financial year.

Expiry date	Exercise Price	Number of shares
7 February 2011	$0.35	635,000
30 September 2011	$0.50	1,400,000
12 July 2013	$0.60	120,000

Options expired

The following options over ordinary shares issued by the Company expired during or since the end of the financial year.

Expiry date	Exercise Price	Number of shares
30 September 2008	$0.20	525,000
31 December 2008	$0.25	2,372,000

12. Remuneration report - audited

12.1 Principles of compensation

Remuneration is referred to as compensation throughout this report.

Key management personnel (KMP) have authority and responsibility for planning, directing and controlling the activities of the Company, including directors of the Company and other executives. Key management personnel comprise the directors and executives of the Company including the five most highly remunerated Company executives.

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 explained below 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.

The Board has no established retirement or redundancy schemes.

Other than the directors, no other person is concerned in, or takes part in, the management of the Company, or has the authority and responsibility for planning, directing and controlling the activities of the Company. As such, during the financial year, the Company did not have any person, other than directors, that would meet the definition of “Key Management Personnel” for the purposes of AASB124 Company Executive or Relevant Group Executive for the purposes of section 300A of the Corporations Act 2001 (“Act”).

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

12. Remuneration report – audited (continued)

12.1 Principles of compensation (continued)

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.

Equity based compensation ( Long-term incentive bonus )

The Board has introduced a number of equity-based long-term incentives (LTIs) to promote continuity of employment and to provide additional incentive to key management personnel to increase shareholder wealth and are provided to key management personnel based on their level of seniority and position within the Company. LTIs comprise the issue of contributory shares in the Company and the issue of options over ordinary shares in the Company.

Options may only be issued to directors subject to approval by shareholders in general meeting.

The Company did not grant any options over unissued ordinary shares in Sandfire Resources NL to key management personnel during, or since the end of the financial year. Details of existing equity based compensation plans issued in prior financial years are included in section 12.3.4 of the Directors’ Report.

Short-term and long-term incentive structure and consequences of performance on shareholder wealth

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 earning measures to be an appropriate key performance indicator. The issue of options as part of the remuneration package of directors is an established practice for listed exploration companies and has the benefit of conserving cash whilst appropriately rewarding the directors. 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.

Service contracts

Compensation and other terms of employment for key management personnel and the company secretary are formalised in contracts of employment.

Mr K Simich – Managing Director

Mr Simich has a contract with the Company under which he has agreed to provide his services as Managing Director for a gross compensation package of $300,000, payable in the form of a management fee to Resource Development Company Pty Ltd, a Company associated with Mr Simich. Mr Simich is also paid $36,000 in director fees. Mr Simich’s salary is reviewed on an annual basis by the Board and the Company has agreed to reimburse Mr Simich 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 Simich.

Mr WJ Evans – Executive Technical Director

Mr Evans has a contract of employment with the Company under which he has agreed to provide his services as Executive Technical Director for a gross compensation package of $281,000, which includes a base salary plus superannuation contributions of $245,000, plus $36,000 in director fees. 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.

Ms J Mathie - Company Secretary

Ms Mathie has a contract of employment with the Company under which she has agreed to provide her services as Company Secretary for a gross compensation package of $100,000, 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 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.

Non-executive directors

Total compensation for all non-executive directors are set based on advice from external advisors with reference to fees paid to other non-executive directors of comparable companies. Non-executive directors’ fees are presently limited to a total of $250,000 per annum, excluding the fair value of any options granted.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

12. Remuneration report – audited (continued)

Non-executive directors (continued)

Non-executive directors do not receive performance related compensation. Options issued to non-executive directors are provided as an incentive to promote continuity of service and are not performance based. The Board has no established retirement or redundancy schemes in relation to non-executive directors.

12.2 Directors’ and executive officers’ remuneration

Details of the nature and amount of each major element of remuneration of each director of the Company are:

Directors			Short-term			Share- based payments	Total $	Proportion of remuneration performance related %	Value of options as proportion of remuneration %
		Salary & fees $	Management contract $	Total $	Super- annuation benefits $	Options (A) $
Mr M A Kennedy, Non- executive Chairman Mr K M Simich, Managing Director Mr W J Evans, ~~E~~xecutive Technical Director Mr J R Hutton, Non- executive Director Mr J Jong, Non- ~~e~~xecutive Director (appointed 24 Jul 2008)	2009	55,045	-	55,045	4,955	-	60,000	-	-
	2008	33,642	-	33,642	3,028	81,541	118,211	-	69.00%
	2009	33,027	(B)144,000	177,027	2,973	-	180,000	-	-
	2008	20,185	36,000	56,185	1,817	217,443	275,445	-	78.90%
	2009	224,771	-	224,771	20,229	-	245,000	-	-
	2008	70,503	-	70,503	(C)52,876	217,443	340,822	-	63.80%
	2009	33,027	-	33,027	2,973	-	36,000	-	-
	2008	20,185	-	20,185	1,817	27,180	49,182	-	55.30%
	2009	-	-	-	-	-	-	-	-

(A) The fair value of the options are calculated at the date of grant using the Black-Scholes option valuation model and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the options allocated to this reporting period. Further details of the issue are included in section 12.3 of the Directors’ Report.

(B) Amounts totalling $144,000 were charged to the accounts of the Company by Resource Development Company Pty Ltd, a company associated with Mr Simich, representing management and consulting fees.

(C) Compensation payments to Mr Evans included amounts paid as salary sacrifice.

12.3 Equity instruments

All options refer to options over ordinary shares of Sandfire Resources NL, which are exercisable on a one-for-one basis.

12.3.1 Options and rights over equity instruments granted as compensation

The Company did not grant any options over unissued ordinary shares in Sandfire Resources NL to directors or officers during, or since the end of the financial year.

12.3.2 Modifications of terms of equity-settled share-based payment transactions

No terms of equity-settled share-based payment transactions (including options granted as compensation to a key management person) have been altered or modified by the Company during the reporting period or prior period.

12.3.3 Exercise of options granted as compensation

No options over ordinary shares, previously granted as compensation, were exercised during the reporting period.

Mr J Evans exercised 120,000 options over ordinary shares previously granted as compensation on 31 July 2009 at $0.60 per share.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 DIRECTORS’ REPORT

12. Remuneration report – audited (continued)

12.3 Equity instruments (continued)

12.3.4 Analysis of options over equity instruments granted as compensation

Details of the options and relevant vesting profile of the options granted as remuneration to each key management person of the Company are detailed below.

	Options granted	Options granted
			Exercise Price		% vested	% forfeited	Financial years in
Directors	Number	Date	($)	Expiry Date	in year	in year	which grant vested
Mr M Kennedy	300,000	20 June 2008	$0.60	12 July 2013	-	-	30 June 2008
	300,000	20 June 2008	$0.80	12 July 2013	-	-	30 June 2008
	300,000	20 June 2008	$1.00	12 July 2013	-	-	30 June 2008
Mr K Simich	800,000	20 June 2008	$0.60	12 July 2013	-	-	30 June 2008
	800,000	20 June 2008	$0.80	12 July 2013	-	-	30 June 2008
	800,000	20 June 2008	$1.00	12 July 2013	-	-	30 June 2008
Mr J Evans	800,000	20 June 2008	$0.60	12 July 2013	-	-	30 June 2008
	800,000	20 June 2008	$0.80	12 July 2013	-	-	30 June 2008
	800,000	20 June 2008	$1.00	12 July 2013	-	-	30 June 2008
Mr J Hutton	100,000	20 June 2008	$0.60	12 July 2013	-	-	30 June 2008
	100,000	20 June 2008	$0.80	12 July 2013	-	-	30 June 2008
	100,000	20 June 2008	$1.00	12 July 2013	-	-	30 June 2008

All options over ordinary shares were granted and vested during the previous reporting period. There was no movement in options over ordinary shares previously granted as compensation during the current reporting period.

13. 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.

The directors of the Company are not aware of any proceedings or claim brought against Sandfire Resources NL as at the date of this report.

Insurance premiums

The Company has paid insurance premiums of $7,800 in respect of directors’ and officers’ liability and legal expenses insurance contracts for current and former directors, executive officers and secretaires. The insurance policies outlined above do not contain details of the premiums paid in respect of individual officers of the Company.

14. Non-audit services

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

The Board has considered the non-audit services provided by the auditor and is satisfied that the provision of those nonaudit 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 Company 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 & Cooke, for audit and non-audit services provided during the year are set out below.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

DIRECTORS’ REPORT

14. Non-audit services (continued)

14. Non-audit services (continued)
In AUD Audit services: Audit and review of financial reports (Somes & Cooke) Services other than statutory audit: Taxation services (Somes & Cooke) Tenement audit services (Somes & Cooke)	2009 2008 21,550 20,769 4,022 5,894 - 1,750
	25,572 28,413

15. Lead auditor’s independence declaration

The Lead auditor’s independence declaration is set out on page 15 and forms part of the directors’ report for the financial year ended 30 June 2009.

This report is made with a resolution of the directors:

==> picture [255 x 82] intentionally omitted <==

Karl M Simich Managing Director

Dated at West Perth this 25[th] day of September 2009.

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LEAD AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

==> picture [483 x 683] intentionally omitted <==

- 15 -

INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2009

Note Other income Exploration and evaluation expenses 12 Administrative expenses Share based payments 17 Other expenses 4 Loss from operating activities Finance income Finance expenses Net finance income 6 Loss before income tax Income tax (expense) benefit Loss for period Earnings (loss) per share Basic earnings (loss) per share (cents) 8 Diluted earnings (loss) per share (cents) 8	2009 $ 2008 $ - 13,894 (4,776,900) (4,472,270) (676,743) (519,844) (14,844) (661,666) (18,021) (25)
	(5,486,508) (5,639,911)
	338,351 223,884 - -
	338,351 223,884
	(5,148,157) (5,416,027) - -
	(5,148,157) (5,416,027)
	(6.19) (8.24)
	(6.19) (8.24)

The income statement is to be read in conjunction with the accompanying notes.

- 16 -

BALANCE SHEET AS AT 30 JUNE 2009

Note Assets Cash and cash equivalents 18 Trade and other receivables 10 Prepayments Total current assets Receivables 10 Property, plant and equipment 11 Exploration and evaluation assets 12 Total non-current assets Total assets Liabilities Trade and other payables 14 Provisions 15 Total current liabilities Net Equity Equity Issued capital 16 Reserves 16 Accumulated losses Total Equity	2009 $ 2008 $ 2,645,110 8,362,681 169,544 35,104 28,742 46,227
	2,843,396 8,444,012
	80,247 37,247 293,730 281,010 - -
	373,977 318,257
	3,217,373 8,762,269
	400,391 905,551 27,384 44,349
	427,775 949,900
	2,789,598 7,812,369
	22,089,371 22,007,569 2,068,813 2,025,229 (21,368,586) (16,220,429)
	2,789,598 7,812,369

The balance sheet is to be read in conjunction with the accompanying notes.

- 17 -

STATEMENT IN CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2009

Note Opening balance at 1 July 2007 Loss for the year Total income and expense recognised directly in equity Shares issued for cash Contributing share issues for cash Contributing shares paid up in full Exercise of options Share issue costs Share based payments Balance as at 30 June 2008 Loss for the year Total income and expense recognised directly in equity Contributing shares paid up in full Exercise of options Transfer from share-based payments reserve on exercise of options Transfer from share-based payments reserve on contributing shares paid up in full Share based payments Balance as at 30 June 2009	Issued capital Accumulated losses Share based payments reserve Fair value reserve 15,094,660 (10,804,402) 1,363,563 5,653,821 - (5,416,027) - (5,416,027)
	- (5,416,027) - (5,416,027) 6,599,336 - - 6,599,336 633,832 - - 633,832 143,250 - - 143,250 5,000 - - 5,000 (468,509) - - (468,509) - - 661,666 661,666
	22,007,569 (16,220,429) 2,025,229 7,812,369
	- (5,148,157) - (5,148,157)
	- (5,148,157) - (5,148,157)
	30,300 - - 30,300
	38,500 - - 38,500
	9,078 - (9,078) -
	3,924 - (3,924) -
	- - 56,586 56,586
	22,089,371 (21,368,586) 2,068,813 2,789,598

The statement in changes in equity is to be read in conjunction with the accompanying notes.

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STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2009

Note Cash flows from operating activities Cash receipts Cash paid to suppliers and employees Cash generated from (utilised in) operations Interest received Net cash inflow (outflow) from operating activities 18 Cash flows from investing activities Payments for exploration and evaluation Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for security deposits/bonds Net cash inflow (outflow) from investing activities Cash flows from financing activities Proceeds from issue of share capital Proceeds from contributing shares paid up in full Conversion of options Share issue costs Net cash inflow (outflow) from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 18	2009 $ 2008 $ - 13,869 (657,156) (564,031)
	(657,156) (550,162) 180,585 223,884
	(476,571) (326,278)
	(4,627,165) (4,407,934) (184,918) (130,761) 41,618 34,567 (43,000) -
	(4,813,465) (4,504,128)
	- 7,238,168 30,300 143,250 38,500 - (496,335) -
	(427,535) 7,381,418
	(5,717,571) 2,551,012 8,362,681 5,811,669
	2,645,110 8,362,681

The statement of cash flows is to be read in conjunction with the accompanying notes.

- 19 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

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 WA 6005. The financial statements of the Company as at and for the year ended 30 June 2009 comprise only the Company. The Company is primarily involved in the exploration and evaluation of mineral tenements in Western Australia 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 and the financial report of the Company comply with the International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were approved by the Board of Directors on 25 September 2009.

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 methods used to determine fair values are discussed further note 3(g).

c) Functional and presentation currency

These financial statements are presented in Australian dollars, which is the Company’s functional and presentation 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 significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3(q).

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 with the current year’s presentation.

a) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currency of the Company at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on retranslation are recognised in the income statement.

b) Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Company’s contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Company’s obligations specified in the contract expire or are discharged or cancelled.

- 20 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

3 Significant accounting policies (continued)

Cash and cash equivalents

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

Accounting for finance income and expense is discussed in note 3(k).

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Issued 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 shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends on ordinary shares are recognised as a liability in the period in which they are declared.

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 expenditure that is 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.

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/expenses” in profit or loss.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other costs are recognised in the income statement as an expense incurred.

Depreciation

Depreciation is recognised in the income statement 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 in the current and comparative periods are as follows:

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

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

d) Exploration and evaluation assets

Exploration and evaluation expenditure, including the costs of acquiring licenses, are expensed in the income statement in the year in which they are incurred.

e) Impairment

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.

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.

- 21 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

3 Significant accounting policies (continued)

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.

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.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. 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.

The recoverable amount of an asset or cash-generating unit is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs.

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.

f) Employee benefits

Defined contribution superannuation funds

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 a personnel expense in the income statement as incurred. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date 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.

Long-term employee benefits

The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs: that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on AA credit-rated government bonds that have maturity dates approximating the terms of the Company’s obligations.

g) Share-based payment transactions – equity settled

Share-based payment transactions granted to directors and employees via the Company’s various share option plans are recognised at fair value as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the party become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions not being met.

h) Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

- 22 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

3 Significant accounting policies (continued)

i) Revenue

Goods sold

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances. Revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration.

Sale of non-current assets

The net gain (loss) on the sale of non-current assets is included as revenue or expense at the date control of the assets passes to the buyer. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs).

j) Lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

k) Finance income

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

l) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet 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 the following temporary differences: the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. 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. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset 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.

m) 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 relevant taxation authority 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 relevant taxation authority are classified as operating cash flows.

n) 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 shareholders of the Company by the weighted average number of ordinary shares of the Company during the period. Diluted loss per share is determined by adjusting the net loss attributable to the ordinary shareholders and the number of shares outstanding for the effects of all dilutive potential shares, which comprise share options.

- 23 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

3 Significant accounting policies (continued)

o) 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 segment (mineral exploration and evaluation) and one geographical segment (Australia).

p) New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2009, 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 a change in the presentation on and disclosure of segment information based on the internal reports regularly reviewed by the Company’s Chief Financial Decision Maker in order assess each segment’s performance and to allocate resources to them. The Company currently operates in one business segment and in one geographical segment and does not expect AASB 8 to have a significant impact on the financial statements.

• Revised AASB 101 Presentation of Financial Statements (2007) introduces the term total comprehensive income, which represents changes in equity during a period other than changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement) or, in an income statement and a separate statement of comprehensive income. Revised AASB 101, which becomes mandatory for the Company’s 30 June 2010 financial statements, is expected to have a significant impact on the presentation of the financial statements.

• Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the Company’s 30 June 2010 financial statements and will have a limited impact on the financial statements.

• AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payment: Vesting Conditions and Cancellations clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations. The amendments to AASB 2 will be mandatory for the Company’s 30 June 2010 financial statements, with retrospective application. The Company has not yet determined the potential effect of the amendment.

• AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Process and 2008-6 Further Amendments to Australian Accounting Standards arising from The Annual Improvements Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments, which become mandatory for the Company’s 30 June 2010 financial statements, are not expected to have any impact on the financial statements.

• AASB 2008-8 Amendments to Australian Accounting Standard – Eligible Hedged Items clarifies the effect of using options as hedging instruments and the circumstances which inflation risk can be hedged. The amendments become mandatory for the Company’s 30 June 2010 financial statements, with retrospective application. The revised standard will have no impact on the Company’s financial statements.

q) Accounting estimates and judgements

Management discusses with the Board the development, selection and disclosure of the Company’s critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Environmental issues

Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the directors understanding thereof. At the current stage of the Company’s development and its current environmental impact the directors believe such treatment is reasonable and appropriate.

Taxation

Balances disclosed in the financial statements and the notes related to taxation, are based on the best estimates of directors and take into account the financial performance and position of the Company as they pertain to current income tax legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current tax position represents the best estimate, pending assessment by the Australian Tax Office.

- 24 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

3 Significant accounting policies (continued)

Share-based payment transactions

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions set out within note 17. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

Estimated useful lives of assets

Estimated useful lives of assets have been based on historical experience. The condition of the assets are assessed at least once per year and considered against the remaining life. Adjustments to useful lives are made when necessary.

r) 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. Where applicable, information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Trade and other receivables

Fair value which is determined for disclosure purposes, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Non derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

4 Expenses

Expenses
Included in the income statement depreciation of: Office furniture and computer equipment Plant and equipment Motor vehicles Depreciation capitalised to exploration and evaluation assets Operating lease rental expenses Operating lease rental expenses capitalised to exploration and evaluation assets Other expenses Net loss on sale of property, plant and equipment	2009 $ 2008 $ 26,579 15,494 26,563 6,647 59,416 43,445
	112,558 65,931 (99,273) (64,336)
	13,285 1,595
	212,068 134,339 (163,225) (36,355)
	48,843 97,984
	18,021 25

5 Personnel expenses

Note Wages, salaries and director fees Superannuation costs Equity settled share-based payment transactions 17 Other associated personnel costs Increase (decrease) in liability for annual leave Personnel expenses capitalised to exploration and evaluation assets	2009 $ 2008 $ 1,400,026 1,088,065 125,373 200,132 56,586 661,666 43,806 36,142 (16,965) 10,413
	1,608,826 1,996,418 (1,208,103) (1,112,522)
	400,723 883,896

- 25 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

6 Finance income

6	Finance income
		2009	2008
		$	$
	Interest income – bank deposits	338,351	223,884
	Net finance income	338,351	223,884
7	Income tax expense
	Numerical reconciliation between tax expense (benefit) and pre-tax net profit (loss)
		2009	2008
		$	$
	Loss before tax	(5,148,157)	(5,416,027)
	Income tax expense (benefit) using the domestic corporate tax rate of 30% (2008: 30%)	(1,544,447)	(1,624,808)
	Increase (decrease) in income tax due to:
	Non-deductible expenses	17,805	198,500
	Effect of tax losses not recognised	1,633,267	1,426,308
	Non-assessable income	(11,264)	-
	Movement in unrecognised temporary differences	(34,714)	-
	Deductible equity raising costs	(60,647)	-
	Income tax expense (benefit)	-	-
8	Loss per share
	Basic loss per share
		2009	2008
	Basic loss per share (cents)	6.19	8.24

The calculation of basic loss per share at 30 June 2009 was based on the loss attributable to ordinary shareholders of $5,148,157 (2008: $5,416,027) and a weighted average number of ordinary shares outstanding of 83,185,027 (2008: 65,731,717).

Weighted average number of shares

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 in full Weighted average number of ordinary shares and proportion of contributing shares at 30 June Diluted loss per share Diluted loss per share (cents)	2009 2008 83,167,811 65,060,693 6,070 12,623 - 45,077 - 36 11,146 613,288
	83,185,027 65,731,717
	2009 2008 6.19 8.24

As at 30 June 2009, the contributing shares and options detailed within note 17 are considered to be dilutive.

The Company is in a loss making position and the conversion to, calling of, or subscription for, ordinary share capital in respect of potential ordinary shares is unlikely to lead to a diluted loss per share that shows an inferior view of the basic loss per share. For this reason, the diluted loss per share is disclosed to be the same as basic loss per share.

- 26 -

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2009

9 Auditor’s remuneration

Audit services: Audit and review of financial reports (Somes & Cooke) Services other than statutory audit: Taxation services (Somes & Cooke) Tenement audit services (Somes & Cooke) Trade and other receivables Current Receivables Accrued interest GST receivable Non current Security and environmental bonds	2009 $ 2008 $ 21,550 20,769 4,022 5,894 - 1,750
	25,572 28,413
	2009 $ 2008 $ 640 2,156 160,594 2,828 8,310 30,120
	169,544 35,104
	80,247 37,247

10 Trade and other receivables

Security and environmental bonds are secured by bank guarantees and have been given as a condition of the rental of two properties by the Company and in relation to the Company’s exploration activities.

The Company’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in note 19.

11 Property, plant and equipment

A reconciliation of the carrying amounts for each class of property, plant and equipment is set out below.

In AUD Carrying amount Balance at 1 July 2007 Additions Disposals Depreciation Balance as at 30 June 2008 Balance at 1 July 2008 Additions Disposals Depreciation Balance as at 30 June 2009 Carrying amounts At 1 July 2007 At 30 June 2008 At 1 July 2008 At 30 June 2009	Office furniture & computer equipment Plant & equipment Motor vehicles Total 37,318 22,225 191,204 250,747 40,352 29,776 60,633 130,761 - - (34,567) (34,567) (15,949) (6,647) (43,335) (65,931)
	61,721 45,354 173,935 281,010
	61,721 45,354 173,935 281,010
	33,659 57,498 93,761 184,918
	(969) (1,706) (56,965) (59,640)
	(26,579) (26,563) (59,416) (112,558)
	67,832 74,583 151,315 293,730
	37,318 22,225 191,204 250,747
	61,721 45,354 173,935 281,010
	61,721 45,354 173,395 281,010
	67,832 74,583 151,315 293,730

- 27 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

12 Exploration and evaluation assets

Exploration and evaluation assets	2009 $ 2008 $ - -

In accordance with the Company’s accounting policy, all exploration and evaluation expenditure, including the costs of acquiring licenses, are expensed in the income statement in the year in which they are incurred.

13 Tax assets and liabilities

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

Deductible temporary differences Tax losses	2009 $ 2008 $ 156,090 251,450 6,110,317 4,477,051
	6,266,407 4,728,501

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

In AUD			Assets	Assets		Liabilities	Liabilities	Net	Net
			2009	2008	2009		2008	2009	2008
Provision for annual leave			8,216	848		-	-	8,216	848
Other accruals			35,587	-		-	-	35,587	-
Previously expensed capital costs		raising	4,376	-		-	-	4,376	-
Unearned income			-	-	(48,179)		(848)	(48,179)	(848)
Net tax (assets) liabilities			48,179	848	(48,179)		(848)	-	-
Movements in temporary differences during the year
	Balance at		Recognised	Recognised	Balance		Recognised	Recognised	Balance
In AUD	1 Jul 07		in Income	in Equity	30 June	08	in Income	in Equity	30 June 09
Provision for annual leave		4,798	(3,950)	-		848	7,368	-	8,216
Other accruals		-	-	-		-	35,587	-	35,587
Previously expensed capital raising costs		-	-	-		-	4,376	-	4,376
Unearned income		(4,798)	3,950	-	(848)		(47,331)	-	(48,179)
		-	-	-		-	-	-	-

14 Trade and other payables

Trade creditors Other creditors and accruals Trade creditors – related parties 21	2009 $ 2008 $ 242,136 212,404 140,850 657,147 17,405 36,000
	400,391 905,551

Amounts due to related parties are payable to Tongaat Pty Ltd, a company associated with Mr K Simich, and represent a balance due in relation to the lease of office premises.

The Company’s exposure to liquidity risk related to trade and other payables is disclosed in note 19.

15 Provisions

In AUD Annual leave provision	Balance at 1 July 07 Provisions made Provisions used Balance at 30 Jun 08 Provisions made Provisions used Balance at 30 Jun 09 24,145 20,204 - 44,349 14,240 (31,205) 27,384

- 28 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

16 Issued capital and reserves

Issued capital comprises ordinary shares and contributing shares.

Issued ordinary shares

Issued ordinary shares
On issue at 1 July Contributing shares paid up in full Placement to POSCO Exercise of options expiring 31 December 2008 Exercise of options expiring On issue at 30 June	2009 Number 2008 Number 82,532,965 65,059,626 202,000 955,000 - 16,498,339 - 20,000 110,000 -
	82,844,965 82,532,965

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.

Contributing shares

On issue at 1 July Issued to employees as share based payments Contributing shares paid up in full Placement to POSCO On issue at 30 June	2009 Number 2008 Number 12,682,979 10,672,652 - 430,000 (202,000) (955,000) - 2,535,327
	12,480,979 12,682,979

Terms and conditions

Contributing shares are partly paid up to $0.0001, with the exception of 2,535,327 contributing shares issued to Posco Australia Pty Ltd which are partly paid up to $0.15. The holders of contributing shares are required to make 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.

Unissued shares under options

Details of share options as at 30 June 2009 are as follows:

		2009		2008
		Number of	Exercise	Number of	Exercise
		options	Price	options	Price
Options expiring on or before	30 September 2008	-	-	525,000	$0.20
Options expiring on or before	31 December 2008	-	-	2,372,000	$0.25
Options expiring on or before	7 February 2011	1,060,000	$0.35	1,170,000	$0.35
Options expiring on or before	8 August 2011	1,420,000	$0.40	-	-
Options expiring on or before	30 September 2011	3,000,000	$0.50	3,000,000	$0.50
Options expiring on or before	12 July 2013	2,000,000	$0.60	2,000,000	$0.60
Options expiring on or before	12 July 2013	2,000,000	$0.80	2,000,000	$0.80
Options expiring on or before	12 July 2013	2,000,000	$1.00	2,000,000	$1.00

- 29 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

16 Issued capital and reserves (continued)

Movement in share options

1,420,000 options with an exercise price of $0.40, exercisable on or before 8 August 2011, were issued to employees under the Company’s Incentive Option Scheme.

110,000 options at an exercise price $0.35, exercisable on or before 7 February 2011, were exercised during the period.

The following options expired during the period:

• 525,000 options with an exercise price $0.20 expired on 30 September 2008; and

• 2,372,000 options with an exercise price $25 expired on 31 December 2008.

Reserves

Nature and purpose of reserves

Share-based payments reserve

The share-based payments reserve represents the fair value of equity instruments issued to employees as compensation and issued to external parties for the receipt of goods and services. This reserve will be reversed against issued capital when the underlying shares are converted.

17 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 key management personnel and staff to increase shareholder wealth and are provided to key management personnel and staff based on their level of seniority and position within the Company.

These LTIs comprise:

• Issue of contributory shares in the Company; and

• Issue of options over ordinary shares in the Company.

Options may only be issued to directors subject to approval by shareholders in general meeting.

The terms and conditions of equity based compensation plans issued during the current and prior financial years to which the recognition and measurement principles of AASB 2 have been applied are listed below.

Employee Incentive Option Scheme

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 right 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 1,420,000 unlisted options to subscribe for ordinary fully paid shares in the Company at any time on or before 8 August 2011 at an exercise price of $0.40 each. The holders may only exercise the options subsequent to completion of the service based criteria, being 31 December 2009.

The fair value of options issued under the plan is estimated at the date of grant using the Black-Scholes model and allocated to each reporting period evenly over the period from grant date to vesting date. The following table sets out the assumptions made in determining the fair value of the options granted.

	Options
	expiring
	8 Aug 2011
Grant date	13 Aug 2008
Dividend yield	0.00%
Expected volatility	60.00%
Risk-free interest rate	7.25%
Option exercise price	$0.40
Expected life (years)	3.00
Share price on date of grant	$0.22

- 30 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

17 Share based payments (continued)

The number and weighted average exercise prices of share options issued as share based payments during the current and previous financial periods are as follows:

Outstanding at 1 July Granted during the period Exercised during the period Expired during the period Outstanding and exercisable at 30 June Exercisable at 30 June	2009 2008 Weighted average exercise price Number of options Weighted average exercise price Number of options $0.66 10,170,000 $0.50 3,000,000 $0.40 1,420,000 $0.73 7,170,000 $0.35 (110,000) - - - - - - $0.63 11,480,000 $0.66 10,170,000 $0.66 10,060,000 $0.66 10,170,000	2009 2008 Weighted average exercise price Number of options Weighted average exercise price Number of options $0.66 10,170,000 $0.50 3,000,000 $0.40 1,420,000 $0.73 7,170,000 $0.35 (110,000) - - - - - - $0.63 11,480,000 $0.66 10,170,000 $0.66 10,060,000 $0.66 10,170,000
	$0.66
	$0.40
	$0.35
	-
	$0.63	10,170,000
	$0.66	10,170,000

The options outstanding at 30 June 2009 have an exercise price in the range of $0.35 to $1.00 and a weighted average contractual life of 3 years.

The weighted average share price at the date of exercise for share options exercised during the year ended 30 June 2009 was $0.62. No issued options, previously recognised as share based payments, were exercised during the 2008 financial year.

Contributing shares issues as share based payments

100,000 contributing shares granted to employees as share based payments in previous financial years, were paid up and converted to ordinary shares during the current financial year. The weighted average share at the date of conversion was $0.84.

905,000 (2008: 1,005,000) contributing shares, previously granted as share based payments, remain to be converted as at 30 Jun 2009.

18 Cash and cash equivalents

Bank balances Call deposits Term deposits Cash and cash equivalents in the statement of cash flows	2009 $ 2008 $ 645,110 7,364,938 - 197,743 2,000,000 800,000
	2,645,110 8,362,681

The Company’s exposure to interest rate risk and a sensitivity analysis for financial assets are discussed in note 19.

Reconciliation of cash flows from operating activities

Reconciliation of cash flows from operating activities
Loss for the period Adjusted for: Loss on sale of assets Depreciation Exploration and evaluation expenses Share-based payments Interest income accrued Operating loss before changes in working capital and provisions Decrease (increase) in receivables Decrease (increase) in prepayments (Decrease) increase in payables and provisions Net cash outflow from operating activities	2009 $ 2008 $ (5,148,157) (5,416,027) 18,021 - 13,285 1,595 4,776,900 4,472,270 14,844 661,666 (157,766) -
	(482,873) (280,496) 2,895 219,143 8,742 (162) (5,335) (246,763)
	(476,571) (326,278)

Expense items within the reconciliation of cash flows from operating activities are shown on a net basis.

- 31 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

19 Financial instruments

Financial risk management

This note presents information about the Company’s exposure to credit, liquidity and market risks, their objectives, policies and processes for measuring and managing risk, and the management of capital.

The Company does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Company through regular reviews of the risks.

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company. Considering the nature of the Company’s operations, ultimate customers and the relevant terms and conditions entered into with such customers, the Company believes that the credit risk is limited. The Company therefore does not have any significant exposure to credit risk.

The Company’s potential concentration of credit risk consists mainly of cash deposits with banks and other receivables. The Company’s cash surpluses are placed with banks that have investment grade ratings. The maximum credit risk exposure relating to the financial assets is represented by the carrying value as at the balance sheet date. The Company considers the credit standing of counterparties when making deposits to manage the credit risk.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash flows.

Funds received by the Company from the issue of share capital are placed 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, whilst also ensuring that interest income is maximised.

The following are the contractual and expected maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Note Trade and other payables 14 - Within 3 months - Greater than 3 months Total	2009 $ 2008 $ 400,391 905,551 - -
	400,391 905,551

Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets to reduce debt. The Company’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities.

As at 30 June 2009 the Company had a net working capital surplus of $2,415,621 (2008: $7,494,112), represented significantly by cash and cash equivalent assets of $2,645,110 (2008: $8,362,681). The Company’s net asset position was $2,789,598 (2008: $7,812,369), with no value assigned to exploration and evaluation assets in the balance sheet.

Pursuant to the Company’s 1 for 10 pro rata non-renounceable entitlements offer to existing shareholders, the Company issued 9,716,933 fully paid ordinary shares subsequent to period end to raise $11,660,320 before issue costs. These funds will allow the Company to continue to actively explore and evaluate its mineral tenements.

The Company encourages employees and directors to be shareholders through its various equity-based long-term incentives as detailed in note 17.

There were no changes in the Company’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

The Company is not subject to externally imposed capital requirements.

- 32 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

19 Financial instruments (continued)

Fair value

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.

The financial assets and liabilities included in the assets and liabilities of the Company approximate net fair value, determined in accordance with the accounting policies disclosed in note 3 to the financial statements.

Market risk

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

Cash flow interest rate risk

The Company is exposed to interest rate risk, primarily on its cash and cash equivalents and security and environmental bonds, which is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. Whilst the Company aims to maximise its interest returns on money held on call and deposits at its bank, it does not rely on this income to finance its operations. The Company does not have financial borrowings.

At 30 June 2009 the interest rate profile of the Company’s interest-bearing financial instruments was:

Financial assets Bank balances Term deposits Security and environmental bonds	Average Interest Rate % Variable Interest Rate A$	Fixed Interest Rate Maturity Less than 1 Year A$ 1 to 5 Years A$ More than 5 Years A$ Total A$
	3.50% 644,610	- - - 644,610
	8.35% -	2,000,000 - - 2,000,000
	3.62% -	62,718 - - 62,718

At 30 June 2008 the interest rate profile of the Company’s interest-bearing financial instruments was:

Financial assets Bank balances Call deposits Term deposits Security and environmental bonds	Average Interest Rate % Variable Interest Rate A$ 2.99% 131,709 7.15% 197,743 7.59% - 7.17% -	Fixed Interest Rate Maturity Less than 1 Year A$ 1 to 5 Years A$ More than 5 Years A$ Total A$ - - - 131,709 - - - 197,743 800,000 - - 800,000 23,718 - - 23,718

Cash flow sensitivity analysis for variable rate instruments

The sensitivity analysis has been prepared to demonstrate the sensitivity to a reasonably possible change in interest rates, with all other variables held constant through the impact on floating rate interest rates.

A change of 100 basis points in interest rates at the reporting date would have no material impact on the income statement. There would be no effect on the equity reserves other than those directly related to income statement. The analysis is performed on the same basis for 2008.

Commodity price risk

The Company operates primarily in the exploration and evaluation phase and accordingly the Company’s financial assets and liabilities are not subject to commodity price risk.

- 33 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

20 Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Non-cancellable operating lease rentals are payable as follows:
Less than one year Between one and two years More than two years	2009 $ 2008 $ 186,982 167,690 121,228 19,830 84,604 -
	392,814 187,520

The Company leases corporate office and administrative facilities in West Perth and storage sheds in Western Australia and the Northern Territory. The leases have varying terms, with options to renew the lease on respective expiry dates.

During the year ended 30 June 2009 $212,068 was recognised with respect to operating lease rental payments (2008: $134,339).

21 Related parties

Key management personnel compensation

The key management personnel compensation included in ‘personnel expenses‘ (see note 5) is as follows:

Short-term employee benefits Post-employment benefits Share-based payments	2009 $ 2008 $ 489,870 341,265 31,130 114,538 - 575,303
	521,000 1,031,106

Individual directors and executives compensation disclosures

Information regarding individual directors and executives compensation and some equity instruments disclosures as required by Corporations Regulations 2M.3.03 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 at year-end.

Key management personnel and director 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 or its subsidiaries 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 value of transactions and outstanding balances relating to key management personnel and their related entities over which they have control or significant influence were as follows:

Transactions value year ended 30 June In AUD Note 2009 2008 Key management personnel and their related parties Transaction Mr K Simich - Resource Development Company Pty Ltd Management and consulting services (i) 144,000 36,000 Mr K Simich Tongaat Pty Ltd Lease of corporate office premises (ii) 89,365 39,325 Mr M Kennedy and Mr J Hutton Resource & Investment NL Sale of motor vehicle (iii) - 34,567

Balance outstanding as at 30 June 2009 2008 13,200 36,000 4,205 - - -

17,405 36,000

(i) Amounts totalling $144,000 ($12,000 per month) (2008: $36,000) were charged to the accounts of the Company by Resource Development Company Pty Ltd, a company associated with Mr Simich, representing consulting and management fees. The charge was agreed to in a directors’ resolution and commenced on 1 April 2008. As at 30 June 2009 an amount of $13,200, including GST, remained outstanding.

- 34 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

21 Related parties (continued)

• (ii) $89,365 (2008: $39,325) was charged by Tongaat Pty Ltd for the lease of corporate office premises to the Company. The amount charged under the lease agreement was set by an independent valuer and approved by the Board. As at 30 June 2009 an amount of $4,205, including GST, remained outstanding.

• (iii) Resource & Investment NL (RNI) purchased a motor vehicle from the Company during the financial year ended 30 June 2008. The sale value of the vehicle was represented by the written down value within the balance sheet of the Company. Mr Kennedy and Mr Hutton are both directors of RNI.

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 over equity instruments

The movement during the reporting period in the number of options 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 2008						Vested
	or date of	Granted as			Held at	Held at 30	during the	Vested &
	appointment	compensation	Exercised		resignation	June 2009	year	Exercisable
Directors
Mr M Kennedy	900,000	-		-		900,000	-	900,000
Mr K Simich	2,400,000	-		-		2,400,000	-	2,400,000
Mr J Evans	2,400,000	-		-		2,400,000	-	2,400,000
Mr J Hutton	1,300,000	-		-		1,300,000	-	1,300,000
Mr J Jong
(appointed 24 July 08)	-	-		-		-	-	-
	Held at
	1 July 2007 or						Vested
	date of	Granted as			Held at	Held at 30	during the	Vested &
	appointment	compensation	Exercised		resignation	June 2008	year	Exercisable
Directors
Mr M Kennedy	-	900,000		-		900,000	900,000	900,000
Mr K Simich	-	2,400,000		-		2,400,000	2,400,000	2,400,000
Mr J Evans	-	2,400,000		-		2,400,000	2,400,000	2,400,000
Mr J Hutton	1,000,000	300,000		-		1,300,000	300,000	1,300,000
Mr G Steemson (resigned 3 August 07)	1,000,000	-		-	1,000,000
Mr G Hutton (deceased 16 July 07)	1,000,000	-		-	1,000,000
Mr B Coppin
(resigned 27	-	-		-	-
September 07)

No options held by key management personnel are vested but not exercisable as at 30 June 2008 or 2009.

Movement in ordinary 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 2008		Received
	or date of		on exercise			Other		Held at	Held at
	appointment	Purchases	of options	Sales		changes		resignation	30 June 2009
Directors
Mr M Kennedy	206,268	-	-		-		-		206,268
Mr K Simich	2,886,268	96,361	-		-		-		2,982,629
Mr J Evans	-	-	-		-		-		-
Mr J Hutton	5,791,108	-	-		-		-		5,791,108
Mr J Jong
(appointed 24 July 08)	-	-	-		-		-		-

- 35 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

21 Related parties (continued)

	Held at
	1 July 2007 or		Received
	date of		on exercise			Other		Held at	Held at
	appointment	Purchases	of options	Sales		changes		resignation	30 June 2008
Directors
Mr M Kennedy	206,268	-	-		-		-		206,268
Mr K Simich	2,766,268	120,000	-		-		-		2,886,268
Mr J Evans	-	-	-		-		-		-
Mr J Hutton	5,791,108	-	-		-		-		5,791,108
Mr G Steemson (resigned 3 August 07)	1,373,286	-	-		-		-	1,373,286
Mr G Hutton (deceased 16 July 07)	5,676,822	-	-		-		-	5,676,822
Mr B Coppin
(resigned 27	150,000	-	-		-		-	150,000
September 07)

No shares were granted to key management personnel during the reporting period as compensation in 2008 or 2009.

Movement 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			Paid in full
	1 July 2008			and converted
	or date of		Granted as	to ordinary			Other		Held at	Held at
	appointment		compensation	shares	Sales		changes		resignation	30 June 2009
Directors
Mr M Kennedy	753,134		-	-		-		-		753,134
Mr K Simich	1,253,714		-	-		-		-		1,253,714
Mr J Evans		-	-	-		-		-		-
Mr J Hutton		-	-	-		-		-		-
Mr J Jong
(appointed 24 July 08)		-	-	-		-		-		-
	Held at			Paid in full
	1 July 2007	or		and converted
	date of		Granted as	to ordinary			Other		Held at	Held at
	appointment		compensation	shares	Sales		changes		resignation	30 June 2008
Directors
Mr M Kennedy	753,134		-	-		-		-		753,134
Mr K Simich	1,253,714		-	-		-		-		1,253,714
Mr J Evans		-	-	-		-		-		-
Mr J Hutton		-	-	-		-		-		-
Mr G Steemson (resigned 3 August 07)	20,000		-	-		-		-	20,000
Mr G Hutton
(deceased 16 July 07)		-	-	-		-		-	-
Mr B Coppin
(resigned 27		-	-	-		-		-	-
September 07)

- 36 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

22 Events subsequent to reporting date

Subsequent to 30 June 2009, the Company has announced the issue 1,120,000 unlisted employee options with an exercise price of $1.40, expiring 6 July 2012.

Subsequent to period end the Company has announced the following issue of ordinary shares:

• 1,400,000 from the exercise of 1,400,000 unlisted options at an exercise price of $0.50 expiring 30 September 2011, to raise $700,000;

• 568,570 from the exercise of 568,570 unlisted options at an exercise price of $0.35 expiring 7 February 2011, to raise $199,000;

• 120,000 from the exercise of 120,000 unlisted options at an exercise price of $0.60 expiring 12 July 2013, to raise $72,000;

• 718,373 issued on payment in full of contributing shares, to raise $107,754; and

• 9,716,933 at $1.20 per share, pursuant to the Company’s 1 for 10 pro rata non-renounceable entitlements offer to existing shareholders, to raise $11,660,320 before issue costs.

Other than the matters discussed above, there has not arisen in the interval between the end of the year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Group, in future financial years.

- 37 -

DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

1. In the opinion of the directors of Sandfire Resources NL (“the Company”):

2. (a) the financial statements and notes as set out on pages 16 to 37 and the Remuneration report in the Directors’ report 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 2009 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;

3. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(b);

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

5. The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2009.

Signed in accordance with a resolution of the directors:

==> picture [255 x 82] intentionally omitted <==

Karl M Simich Managing Director

Dated at West Perth this 25[th] day of September 2009

- 38 -

AUDITOR’S INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2009

==> picture [483 x 683] intentionally omitted <==

- 39 -

AUDITOR’S INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2009

==> picture [483 x 683] intentionally omitted <==

- 40 -