SCIDEV LTD - Annual Report 2008 | FinancialReports.eu

ASXABN INL 25 001 150 849 2008 Annual Report

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Intec Ltd Contents

Page

Letter from Chairman and Managing Director & CEO	1
The Intec Process	3
Project Highlights	6
Market Review	8
Review of Operations	9
Directors' Report	12
Auditors’ Independence Declaration	22
Income Statements	23
Balance Sheets	24
Statements of Changes in Equity	25
Cash Flow Statements	26
Notes to the Financial Statements	27
Directors' Declaration	67
Audit Report	68
Schedule of Tenements	71
Shareholder Information	72
Corporate Governance Statement	74
Corporate Directory	Inside back cover

Cover: The Intec Logo

Designed by Maritza Valencia-Bejarano, one of Intec’s talented engineers, the Intec Logo incorporates the five elemental symbols from mediaeval alchemy for gold, silver, zinc, lead and copper (left to right, top to bottom) emblazoned over ripples representative of the hydrometallurgical Intec Process.

As these five elements are all to be recovered from the Intec Metals Recycling Project, Intec’s first commercial application of the Intec Process technology, this theme has been adopted throughout this year’s Annual Report.

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Letter

Letter from the Chairman and Managing Director & CEO

Dear Intec Shareholder

30 September 2008

This is Intec Ltd’s (Intec’s or the Company’s) seventh Annual Report since listing on the Australian Securities Exchange and includes the financial statements for the year to 30 June 2008.

metals prices and/or the availability of additional third-party feedstocks to supplement the overall product output at Hellyer.

Therefore, as a high-quality asset with comparatively low startup and ore (tailings) recovery costs, the Intec Hellyer Mill remains available as a ‘swing producer’, well placed to take advantage of peaks in international metals prices.

During the year, Intec continued to receive revenues from the Hellyer Zinc Concentrate Project joint venture in Tasmania.

However, the significant falls in the global metals markets negatively impacted the profitability of the Hellyer Zinc Concentrate Project. The suspension of operations at Hellyer on 8 September 2008 was an unpalatable but necessary decision in the face of the combination of factors prevailing at the time.

The 21 month operation of the Mill, whilst having been strategically valuable in the generation of significant cash flows for Intec, has however created some unintended outcomes: the market has come to perceive Intec’s value solely in terms of being a zinc producer rather than as a technology company. As a result, throughout 2007/2008, the INL share price was most strongly linked to the declining A$ zinc price (see Figure 1). The announcement of suspension of operations then also resulted in a marked drop in the INL share price, which substantially recovered on news concerning Intec’s ‘main’ strategy, the Intec Metals Recycling Project.

By the end of August 2008, the Australian dollar zinc and lead prices had fallen over 50% year-on-year. Meanwhile, project cost inputs, notably electricity, fuel, freight and reagents had increased significantly, and to a lesser extent labour and other inputs as well. As a result, the operation became unprofitable when the dredge was redeployed to operate in a lowgrade zone of the Hellyer tailings dam according to the established mining plan.

Through the coming year, Intec’s efforts will in part be directed to renewing the market’s focus on the Intec Process technology as the primary driver of shareholder value. This should be aided by the clear value proposition inherent in the Intec Metals Recycling Project. It should however be noted that the definitive decision to proceed with the Intec Metals Recycling Project remains dependent on certain financial, commercial and technical outcomes that are yet to be achieved.

The withdrawal of Polymetals from the Joint Venture and the forecast working capital demands left your Board with no choice but to suspend operations and place the Intec Hellyer Mill on care and maintenance, pending a sustained future improvement in global

Figure 1: Correlation of the INL share price and A$ zinc price

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$0.30 INL Share Price $6,300
A$ Zinc Price
$0.25 $5,500
$0.20 $4,700
$0.15 $3,900
$0.10 $3,100
$0.05 $2,300
$0.00 $1,500
01-Jul-06 31-Dec-06 02-Jul-07 01-Jan-08 02-Jul-08
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Intec’s near-term financial objective is to continue to be self-supporting via the development of a commercial-scale project utilising the Intec Process.

This will require a period of development prior to the first cash flows from the Intec Metals Recycling Project, during which time the primary source of revenue is expected to be derived from testwork and

Letter

We thank all of our staff for their diligence and professionalism throughout the year, and our shareholders for their ongoing support, comments and suggestions.

engineering services for the development of future project opportunities. Moreover, the Board is investigating all possible sources of cash income, and this may include the realisation of assets. Additionally, your Board remains vigilant in restraining costs wherever possible: for example there have been no increases of Directors’ fees or staff salaries at the commencement of the current 2009 financial year.

OUR VISION Intec is a world-leader in the field of chloride hydrometallurgy.

Our vision is that the Intec Process should become the technology of choice for the sustainable and economic production of base and precious metals, especially from metallurgically challenging feedstocks.

Yours sincerely

In addition, the continued development of Intec’s involvement in Our executive staff and fellow the substantial Browns Sulphide directors look forward to seeing as Project owned by Compass many of you as possible at Intec’s Resources NL and in other thirdAnnual General Meeting to be held party projects currently being on 18 November 2008. We also considered, is expected to further invite those shareholders who indicate to the market the cannot be there in person to listen attractive opportunities for the to the live audio broadcast on Intec Process technology, within Boardroom Radio. Australia and worldwide.

Trevor A Jones Chairman

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Philip R Wood Managing Director & CEO

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The Intec Board - (from the left): Kieran Rodgers (Finance Director), James Bell (Non-
executive Director), Philip Wood (Managing Director & CEO), John Moyes (Technical
Director), Ken Severs (Non-executive Director), Trevor Jones (Chairman)
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The Intec Process

The Intec Process

Technology Overview

Multiple Metals

Purification

After separating the solid leach The Intec Process is applicable to residue, the impure metal-bearing a wide range of base and precious electrolyte is purified by metals - copper, lead, zinc, nickel, selectively separating important gold, silver, indium, scandium, but low-concentration elements and more. such as gold, silver and indium. These are recovered as saleable Multiple Feedstocks by-products. The Intec Process can unlock value

The Intec Process is actually a suite of related technologies that use concentrated brine (chloride, bromide and iodide solutions) to leach metals into solution, then purify them to recover high-grade commodity products for sale on domestic and international markets.

by-products. The Intec Process can unlock value from a very wide range of Recovery feedstocks - mineral ores and Lastly, the purified electrolyte is concentrates, industrial wastes, then passed to the product and a number of unconventional recovery section, where the materials. primary-value metals such as copper, lead, zinc and/or nickel The feedstocks can be sulphides, can be recovered in various oxides, carbonates and chlorides. saleable forms.

Leach Step

Although the process is cyclic, the conceptual ‘first’ step is to add the mineral concentrate or industrial waste feedstock to the leach reactors.

The feedstocks can be sulphides, oxides, carbonates and chlorides. They can be low-grade, polymetallic, and/or contaminated with elements such as arsenic, which cause significant environmental concerns at smelters.

Depending on the specific application, most or all of the metals in the feedstock will be dissolved into solution. Then, under the conditions in the leach, the iron and other unwanted elements are precipitated as a stable iron oxidebased solid residue that is suitable for disposal or reuse in other industry applications.

After recovering these products, the barren electrolyte is then cycled back to the leach step in a closed-loop circuit.

Multiple Products

The Intec Process can be used to generate:

Low Impact

The Intec Process operates at atmospheric pressure and low • temperature (<100°C). It produces no gaseous emissions or liquid effluents, and after • recovering valuable metals leaves only a stable iron-based residue suitable for disposal or reuse.

intermediate products such as zinc sulphide or copper sulphate;
high-value premium products such as high-purity zinc oxide; and
pure metal products such as LME Grade-A copper or Prime Western Grade zinc.

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Metal-bearing feedstock
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Iron-based residue
Leach
to tailings or industry
Recycle Purification
By-products
Recovery
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Primary Product
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Smelting

“The [Mount Isa copper and lead smelter] … released 290 tonnes of lead into the air in 2004-2005. By contrast, the lead smelter at Port Pirie, South Australia – where regular testing has discovered nearly 60 percent of children have unsafe blood lead levels – emitted 47 tonnes.”

“The children of La Oroya have grown up in the shadow of a giant smelter – too young to understand the devastation health threat it’s created for more than 80 years… A recent study by St. Lous University screened more than 5,000 children here and found that 99 percent had three to seven times the acceptable lead levels.” “Pollution’s Youngest Victims” CBS Evening News, La Oroya, Peru, March 5, 2006

The smelting process emits lead, arsenic, cadmium, mercury, selenium, zinc and sulphur dioxide to air and water, with the greatest effects suffered by the local children. In Boolaroo in Newcastle in 1991, 84% of children tested had a blood lead level over 10µg/ dL, some as high as 40µg/dL. To this day, even with remediation efforts, it is not known if it will ever be possible for a community of children to live close to a lead smelter and maintain a blood lead level below 10µg/dL.

LEAD Action News Vol 5, No 1 1997

ABC News, 21 June 2006

Intec Process

Higher Metals Recovery

Overseas Opportunity

Strong Potential Returns

Clean Production

Proven Production Process

Wide Range of Applications

Access To Metal Resources

Tighter Pollution Controls Curb Traditional Smelting

Our Timing Is Right

Opportunity Ahead

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Intec is ready to reap the benefits
of future metals prices and the
greater controls placed on
traditional smelting.
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5
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Project Highlights

Project Highlights - Australia

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Intec Metals Recycling Project On 19 September 2008, the Company reached in-principle agreement with a key third party that is expected to materially assist in the development of the Intec Metals Recycling Project. While the details remain confidential pending the formalisation of a legally binding Agreement, the Company believes that its implementation will provide material advantages to the Intec Metals Recycling Project.

A finalised agreement should pave the way for a significant upgrade to the Intec Metals Recycling Project. Taking multiple mineral concentrate and industrial waste feedstocks, the upgraded Project is now expected to produce highpurity copper and lead metal products via electro-winning, as well as high-grade zinc sulphide and important silver, and indium byproduct credits.

The agreement, if finalised, is expected to yield significant capital savings for the upgraded Intec Metals Recycling Project (subject to independent engineering studies by GHD and ACSI) and should result in a shortened timeline to commencement.

Intec has received and provided to the third party a number of letters of support from potential financiers, project participants and other project stakeholders.

It is intended that financing for the full Intec Metals Recycling Project will be finalised by 31 March 2009,

Hellyer Zinc Conc. Project

Browns Sulphide Project

Restarted in December 2006, the Intec Hellyer Mill took advantage of a period of high international zinc and lead prices to generate revenues for Intec using conventional grinding and flotation technology.

During 2007 and 2008, Intec has worked extensively with Compass Resources NL, a listed entity that owns the substantial Brown’s Sulphide resource in the Northern Territory in which Hunan Nonferrous Metals Corporation is a 50% joint venture partner.

An important complement to the principal strategy of commercialising the Intec Process technology, the Hellyer Zinc Concentrate Project extracted zinc, lead and silver from the 11Mt polymetallic tailings dam in Hellyer, Tasmania.

The resource exhibits a complex, polymetallic metallurgy, requiring multiple technologies to unlock the full value of the contained lead, zinc, copper, cobalt, nickel and silver.

This Project was operated by Intec’s 50% joint venture partner, Polymetals, freeing up Intec’s management time to concentrate on the Intec Process.

The Intec Process is currently being considered for inclusion as one of the processing steps in the overall processing of the Browns Sulphide ore.

Under Polymetals’ operation, the plant repeatedly broke its own production and efficiency records throughout 2007 and 2008, yielding a total of 52,600t of bulk zinclead concentrate in the 2007/2008 financial year. Intec assumed full ownership and operational control of the Project on 1 August 2008.

Intec has conducted paid testwork on samples of Brown’s Sulphide concentrate, the results of which demonstrated high metal extractions. Using these results, Intec has produced ±50% estimates for the capital and operating costs of its portion of the process options, as well as conceptual layouts, heat and mass balances, equipment selection and sizing, process flow diagrams, and other engineering data.

However, sharply declining Australian dollar product revenues, combined with significant cost increases, forced the suspension of operations in September 2008 pending a significant change in economic conditions or the availability of third party ores.

The Company will continue to work with Compass, Hunan and consulting engineers Ausenco with the aim of progressing to demonstration plant campaign at Intec’s Burnie Research facility, and of finalising a deal for the use of the Intec Process at the significant Brown’s Sulphide Project.

The Intec Hellyer Mill is currently on care and maintenance, with the ability to act as a ‘swing producer’ to respond to changing conditions.

milestones. 6

Project Highlights

Project Highlights - International

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Global Projects

Russia Project

Iran Project

With strong growth in global Intec successfully completed demand for metals set to Phase I testwork on a polymetallic continue, particularly as a result of copper, lead, zinc, silver sulphide the growth of population and concentrate in early 2008. economic development in countries such as China and India, Developing from these positive global producers are increasingly results, Ural Mining and Metallurlooking for new, clean, economic gical Company has signed an technologies to increase supply. agreement to proceed to a Phase

Intec signed a Memorandum of Understanding in June 2008 with a major established Iranian mining and minerals processing company to jointly investigate the potential to utilise the Intec Copper Process to extract and recover metals from a substantial resource in Iran.

Developing from these positive results, Ural Mining and Metallurgical Company has signed an agreement to proceed to a Phase II Engineering Study to process 300,000 tpa of concentrate. This study is due at the end of October 2008.

Intec expects to conduct a range of testwork on samples in the second half of 2008.

With new supply of smelter-grade concentrates from conventional mineral resources becoming limited for many of these commodities, producers are also looking for technologies that can unlock value from previously uneconomic or unsuitable reserves, such as low-grade, polymetallic or refractory resources, or those contaminated with sensitive elements such as arsenic or mercury.

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With the advantages of the Intec Process technology becoming increasingly well-known, Intec receives a regular stream of enquiries from around the world about opportunities to unlock value from ‘stranded’ resources.

Outotec Collaboration

Sardinia Project

Intec successfully demonstrated Under a comprehensive Technical the ability of the Intec Process to Collaboration Agreement in the unlock value from refractory field of chloride hydrometallurgy, enargite (copper/gold) resources. Intec regularly passes interesting third-party enquiries to Outotec OYJ of Finland.

Where appropriate, Intec investigates these opportunities and cooperates with potential users of the Intec Process technology for licensing or the joint development of projects worldwide. Prior to future formalisation of deals, these projects are not guaranteed, and remain several years into the future, but some examples are included here.

Although the lack of mineral reserves meant that the Sardinian project did not proceed, the fullyfunded testwork programme opened up significant new opportunities for the application of the Intec process technology to this difficult but commonly-occurring mineral.

With its significantly greater resources, Outotec has the capacity to develop many projects in parallel, allowing Intec to jointly pursue further opportunities with Outotec as appropriate on a caseby-case basis.

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Market Review

Market Review

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Company Details

ASX Code: INL, INLO Deutsche Boerse: INLF OTCQX: ICLJY Shares on Issue: 671,519,848 Listed Options: 131,919,975 Unlisted Options: 28,581,930

Top 10 Shareholders

As at 29 September, 2008 ANZ Nominees Limited 6.3% Orian Holding Corp 6.1% Oregon Nominees Pty Ltd 2.1% Alliance Resources Limited 1.4% National Nominees Limited 1.3% A.D. Christie Pty Ltd 0.9% Lintarn Pty Ltd 0.9% Mr William E. Conway 0.9% Mr Michael John Mackenzie 0.9% Smacer Pty Ltd 0.9% Total 21.8%

2007-2008 Highlights

In May 2008 Intec’s shares commenced trading in the United States as American Depository Receipts (ADRs), providing the opportunity for the Company and its unique minerals processing and metals recycling technologies to further access world investment markets.

Intec ADRs now trade on the International OTCQX, the leading electronic inter-dealer quotation, trader technology and financial information system for over-thecounter (OTC) securities), provided by Pink OTC Markets Inc. Each ADR represents twenty ordinary Intec shares.

Merriman Curhan Ford & Co., the San Francisco-based investment bank, serves as Intec’s Principal American Liaison (PAL) on International OTCQX.

market’s perception that the Intec will seek in the coming year operation of the Hellyer Zinc to re-engage investor markets Concentrate Project (rather than with the value potential of the the proprietary Intec Process techIntec Process technology, both in nology) was the primary value terms of near-term project applicproposition for the Company as a ations and ‘blue-sky’ potential. whole.

Throughout the 2007-2008 financial year, the primary driver of the INL share price was the price of zinc metal, based on the

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Review of Operations

Review of Operations

Intec Metals Recycling Project

Previously known as the Hellyer Residues Project, the scope of this Project was expanded in 2007-2008 to include additional feedstocks, particularly ‘intermediate’ mineral concentrates.

It has been shown that the Intec Process is capable of efficiently extracting the metal values from concentrates that fall well below the required specifications for conventional smelters.

Taking the conventional concentrate products from Hellyer as example, the result is that lead (and to a lesser extent zinc and silver) recoveries from the tailings resource can be significantly enhanced for minimal additional cost.

The same business model has the potential to be widely applicable, within Australia and internationally, offering a nearto medium-term opportunity to further enhance the Intec Metals Recycling Project via the toll treatment of ‘intermediate’ concentrates.

The Intec Metals Recycling Project received a Development Approval from the Tasmanian regulatory authorities in what is considered to be near-record time: under four months from application to approval.

Intec believes that this rapid outcome reflects the significant environmental and economic advantages offered by the Intec Process.

Concurrent with the receipt of regulatory approvals in December 2007, Intec advanced the engineering of the Project and the associated economic modelling, delivering an initial package of information in April 2008.

Based on the robust economic outcomes of this package, and some suggested process optimisation measures, the Board moved to expand the planned operations, with the resulting engineering work occupying the remainder of the 2007-2008 financial year.

Project Update

Subsequent to the end of the 2007-2008 fiscal year, Intec announced that it has reached an in-principle agreement with a key third party that is expected to be a major boost for the Intec Metals Recycling Project.

While the nature of the inprinciple agreement remains confidential pending the formalisation of a legally binding Agreement before 31 October 2008, Intec is confident that the in-principle agreement offers numerous important advantages for the Project.

A finalised agreement would pave the way for a significant upgrade to the Intec Metals Recycling Project. Taking multiple mineral concentrate and industrial waste feedstocks, the upgraded Project is now expected to produce highpurity copper and lead metal products via electrowinning, as well as high-grade zinc sulphide and important silver and indium by-product credits.

The moderate additional capacity and advantageous location enhance the availability of the Intec Metals Recycling Project for the recycling of metal-bearing waste materials. The plant thus should be able to play an enhanced role to that previously envisaged under the collaboration agreement established with Veolia Environmental Services in December 2007.

As a further major financing advantage, a finalised agreement is expected to yield significant capital savings for the upgraded Intec Metals Recycling Project (subject to independent engineering studies by GHD and ACSI) and to result in a shortened

timeline to commencement.

The upgraded Intec Metals Recycling Project will retain all of the Intec Process’s multiple environmental advantages - particularly the absence of liquid effluents or gaseous emissions; the stable solid residues (potentially suitable for reuse); and the low temperature of operation.

Intec has received and provided to the third party a number of letters of support from potential financiers, project participants and other project stakeholders.

Following signing of the formal Agreement before 31 October 2008, it is intended that financing for the full Intec Metals Recycling Project will be finalised by the end of the first quarter of 2009, subject to achievement of specific financial, commercial and technical milestones.

Burnie Research Facility

The Burnie Research Facility includes the Burnie Demonstration Plant (a testing and demonstration facility for the Intec Process) and the Burnie office, with close ties to the adjacent Burnie Research Laboratories owned by Ammtec Limited.

Throughout 2007-2008, the Burnie Research Facility continued a range of testwork designed to support and optimise the Intec Metals Recycling Project.

This work included a series of campaign operations which successfully demonstrated the primary unit operations for the Intec Process.

In addition, the small Burnie team conducted further trials of new materials of construction as part of the ongoing efforts to minimise the capital and operating costs of running future Intec Process operations.

A high-quality long-term testing unit, the Burnie Research Facility stands ready to serve the ongoing needs of the Intec Metals Recycling Project during the ramp-up to production, as well as being available for testing of third-party feedstocks as future projects advance towards implementation.

Review of Operations

Figure 2: Metal Recoveries at the HZCP

Hellyer Zinc Concentrate Project

The Hellyer Zinc Concentrate Project achieved a series of production and efficiency records during 2007-2008, particularly during the March and June Quarters, 2008.

Production during these periods was 14,691 tonnes and 15,392 tonnes of bulk zinc/lead concentrate product, respectively.

Through a series of optimisation initiatives, zinc recovery efficiencies peaked at over 80% (Figure 2), with the average for the June 2008 quarter being 69%.

Put in the context that this operation was re-treating tailings that had already once been processed through the Mill, this is an impressive result.

However, Australian dollar zinc and lead prices weakened considerably throughout the financial year, dropping over 50% to 20-year lows in real terms (Figure 3).

At the same time, input costs such as sea freight, power, fuel, reagents and smelter charges increased materially.

The operations became unprofitable in the September 2008 Quarter, and were suspended on 8 September 2008. The plant was put onto care and maintenance, in readiness for any sustained future improvement in global metals prices and/or the availability of additional thirdparty feedstocks to augment the overall product output.

The Hellyer Zinc Concentrate Project has the advantage of low costs and infrastructure requirements associated with the dredging of the Hellyer tailings (which are however of variably low grade) for processing at the Intec Hellyer Mill.

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90%
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0%
Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08
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Figure 3: LME Zinc Cash Price in Australian Dollars

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A$4,500
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20 year average (real terms)
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01 Jul 07 31 Aug 07 31 Oct 07 31 Dec 07 01 Mar 08 01 May 08 01 Jul 08 31 Aug 08
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It can thus be operated as a ‘swing producer’ to take advantage of favourable periods within global metals cycles, without having to bear the burden to shareholders of operating during unfavourable periods.

Bass Metals concluded its announcement on 1 July 2008 as follows: “Results received from BSM’s drilling to date indicate that the target high grade base metal, gold and silver mineralisation has now been defined over a strike extent of at least 170 metres.”

Bass Metals

Estimates published on 30 September 2008 doubled the total JORC resources at Hellyer, yielding a total mineral resource for the Hellyer Metals Project (which comprises the Fossey zone mineralisation and the Hellyer remnants resource) and Que River of 2.28 million tonnes at 7.3% Zn, 3.9% Pb, 0.6% Cu, 97g/t Ag and 1.6g/t Au. This includes the higher-grade Fossey zone, which was estimated at 0.83 Mt at 9.1% Zn, 4.6% Pb, 0.3% Cu, 120g/t Ag and 2.5g/t Au at a 5% (Pb+Zn) cutoff.

Bass Metals Ltd (23.2% owned by Intec Hellyer Metals Pty Ltd) commenced drilling in the ‘Fossey Zone’ exploration tenements on the Hellyer site during 20072008.

Throughout the financial year and the September 2008 Quarter, Bass Metals has made a series of positive announcements detailing drilling ‘hits’ within the Fossey Zone, which lies only a few hundred metres from the Intec Hellyer Mill.

Review of Operations

Bass Metals has progressed to conducting a mining evaluation study for its Hellyer Mine Project.

Metallurgical testwork on 12 samples of Fossey zone material was conducted at Burnie Research Laboratories, an independent facility which has a long involvement with and has significant expertise in the metallurgy and operation of the Intec Hellyer Mill.

Based on this preliminary work, Bass Metals’ preferred processing route is the sequential flotation of copper, lead and zinc to form separate concentrates, in similar fashion to the original design of the Intec Hellyer Mill, which produced these three types of concentrate plus a bulk zinc/ lead product.

Intec Exploration

Early in 2008, Intec formed Intec Exploration Pty Ltd (IEX) as an exploration vehicle 50/50 co-owned by INL and Roberts Consulting Pty Ltd.

For minimal outlays of cash, time and resources, IEX has acquired a number of mineralogically prospective exploration tenements immediately adjacent to and surrounding the Young Nickel Laterite Project of Jervois Mining Ltd and the currently operating magnesite mine of The Young Mining Company Limited. More recently, IEX has also acquired similarly prospective tenements around the Syerston nickel/cobalt project in central NSW.

IEX considers that its tenements in these regions are both geologically prospective and operationally strategic in nature and INL is granting IEX an Intec Process licence in relation to ores discovered within its tenements.

Outotec Agreement

During the 2008 financial year, Intec entered into a comprehensive Technical Collaboration Agreement in the field of chloride hydrometal-lurgy with Outotec OYJ of Finland. This formalised legally the relationship between the companies which had already been active at a practical level since the original Heads of Agreement was first announced in June 2007.

According to the Technical Collaboration Agreement, Intec makes available to Outotec its internationally patented mixed halide leaching technology, which enhances the recovery of gold and other precious and base metals from mineral ores, concentrates and residues. Similarly, Outotec makes available to Intec its extensive hydrometallurgical capabilities, such as its OKTOP® reactor technology developed for a variety of applications including the efficient transfer of oxygen into mineral slurries, which will enhance kinetics in the leach section of the Intec Process.

The Agreement provides for regular meetings between the two companies for information exchange, joint marketing and project development initiatives. Several active projects have already been identified by either party to the Agreement and have been referred to each other for developmental consideration.

Veolia Environmental Services Agreement

In December 2007, Intec signed a collaboration agreement with Veolia Environmental Services, Australia’s largest provider of waste management and industrial services, and part of the global Veolia Group, which is the world’s leader in waste management.

Under the terms of the agreement, Intec and Veolia will identify Australian waste streams that are suitable as feedstock for Intec’s patented hydrometallurgical technology. The wastes will be supplied to the Intec Metal Recycling Project.

The agreement will enable Veolia to offer a new, environmentally-superior alternative to clients with heavy metal waste problems, and to utilise its extensive infrastructure advantages and client knowledge to continue to divert as much waste as possible away from traditional disposal and towards recycling.

This collaboration agreement between Veolia and Intec represents a synergistic fit between the two companies. Intec seeks to generate economically superior returns by recycling valuable metals from nontraditional sources in an environmentally advantageous manner, and Veolia proactively seeks the most economic and environmentally responsible solutions to its clients’ waste problems.

China Representative Office

Intec established a Chinese representative office in November 2007 in the southeastern city of Guangzhou.

The office reflects the increasing importance of China to Intec’s business, in terms of sales of products from upcoming projects; purchasing opportunities for raw materials (including feedstocks and reagents); potential project opportunities for the Intec Process technology; and potential sourcing of investment funding.

In the intervening months, Intec’s Chinese representatives have been active in all of these areas, most particularly with regard to project opportunities for the recycling of electric arc furnace dust, a zincbearing waste from the steel recycling industry.

Directors’ Report

Directors’ Report

Your Directors present their report on the Intec Group of Companies (referred to hereafter as the Group) consisting of Intec Ltd (Intec or the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2008.

Directors

The following persons were Directors of the Company during the whole of the financial year and up to the date of this report except for Mr Ian Ross who resigned on 31 December 2007. Apart from as specified below, no Intec Director has been a director of any other ASX-listed company in the last 3 years.

Executive Officer on 26 March 2001. He is responsible for implementation of the corporate, financial and marketing strategies of the Group. Mr Wood was appointed a director of ASX-listed Compass Resources NL on 1 August 2007.

A John Moyes B.A. (Chem) (Macquarie) Technical Director

Trevor A Jones B.Comm. (Melb)

Chairman (appointed as Chairman on 1 January 2008)

Mr Jones has spent over 30 years working in the finance industry in Australia, United Kingdom and the USA. During this time he has held senior executive positions in investment funds management, stockbroking and corporate finance, and gained a broad experience of capital structuring and capital raising, particularly in the mining sector. Mr Jones was manager of equity portfolios for Shell Australia and National Employers Mutual in the United Kingdom. He was a Director of County NatWest Securities Australia Limited in London and then Director of Corporate Finance with Westpac Institutional Bank in Sydney. More recently Mr. Jones was the Sydney Chief Executive for Melbourne-based Austock Group and was Chairman of both its Corporate Finance and Investment Management divisions. He was appointed as a Nonexecutive Director of Intec on 28 February 2007.

Ian W Ross

Chairman (resigned on 31 December 2007)

Mr Ross has extensive international corporate finance experience. He was a founding director of a group of mining companies located in the People’s Republic of China (PRC) which was acquired by the Ivanhoe group in 1994. His ensuing senior executive roles with Ivanhoe Capital Corporation included several years resident in the PRC as the Ivanhoe group’s director and as Vice Chairman of Shanghai Land Corporation. Mr Ross is now resident in Sydney and was appointed a Non-executive Director of the Company on 19 September 2003 and Chairman on 14 March 2006. Mr Ross is a director of ASX-listed Union Resources Limited.

Philip R Wood B.A. (Syd), Ll.B. (Syd), A.S.I.A., Dip. L.C.F. (Sorbonne) Managing Director and Chief Executive Officer

Mr Wood has qualified and practised as a legal and corporate adviser on local and international financial and commercial transactions in Sydney, New York, London, Bahrain and Hong Kong. He has been a Director of the Company since 1993 and was appointed Managing Director and Chief

Mr Moyes has over 40 years of experience in the mining and metals industry, encompassing minerals analysis, laboratory management, hydrometallurgical and electrochemical research, process development, plant design and project management. He has been a Director of the Company since 1995 and is presently its Technical Director.

Kenneth J Severs B.Sc., C.Eng., P.Eng., F.I.Chem. E. Non-executive Director

Mr Severs is a senior chemical engineer with 50 years of experience in the mining and metals industry. He has worked at all levels of management in extractive metallurgy including research and development, operations, projects, design, consultancy, marketing and executive functions. He has held senior executive positions with a number of large mining companies including nine years (1990-1999) for the Rio Tinto group as Group Metallurgical Executive and 24 years (19641988) for the Anglo American Group. Mr Severs was Managing Director of Intec Copper from 1995 to December 1998. He was appointed a Nonexecutive Director of the Company on 26 March 2001 and was Chairman from 10 October 2001 until 25 May 2004.

Kieran G Rodgers B.E. (Hons.) Min. (UNSW), M.B.A. (IMD) Finance Director & Chief Financial Officer

Mr Rodgers joined Intec in March 2001 after 13 years of experience in merchant banking and financial consulting, principally at Resource Finance Corporation Ltd, which specifically focused on the Australian and international resources industry. Prior to entering the merchant banking sector, Mr Rodgers gained three years of operational mining engineering experience in the gold and base metals industries, including at the Cobar copper mine. He is Intec’s nominated Director on the board of Bass Metals Ltd, an ASX-listed company in which Intec has a 23.2% shareholding.

Directors’ Report

James R G Bell B.A. (Syd), Ll.B. (Syd) Non-executive Director

Mr Bell is an Australian barrister and solicitor who has practised as a commercial lawyer for 30 years, including 10 years as a partner in the national law firm of Blake Dawson Waldron and 3 years as head of the Banking and Finance division of that firm in Sydney. In 1995, he established his own law firm and has advised some of Australia’s major companies and professional firms across a broad spectrum of endeavour, also providing assistance to the board of Intec in relation to various corporate transactions over several years.

Company Secretaries

Robert J Waring B.Ec., C.A., F.C.I.S., F.Fin., F.A.I.C.D. Company Secretary

Mr Waring was appointed to the position of Company Secretary of Intec in December 1998 and has over 35 years’ experience in financial and corporate roles including 17 years in company secretarial roles for ASX-listed companies and 14 years as a director of an ASX-listed company. He is a director of Oakhill Hamilton Pty Ltd, a company which provides secretarial and corporate advisory services to a range of listed and unlisted companies including the Group.

David W Clark B.Com. (UNSW), C.A., C.P.A., Registered Tax Agent, M.B.A (Executive) (AGSM). Company Secretary, Intec Subsidiaries (appointed on 20 March 2008)

Mr Clark was appointed to the position of Company Secretary of the subsidiary companies in the Intec Group on 20 March, 2008. Mr Clark has over 20 years’ experience in public practice as a chartered accountant and has held positions as Financial Controller and Company Secretary providing accounting, taxation and secretarial services and advice to a diverse range of listed and unlisted public and private companies.

Grahame Clegg J.P., B.Com., C.A., A.C.I.S., M.A.I.C.D., F.T.I.A., A.F.A.I.M., F.N.T.A.A., S.A. Fin. Company Secretary (resigned on 20 March 2008)

Mr Clegg has over 35 years’ experience in financial and corporate roles including 15 years in company secretarial roles for ASX-listed companies. He is a director of Oakhill Hamilton Pty Ltd, and Taen Pty Ltd, companies which have provided secretarial, accounting and corporate advisory services to a range of listed and unlisted companies including the Group.

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Directors’ Report

Meetings of Directors

The numbers of meetings of the Company’s Board of Directors and of each board committee held during the year ended 30 June 2008, and the numbers of meetings attended by each director were:

		Full			Meetings of	Meetings of	committees	committees
	meetings							Nomination
		of				Corporate			and
	Directors			Audit		Governance		Remuneration
	A	B	A		B	A	B	A	B
T A Jones	5	5	2		2	1	1	1	1
I W Ross1	2	2	*		*	1	1	1	1
P R Wood	5	5	*		*	*	*	*	*
A J Moyes	5	5	*		*	*	*	*	*
K J Severs	5	5	2		2	1	1	1	1
K G Rodgers	5	5	*		*	*	*	*	*
J R G Bell	5	5	2		2	*	*	1	1

A = Number of meetings attended

B = Number of meetings held during the time the Director held office or was a member of the committee during the year

Not a member of the relevant committee. 1 Mr Ross resigned on 31 December 2007.

Retirement, election and continuation in office of Directors

Mr A J Moyes and Mr JRG Bell are the Directors retiring by rotation, and being eligible, offer themselves for reelection to the Board.

Principal activities

During the year to 30 June 2008, the Group participated in the Hellyer Zinc Concentrate Project Joint Venture, which produces metal in concentrate by recovering tailings from the Intec Hellyer tailings dam for re-treatment in the Hellyer Mill. The Group also continued the commercialisation of the Intec

Processes, including the operation of the Burnie demonstration plant and associated activities.

There were no other significant changes in the nature of the activities of the Group during the year.

Dividends Intec Ltd

No dividends have been paid to members during the financial year and no recommendation is made as to the payment of dividends.

Review of operations

Information on the operations and financial position of the Group and its business strategies and prospects is set out in the Review of Operations on pages 9 to 11 in the 2008 Annual Report.

Significant changes in the state of affairs

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

On 28 May 2008 the Company lodged at ASIC and ASX a prospectus for a one for five renounceable Entitlements Issue to shareholders for the issue of 111,919,975 New Shares at a price of $0.05 per share together with 111,919,975 free attaching New Options with an exercise price of 8 cents and an expiry date of 31 December 2009. The Entitlements Issue closed successfully on 26 June, 2008 and raised $5,115,000 contributed equity after $394,336 expenses of the Entitlements Issue.

This resulted in a net increase in contributed equity of $5,115,000 as a result of the Issue of 111,919,975 New Shares, less issue costs of $394,336.

Funds received from the net increase in contributed equity amounting to $5,115,000 were used principally to finance the Group’s capital commitments and operations at the Hellyer minesite and the demonstration plant at Burnie and associated activities and the Group’s corporate overheads.

Matters subsequent to the end of the financial year

Hellyer Zinc Concentrate Project

The Group assumed full ownership and operational control of the Hellyer Zinc Concentrate Project from 1 August 2008 for nominal consideration, subject to

reconciliation of joint venture financial accounts at the change over date. Final settlement of the joint venture occurred prior to 30 September 2008, resulting in a net payment by the Group of

Directors’ Report

$700,000 to Polymetals (Hellyer) Pty Ltd. In addition, Polymetals (Hellyer) Pty Ltd retains certain rights to receive additional payments if certain specific assets are sold for total consideration above an agreed amount.

On 8 September 2008 the Group announced suspension of operations of the Hellyer Zinc Concentrate Project and the intention to put the Hellyer facilities onto a care and maintenance status.

Electric Arc Furnace dust (EAF dust)

As a consequence of the impact of severe weather conditions during July 2008 on the EAF dust storage facility at the Hellyer minesite, the Company decided to stop delivery of EAF dust to the Hellyer minesite and commenced remedial work on the Hellyer storage facility. Subsequently, the Environmental Protection Authority of Tasmania (the EPA), by letter received 11 August 2008, withdrew until further notice approval for delivery of EAF dust to the Hellyer minesite, until satisfactory remedial actions were completed. The Company advised OneSteel Limited on 9 September 2008 that it was no longer able to accept EAF dust with immediate effect.

Intec Metals Recycling Project

On 19 September 2008, the Company reached inprinciple agreement with a key third party that is expected to materially assist in the development of the Intec Metals Recycling Project. While the nature of the in-principle agreement remains confidential pending the formalisation of a legally binding Agreement, the Company believes that its implementation will provide material advantages to the Intec Metals Recycling Project. However, a definitive decision to proceed with the Intec Metals Recycling Project is dependant on certain financial, commercial and technical outcomes that are yet to be achieved.

No other matters or circumstances have arisen since 30 June 2008 that have significantly affected or may significantly affect the Group’s operations in future financial years, or the results of those operations in future financial years, or the Group’s state of affairs in future financial years.

Likely developments and expected results of operations

The Group will continue the development of the Intec Metals Recycling Project and generate revenue from the provision of testwork and engineering services for third parties.

Environmental regulation

The Group’s operations are presently subject to environmental regulation under the laws of the Commonwealth of Australia and the States of New South Wales, Victoria and Tasmania.

Intec Ltd is licensed to operate under Section 55 of the Protection of the Environment Operations Act 1997 (NSW Environment Protection Authority) and the associated Protection of the Environment Operations (General) Regulation 1998.

Intec Hellyer Metals Pty Ltd is licensed to operate premises in Victoria under Section 20 (9) of the Environmental Protection Act 1970.

Intec Hellyer Metals Pty Ltd is licensed to operate premises in Tasmania under Section 25 (5) of the Environmental Management and Pollution Control Act 1994 (Tas).

The Group is at all times in full environmental compliance with the conditions of its licences.

Remuneration report

The remuneration report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration; B Details of remuneration; C Service agreements; D Share based compensation; and E Additional information.

The information provided in this remuneration report has been audited as required by Section 308 (3C) Corporations Act 2001 .

Directors’ Report

A Principles used to determine the nature and amount of remuneration

The objective of the Group’s executive reward framework is to ensure that the reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

Non-executive Directors

Fees and payments to Non-executive Directors reflect the demands which are made on, and the responsibilities of, the Non–executive Directors. The Board reviews Non-executive Directors’ fees and payments annually. The Chairman’s fees are determined independently to the fees of Nonexecutive Directors. Individual Non-executive Directors are not present at any discussions relating to determination of their own remuneration.

competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation;
transparency; and
capital management.

The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.

Alignment to shareholders’ interests:

has economic profit as a core component of plan design;
focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non financial drivers of value; and
attracts and retains high calibre executives.

Alignment to programme participants’ interests:

rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder wealth;
provides a clear structure for earning rewards; and
provides recognition for contribution.

The framework provides a mix of fixed and variable pay and includes long term incentives.

The Board has established a nomination and remuneration committee which provides advice on remuneration and incentive policies and practices and makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. The Corporate Governance Statement provides further information on the role of this committee.

Non-executive Directors’ fees are determined within an aggregate Non-executive Directors’ cash remuneration limit, which is periodically recommended for approval by shareholders. The current limit of $400,000 was approved by shareholders at the 2007 Annual General Meeting held on 14 November 2007. In addition, Nonexecutive Directors are able to participate in issues of options pursuant to the Intec Option Plan. The values of any options granted to Non-executive Directors are not included in the aggregate cash remuneration limit as they are not cash based payments.

Executive pay

The executive pay and reward framework has three components:

base pay and benefits;
long term incentives through participation in the Intec Option Plan; and
other remuneration such as superannuation.
The combination of these comprises the executive’s total remuneration.

Base pay

Base pay is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non financial benefits at the executives’ discretion.

Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion.

There is no guaranteed base pay increase included in any senior executive’s contract.

Intec Option Plan

Information on the Intec Option Plan is set out in note 40.

B Details of remuneration

Amounts of remuneration

Details of the remuneration of the Directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Intec and the Group are set out in the following tables.

The key management personnel of Intec and the Group includes the Directors and the following senior executive officers:

B A Banister – Chief Operating Officer D W Clark – Financial Controller

Directors’ Report

J L Huens – Chief Operating Officer D J Purdie – Senior Process Engineer D L Sammut – Corporate Development Manager

A R Tong – Senior Research Metallurgist and Laboratory Manager

Remuneration paid to Directors and key management personnel of the Group

2008	Short-term benefits	Short-term benefits	Short-term benefits	Post- employment benefits	Share- based payment
Name	Cash salary $	Directors’ Fees $	Consulting Fees $	Superannuation $	Options $	Total $
Non-executive Directors T A Jones Chairman1 I W Ross2 K J Severs JRGBell	- - - -	66,960 34,808 60,000 59,150	- - 42,251 18,858	6,290 3,133 - 5,324	8,158 27,192 27,192 16,315	81,408 65,133 129,443 99,647
Sub-total Non-executive Directors	-	220,918	61,109	14,747	78,857	375,631
Executive Directors P R Wood A J Moyes K G Rodgers Other key management personnel B A Banister3 D W Clark4 J L Huens5 D J Purdie6 D L Sammut A R Tong	343,333 233,253 263,542 64,615 43,151 122,349 13,750 167,634 153,365	- - - - - - - - -	- - - - - - - - -	30,900 20,993 23,719 5,815 3,883 11,011 1,238 15,087 13,803	135,962 65,262 65,262 - - 17,641 - 35,282 35,282	510,195 319,508 352,523 70,430 47,034 151,001 14,988 218,003 202,450
Totals	1,404,992	220,918	61,109	141,196	433,548	2,261,763

1 Appointed 1 January 2008.

2 Resigned 31 December 2007. 3 Appointed 25 February 2008.

4 Appointed 17 March 2008.

5 Resigned 2 November 2007. 6 Appointed 19 May 2008.

2007	Short-term benefits	Short-term benefits	Short-term benefits	Post- employment benefits	Share- based payment
Name	Cash salary $	Directors’ Fees $	Consulting Fees $	Superannuation $	Options $	Total $
Non-executive Directors I W Ross_Chairman_ K J Severs T A Jones1 J R G Bell2	- - - -	59,633 50,000 16,263 7,583	- 33,456 - -	5,367 - 1,464 682	51,945 38,958 - -	116,945 122,414 17,727 8,265
Sub-total Non-executive Directors	-	133,479	33,456	7,513	90,903	265,351
Executive Directors P R Wood A J Moyes K G Rodgers3 Other key management personnel J L Huens D L Sammut4 A R Tong	305,427 226,927 235,288 175,437 95,625 122,013	- - - - - -	- - - - - -	27,488 20,423 21,176 15,789 8,606 10,981	155,834 90,903 60,291 40,194 - 40,194	488,749 338,253 316,755 231,420 104,231 173,188
Totals	1,160,717	133,479	33,456	111,976	478,319	1,917,947

1 Appointed 28 February 2007.

2 Appointed 1 May 2007.

3 Appointed as a Director 28 February 2007, previously a key management employee. 4 Appointed 1 October 2006.

Directors’ Report

An annual performance review of all Executive Directors and key management personnel is undertaken. The result of these reviews forms the basis of remuneration recommendations to the Nomination and Remuneration Committee.

C Service agreements and letters of employment

Remuneration and other terms of employment for the Managing Director and Chief Executive Officer, Technical Director, Finance Director and the specified executives are formalised in either service agreements or letters of employment. Each of these service agreements and letters of employment provides for the provision of long service leave to accrue at a rate of 0.87 weeks per year up to 10 years’ service and 2 weeks per year for each additional year of service, and participation in the Intec Option Plan.

Each service agreement and letter of employment provides the remuneration rate to be paid to the employee. All salaries are paid monthly by direct bank deposit. Full details of remuneration paid are included in the table in part B of this note. Other major provisions relating to remuneration are set out below.

	Start Date	Term of	Base Salary plus	Notice	Redundancy
		Agreement	Superannuation	period for	payment
			at 1 July 2008	termination
			$	(months)
Directors
P R Wood	1 July 2007	3 years	381,500	6	2 years salary
A J Moyes	1 July 2007	3 years	245,250	6	2 years salary
K G Rodgers	1 July 2007	3 years	288,850	3	18 months salary
Specified Executives
B A Banister	25 Feb 2008	No term	228,900	1	6 months salary
D W Clark	17 March 2008	No term	163,500	1	6 months salary
D J Purdie	19 May 2008	No term	179,850	1	1 months salary
D L Sammut	1 July 2007	3 years	179,850	1	12 months salary
A R Tong	1 July 2007	3 years	163,500	1	12 months salary

D Share based compensation

Options

Options are granted under the Intec Option Plan, which was approved by shareholders at the 2001 Annual General Meeting. All directors, employees and consultants are eligible to participate in the plan.

Options are granted under the plan for no consideration. Options are granted for a five year period, and vest and are exercisable immediately, unless otherwise stated.

Options are granted to directors, employees and consultants after a review of performances during the preceding year which is carried out in conjunction with the annual salary review. The granting of options is at the Board’s discretion and no individual has a contractual right to receive options.

The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:

Grant date	Expiry date	Exercise	Value per option	Date exercisable
		price1	at grant date
16 July 2002	16 July 2007	$0.2376	-2	16 July 2002
20 November 2002	16 July 2007	$0.2376	-2	20 November 2002
26 November 2003	26 November 2008	$0.0913	$0.0247	26 November 2003
1999 – 2000	30 June 2009	$0.4876	-2	1 January 2001
5 April 2005	24 February 2010	$0.0603	$0.0363	5 April 2005
16 November 2005	24 February 2010	$0.0603	$0.0283	16 November 2005
25 September 2006	30 August 2011	$0.1013	$0.0670	25 September 2006
15 November 2006	30 August 2011	$0.1013	$0.1299	15 November 2006
14 November 2007	25 September 2012	$0.1413	$0.054	14 November 2007
31 January 20083	25 September 2012	$0.1413	$0.071	31 January 2008

1 Exercise prices have been adjusted from original exercise prices at the grant date as a consequence of the Company undertaking entitlement issues to all shareholders since the grant date of options as provided for in the terms and conditions of the Intec Option Plan. 2 No value required as exempted from this requirement under AIFRS.

3 These options will not vest, and may not be exercised, until a Trigger Price Threshold of 25 cents is met. To meet the Trigger Price Threshold, the price of Intec Ltd shares traded on the ASX must have closed above 25 cents for 20 consecutive trading days or Intec must have received a bona fide offer for a majority or all of its shares whether by takeover or scheme of arrangement.

Directors’ Report

Options granted under the plan carry no dividend or voting rights.

The exercise price of the options is based on the current market price on the date the options are granted as determined by the Board.

Company provided as remuneration to each Director of Intec and each of the key management personnel of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Intec. Further information on the options is set out in notes 26 and 40 to the financial statements.

Details of options over ordinary shares in the

2008	Options granted	Options granted	Options exercised	Options exercised	Options lapsed	Options lapsed	Total value of options granted, exercised and lapsed $	% salary consisting of options
	Number	Value $	Number	Value $	Number	Value $
Name
_Directors of Intec_1,3
P R Wood	2,500,000	135,962	-	-	-	-	135,962	26.65
A J Moyes	1,200,000	65,262	-	-	-	-	65,262	20.43
T A Jones	150,000	8,158	-	-	-	-	8,158	10.05
I W Ross	500,000	27,192	-	-	-	-	27,192	41.75
K J Severs	500,000	27,192	-	-	-	-	27,192	20.97
KG Rodgers	1,200,000	65,262	-	-	-	-	65,262	18.51
J R G Bell	300,000	16,315	-	-	-	-	16,315	16.37
_Other key management personnel_2
B A Banister	-	-	-	-	-	-	-	-
D W Clark	-	-	-	-	-	-	-	-
J L Huens	250,000	17,641	-	-	-	-	17,641	14.65
D J Purdie	-	-	-	-	-	-	-	-
D L Sammut	500,000	35,282	-	-	-	-	35,282	16.18
A R Tong	500,000	35,282	-	-	-	-	35,282	17.43
2007
_Directors of Intec_4
P R Wood	1,200,000	155,834	-	-	-	-	155,834	31.88
A J Moyes	700,000	90,903	-	-	-	-	90,903	26.87
T A Jones	-	-	-	-	-	-	-	-
I W Ross	400,000	51,945	-	-	-	-	51,945	44.42
K J Severs	300,000	38,958	-	-	-	-	38,958	31.82
K G Rodgers	900,000	60,291	450,000	14,609	-	-	74,900	19.03
J R G Bell	-		-	-	-	-	-	-
_Other key management personnel_2
J L Huens	600,000	40,194	-	-	-	-	40,194	17.37
A R Tong	600,000	40,194	-	-	-	-	40,194	23.21
D L Sammut	-	-	-	-	-	-	-	-

1 Options issued to Directors in 2008 were granted on 31 January 2008 with an expiry date of 25 September 2012 and an exercise price of 15 cents per share. However, these options will not vest, and may not be exercised, until a Trigger Price Threshold of 25 cents is met. To meet the Trigger Price Threshold, the price of Intec Ltd shares traded on the ASX must have closed above 25 cents for 20 consecutive trading days or Intec must have received a bona fide offer for a majority or all of its shares whether by takeover or scheme of arrangement.

2 Options issued to other key management personnel in 2008 were granted on 14 November 2007 with an expiry date of 25 September 2012 and an exercise price of 15 cents per share.

3 Options issued to Directors in 2007 were granted on 15 November 2006 with an expiry date of 30 August 2011 and an exercise price of 11 cents per share.

4 Options issued to other key management personnel in 2007 were granted on 25 September 2006 with an expiry date of 30 August 2011 and an exercise price of 11 cents per share.

The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using share option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and

the risk free interest rate for the term of the option.

The model inputs for options granted during the years ended 30 June 2007 & 30 June 2008 included:

Directors’ Report

		2008	2008
(a)	Options are granted for no consideration
(b)	Exercise price at grant date	$0.1500	$0.1500
(c)	Grant date	14 November 2007	31 January 2008
(d)	Expiry date	25 September 2012	25 September 2012
(e)	Share price at grant date	$0.14	$0.12
(f)	Expected price volatility of the company’s shares	53.1%	53.1%
(g)	Expected dividend yield	0.0%	0.0%
(h)	Risk-free interest rate	6.55%	6.55%
		2007	2007
(a)	Options are granted for no consideration
(b)	Exercise price at grant date	$0.1100	$0.1100
(c)	Grant date	25 September 2006	15 November 2006
(d)	Expiry date	30 August 2011	30 August 2011
(e)	Share price at grant date	$0.125	$0.195
(f)	Expected price volatility of the company’s shares	48.7%	52.4%
(g)	Expected dividend yield	0.0%	0.0%
(h)	Risk-free interest rate	6.0%	6.0%

Shares provided on exercise of remuneration options

No ordinary shares in the Company (2007- 450,000) were provided as a result of the exercise of remuneration options by a Director of Intec Ltd. No other options were exercised by any other director or key management personnel of the Group.

Shares under option

Unissued ordinary shares of Intec under option at the date of this report are shown in Note 26.

Shares issued on the exercise of options

No ordinary shares of Intec were issued during the year ended 30 June 2008 on the exercise of options granted under the Intec Option Plan. No further shares have been issued on the exercise of options since that date. No amounts are unpaid on any of the shares.

E Additional Information

The Group’s activities over the last five years have included the acquisition of the Hellyer Metals Project, the production of metal in concentrate through the Hellyer Zinc Concentrate Project Joint Venture, the construction and operation of a demonstration plant and associated activities relating to the commercialisation of the Intec Processes. During the last five years Directors’ total remuneration has increased by an average 15.0% per annum. This level of increase reflects the appointment of an additional Executive Director and the value attributed to granted options.

Insurance of officers

The Company has, by Deed of Access, Indemnity and Insurance, paid a premium to insure the Directors and Company Secretaries of the Group in respect of certain legal liabilities, including costs and expenses in successfully defending legal proceedings, whilst they remain as Directors and for seven years thereafter. The insurance contract prohibits the disclosure of the total amount of the premiums and a summary of the nature of the liabilities covered.

Proceedings on behalf of the Company

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

proceedings.

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

Non audit services

The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Group are important.

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and taxation services provided during the year are set out below.

The Directors have considered the position and, in accordance with the advice received from the audit committee, are satisfied that the provision of the non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the provision of non audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and

Directors’ Report

none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor's own work, acting in a management or a decision making capacity for the company, acting as advocate for the company or jointly sharing economic risk

and rewards.

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non related audit firms:

		Consolidated	Consolidated
		2008	2007
		$	$
Assurance services
1.	Audit services
	PricewaterhouseCoopers Australian firm:
	Audit and review of financial reports and other audit work under the
	Corporations Act 2001	186,500	173,490
Total remuneration for audit services		186,500	173,490
2.	Other assurance services
	PricewaterhouseCoopers Australian firm:	-	-
	Audit of transition to AIFRS	-	-
Total remuneration for other assurance services		-	-
Total remuneration for assurance services		186,500	173,490
	Taxation services
	PricewaterhouseCoopers Australian firm:
	Tax compliance services, including review of company income tax returns	13,500	18,400
Total remuneration for taxation services		13,500	18,400

Auditors’ independence declaration

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22.

Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001 .

Rounding of Amounts

The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ report. Amounts in the Directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Authorisation

This report is made in accordance with a resolution of Directors. The financial report was authorised for issue by the Directors on 30 September 2008. The Company has the power to amend and revise the financial report.

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Philip R Wood Managing Director & Chief Executive Officer

Sydney

30 September 2008

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Financial Statements

Income Statements

For the year ended 30 June 2008

		Consolidated		Parent entity
		2008	2007	2008	2007
	Notes	$’000	$’000	$’000	$’000
Revenue from continuing operations
	5	27,202	9,564	3,807	5,165
Other income	6	-	4,081	-	4,081
Cost of production less changes in
inventories of metal in concentrate and
work in progress		(15,917)	(4,514)	-	-
Administration expense		(1,559)	(1,102)	(1,120)	(1,215)
Demonstration plant expenses		(1,034)	(3,949)	-	-
Depreciation and amortisation expense	7	(775)	(1,498)	(45)	(127)
Engineering and other consultants
expenses		(1,211)	(209)	-	(209)
Employee benefits expense		(4,007)	(3,296)	(1,834)	(1,638)
Finance costs	7	(252)	(339)	(236)	(339)
Occupancy expense	7	(612)	(337)	(335)	(237)
Provision against advances to subsidiaries		-	-	(152)	(473)
Research and development expenses	7	(436)	(300)	(250)	(234)
Exploration expenditure written off	18	(2,708)		-	-
Other expenses		(715)	(577)	-	(67)
Diminution in the value of investments in
associates	36	(1,205)	-	-	-
Share of net profit/(losses) of associates
accounted for using the equity method	36	403	(268)	-	-
(Loss)/profit before income tax		(2,826)	(2,744)	(165)	4,707
Income tax benefit	8	-	1,572	-	-
(Loss)/profit attributable to members
of Intec Ltd		(2,826)	(1,172)	(165)	4,707
		Cents	Cents
Loss per share attributable to the
ordinary equity holders of the
Company:
Basic (loss) per share	39	(0.51)	(0.21)
Diluted (loss) per share	39	(0.51)	(0.21)

The above income statements should be read in conjunction with the accompanying notes

Financial Statements

Balance Sheets

As at 30 June 2008

As at 30 June 2008
		Consolidated		Parent entity
		2008	2007	2008	2007
	Notes	$’000	$’000	$’000	$’000
ASSETS
Current assets
Cash and cash equivalents	9	5,215	2,971	4,323	576
Trade and other receivables	10	1,394	5,230	98	94
Inventories	11	3,230	3,434	-	-
Derivative financial instruments	12	-	301	-	-
Financial assets at fair value through the
income statement	13	-	-	-	-
Total current assets		9,839	11,936	4,421	670
Non current assets
Receivables	14	1,134	1,211	40,136	36,727
Investment accounted for using the equity
method	15	4,069	3,202	-	-
Other financial assets	16	-	-	-	-
Plant and equipment	17	33,825	31,402	47	69
Exploration expenditure	18	146	2,854	-	7
Intangible assets	19	10	10	-	-
Total non current assets		39,184	38,679	40,183	36,803
Total assets		49,023	50,615	44,604	37,473
LIABILITIES
Current liabilities
Trade and other payables	20	4,023	2,513	820	327
Borrowings	21	1,350	-	1,350	-
Deferred revenue	22	2,520	8,289	-	-
Total current liabilities		7,893	10,802	2,170	327
Non current liabilities
Deferred revenue	23	2,090	3,174	-	-
Provisions	24	1,990	2,241	-	64
Total non current liabilities		4,080	5,415	-	64
Total liabilities		11,973	16,217	2,170	391
Net assets		37,050	34,398	42,434	37,082
EQUITY
Contributed equity	26	64,475	59,423	64,782	59,666
Reserves	28	16,190	15,764	2,485	2,084
Accumulated losses	29	(43,615)	(40,789)	(24,833)	(24,668)
Total equity		37,050	34,398	42,434	37,082

The above balance sheets should be read in conjunction with the accompanying notes.

Financial Statements

Statements of Changes in Equity

For the year ended 30 June 2008

		Consolidated	Parent	entity
		2008	2007	2008	2007
	Notes	$’000	$’000	$’000	$’000
Total equity at the beginning of the
financial year		34,398	31,505	37,082	28,161
Employee share options expense	40(b)	402	865	402	865
Share of associates’ reserves	36	24	7	-	-
Share of associates’ capital raising costs	36	(63)	(156)	-	-
Net income recognised directly in
equity		363	716	402	865
(Loss)/profit for the year		(2,826)	(1,172)	(165)	4,707
Total recognised income and expense
for the year		(2,463)	(456)	237	5,572
Transactions with equity holders in their
capacity as equity holders
Contributions of equity, net of transaction
costs	26	5,115	2,898	5,115	2,898
Amounts transferred to equity on exercise
of options	28	-	(127)	-	(127)
Rights to acquire additional shares granted
on acquisition of Intec Zeehan Residues Pty
Ltd (formerly Encore Metals NL) recognised
in share based payments reserve	40(a)	-	395	-	395
Options issued to Macquarie Bank Limited
in consideration for entering into a
financing facility recognised in share based
payments reserve	40(a)	-	183	-	183
		5,115	3,349	5,115	3,349
Total equity at the end of the financial
year		37,050	34,398	42,434	37,082

The above statements of changes in equity should be read in conjunction with the accompanying notes.

Financial Statements

Cash Flow Statements

For the year ended 30 June 2008

Notes Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest paid Interest received Other receipts Net cash (outflow) inflow from operating activities 42 Cash flows from investing activities Payments for plant and equipment Payments for tenement security deposits Payment for investments in listed companies Proceeds from sale of property, plant & equipment Proceeds from sale of investments in listed companies Loans (to)/from subsidiaries Contribution from JV Party Net cash outflow from investing activities Cash flows from financing activities Proceeds from issues of shares Proceeds from borrowings Repayment of borrowings Net cash inflow from financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year 9 Financing arrangements 41 Non-cash financing and investing activities 41	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 23,757 9,601 - - (20,853) (12,026) (3,310) (2,556) (151) (156) (135) (156) 262 186 71 145 83 90 17 18
	3,098 (2,305) (3,357) (2,549)
	(6,016) (3,709) (23) (66) - (1,021) - (121) (1,708) (6,767) - (4,081) 10 - - - - 8,161 - 8,161 - - 267 (7,538) - 1,771 - -
	(7,714) (1,565) 244 (3,645)
	5,510 348 5,510 348 1,719 4,481 1,350 4,481 (369) (4,481) - (4,481)
	6,860 348 6,860 348
	2,244 (3,522) 3,747 (5,846) 2,971 6,493 576 6,422
	5,215 2,971 4,323 576

The above cash flow statements should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

Notes to the Financial Statements

1 Summary of significant accounting policies 2 Financial risk management
3 Critical accounting estimates and judgements
4 Segment information
5 Revenue
6 Other income
7 Expenses
8 Income tax benefit
9 Current assets - Cash and cash equivalents
10 Current assets - Trade and other receivables 11 Current assets – Inventories at cost 12 Current assets - Derivative financial instruments 13 Current assets - Financial assets at fair value through income statement 14 Non current assets – Receivables 15 Non current assets - Investments accounted for using the equity method 16 Non current assets - Other financial assets 17 Non current assets - Plant and equipment 18 Non current assets - Exploration expenditure 19 Non current assets - Intangible assets 20 Current liabilities - Trade and other payables 21 Current Liabilities – Borrowings 22 Current liabilities - Deferred revenue 23 Non current liabilities - Deferred revenue 24 Non current liabilities – Provisions 25 Non current liabilities - Deferred income tax liability 26 Contributed equity 27 Options 28 Reserves 29 Accumulated losses 30 Key management personnel disclosures 31 Contingencies 32 Commitments 33 Financial instruments 34 Related party transactions 35 Subsidiaries 36 Investments in associates 37 Investments in joint ventures 38 Events occurring after the balance sheet date 39 Loss per share 40 Share based payments 41 Non cash investing and financing activities
42 Reconciliation of (loss)/profit after income tax to net cash flows from operating activities 43 Auditor’s remuneration

Notes to the Financial Statements

Notes to the Financial Statements

30 June 2008

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for the Company as an individual entity and the Group consisting of the Company and its subsidiaries.

Basis of preparation

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

Compliance with International Financial Reporting Standards (IFRS)

Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and notes of the Group comply with IFRS.

During the year ended 30 June 2008 the Group continued to generate income through its participation in Hellyer Zinc Concentrate Project (HZCP). The Group assumed full ownership and operational control of the Hellyer Zinc Concentrate Project from 1 August 2008 for nominal consideration, subject to reconciliation of joint venture financial accounts at the change over date. Final settlement of the joint venture occurred prior to 30 September 2008, resulting in a net payment by the Group of $700,000 to Polymetals (Hellyer) Pty Ltd. In addition, Polymetals (Hellyer) Pty Ltd retains certain rights to receive additional payments if certain specific assets are sold for total consideration above an agreed amount.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain classes of plant and equipment.

Subsequently, on 8 September 2008 the Group announced suspension of operations of the Hellyer Zinc Concentrate Project and the intention to put the Hellyer facilities onto a care and maintenance status.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving either a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

Going concern

The Company and its subsidiaries generated an operating loss of $2.826 million and net cash inflows from operations of $2.244 million in the year ended 30 June 2008. As of balance date, the Company and its subsidiaries had net assets of $37.050 million and cash balances of $5.215 million.

The financial report has been prepared on a going concern basis. The carrying values on non-current assets disclosed in the Financial Statements are predicated on the Group's continued pursuit of its strategy in respect of these assets. The strategy may involve raising additional capital through future equity raisings, the formation of strategic partnerships with other entities or a combination of both. Should the additional capital that may be required to pursue the Group's objectives not be secured and the Group adopt a modified strategy involving rationalization of any non-current assets, while there is inherent uncertainty, the Directors consider that it is unlikely that the carrying values of non-current assets would exceed the realisable value of such assets in an orderly sales process and accordingly no adjustment has been made to their carrying value.

Significant accounting policies

Accounting policies are selected and applied in a manner which ensures that the resultant financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions and other events is reported.

The Company has adopted relevant new and revised accounting standards and pronouncements with no material impact.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Borrowings

Borrowings are initially recognised at fair value, net

of transaction costs incurred. Borrowings are

Notes to the Financial Statements

subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility.

(b) Borrowing costs

Borrowing costs are expensed.

(c) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.

(d) Contributed equity

Ordinary shares are classified as equity.

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

(e) Employee benefits

(i) Wages and salaries and annual leave Liabilities for wages and salaries, including non monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Share based payments

Share based compensation benefits are provided to employees via the Intec Option Plan. Information relating to the plan is set out in note 40.

The fair value of options granted under the Intec Option Plan is recognised as an employee benefit expense with a corresponding increase in equity.

The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using share option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital.

(f) Exploration Expenditure

Exploration and evaluation expenditure comprises costs which are directly attributable to:

researching and analysing existing exploration data;
conducting geological studies, exploratory drilling and sampling;
examining and testing extraction and treatment methods; and/or
compiling pre-feasibility and feasibility studies.

Exploration and evaluation expenditure also includes costs incurred in acquiring mineral rights,

the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects.

Exploration and evaluation expenditures in relation to separate areas of interest are capitalised in the year in which they are incurred and are carried at cost less accumulated impairment losses where the following conditions are satisfied:

(i) the rights to tenure of the area of interest are current; and

Notes to the Financial Statements

(ii) at least one of the following conditions is also met:
the exploration and evaluation expenditures are expected to be recouped through successful development and production from the area of interest, or alternatively, by its sale, or
exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the area of interest are continuing.

Capitalised exploration and evaluation expenditure is reviewed for impairment at each balance sheet date.

Subsequent recovery of the resulting carrying value depends on successful development of the area of interest or sale of the project. If a project does not prove viable, all irrecoverable costs associated with the project and any related impairment provisions are written off.

Where a decision is made to proceed with development, accumulated expenditure is tested for impairment, and transferred to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

(g) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and for disclosure purposes.

The nominal value less estimated credit adjustments of trade receivables and payables are

assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(h) Financial instruments

The Group’s policy with regard to ‘Treasury management and financial instruments’ is set out in note 2 and 33. When the Group enters into derivative contracts these transactions are designed to reduce exposures related to assets and liabilities, firm commitments or anticipated transactions.

Fair Value

Where financial instruments are accounted for at fair value, this is the amount at which they could be exchanged in an arm’s length transaction between informed and willing parties. Where available, market values have been used to determine fair values. In other cases, fair values have been calculated using quotations from independent financial institutions, or by discounting expected cash flows at prevailing market rates. The fair values of the Group’s cash, short term borrowings and loans to subsidiaries and associates approximate to their carrying values, as a result of their short maturity or because they carry floating rates of interest. A further description of the accounting for each class of financial instruments is given below.

Financial assets

All financial assets are initially recorded at fair value. The Group may have certain investments in companies that are not associates or subsidiaries. These investments are not classed as ‘available for sale’. Such investments are subsequently measured at fair value with unrealised gains and losses recognised directly in the income statement. Other financial assets that the Group has the expressed intent and ability to hold to maturity together with loans and receivables are measured at amortised cost less any impairment charges.

Financial liabilities

Borrowings and other financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently stated at amortised cost. Any difference between the amounts originally received (net of transaction costs) and the redemption value is recognised in the income statement over the period to maturity using the effective interest method.

Derivative financial instruments - Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts. Derivative assets and liabilities are recognised at fair value. Derivative income or loss is recognised in deferred revenue until such time as the revenue from the host contract is recognised in the income statement, at which time the derivative income/loss is also recognised in the income statement. Financial assets at fair value through profit or loss Financial assets subject to fair value calculation are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement.

Available-for-sale financial assets

Gains and losses arising from changes in fair value of investments designated as “available for sale” are recognised directly in the available-for-sale reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale reserve within equity is included in the income statement for the period.

Notes to the Financial Statements

(i) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured in Australian dollars and the consolidated financial statements are presented in Australian dollars, which is the Company’s and Group’s functional and presentation currency.

(ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(j) Goods and Services Tax (GST)

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

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the

taxation authority is included with other receivables or payables in the balance sheet.

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

(k) Impairment of assets

In respect of non current assets, each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss is recognised to the extent that carrying amounts exceed recoverable amount. The recoverable amount of an asset or cash-generating group of assets is measured at the higher of fair value less costs to sell and value in use.

Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties, and is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal. Value in use is also generally determined as the present value of the estimated future cash flows, but only those expected to arise from the continued use of the asset in its present form and its eventual disposal. Present values are determined using a risk-adjusted pre-tax discount rate appropriate to the risks inherent in the asset. Future cash flow estimates are based on expected production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors), reserves, operating costs, restoration and rehabilitation costs and future capital expenditure. This policy requires

management to make these estimates and assumptions, which are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be impaired and the impairment would be charged against the income statement.

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than goodwill that suffer impairment are reviewed for possible reversal of the impairment at each reporting date.

(l) Income tax

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

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain

Notes to the Financial Statements

temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses or to the extent that they will be offset by deferred income tax liabilities which will reverse in the same periods.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax consolidation legislation

The Company and its wholly owned Australian subsidiaries have not implemented the tax consolidation legislation as of 30 June 2008.

(m) Intangible assets

Costs incurred in respect of intellectual property are capitalised to the extent that it is expected that the asset may be realised in the future. Intellectual property has an indefinite useful life and is not subject to amortisation and is tested for impairment annually.

(n) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is comprised of materials, labour and overheads related to the production of the inventories, on an absorption costing basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The methods used to assign costs to inventories are actual invoiced costs.

(o) Investments

Non current investments in subsidiaries are measured on the cost basis. The carrying amount of non current investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments.

(p) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 32). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease.

Lease rental income in respect of assets acquired under the terms of the Hellyer Zinc Concentrate Project Joint Venture Agreement is recognised in the income statement on a straight line basis over the remaining term of the Joint Venture.

(q) Loss per share

(i) Basic loss per share

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

(ii) Diluted loss per share

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

(r) Plant and equipment

The Hellyer plant and equipment is shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less

subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of

Notes to the Financial Statements

the asset and the net amount is restated to the revalued amount of the asset. All other plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Increases in the carrying amounts arising on revaluation of the Hellyer plant and equipment are credited, net of tax, to the asset revaluation reserve in shareholders’ equity. To the extent that the increase reverses a decrease previously recognised in the income statement, the increase is first recognised in the income statement. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the income statement.

Depreciation on assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

•	Hellyer plant and equipment	12 years
•	Demonstration plant	3-40 years
•	Office equipment	2-8 years
•	Plant and equipment	4-7 years
•	Rehabilitation asset	12 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(k)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(s) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2008 and the results of all subsidiaries for the year then ended. The Company and its subsidiaries together are referred to in this financial report as the Group.

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

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

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

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

Investments in subsidiaries are accounted for at

cost in the individual financial statements of the Company.

(ii) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost.

The Group’s share of its associates’ post acquisition profits or losses is recognised in the income statement, and its share of post acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Notes to the Financial Statements

(iii) Joint Ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control such that significant operational and financial decisions require the unanimous consent of the parties sharing control. The Group has one joint venture.

Jointly controlled operations (‘JCO’s): a JCO is a joint venture in which the venturers have joint control over the operations of the joint venture.

JCO’s do not involve the establishment of a corporation, partnership or other entity. Each participant derives benefit from the joint activity through a share of production, rather than by receiving a share of the results of trading. The Group’s proportionate interest in the assets, liabilities, revenues, expenses and cash flows of JCO’s are incorporated into the Group’s financial statements under the appropriate headings.

Where necessary, adjustments are made to the results of subsidiaries, joint ventures and associates to bring their accounting policies into line with those used by the Group.

(t) Provisions

(i) General

Provisions for legal claims are recognised when:

the Group has a present legal or constructive obligation as a result of past events;
it is more likely than not that an outflow of resources will be required to settle the obligation; and
the amount has been reliably estimated.

Provisions are not recognised for future operating losses.

(ii) Provisions for close down and restoration and for environmental clean up costs

Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbances occurs, whether this occurs during the mine development or during the production phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations which are expected to arise on the basis of a closure plan. The cost estimates are calculated annually during the life of the operation to reflect known developments e.g. updated cost estimates and revisions to the estimated lives of operations, and are subject to formal review at regular intervals.

Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the

end of the life of the mine. Although the actual cost to be incurred is uncertain, the Group’s management has estimated these respective costs based on feasibility studies, relevant government assessments and engineering studies using current restoration standards and techniques. The amortisation or ‘unwinding’ of the discount applied in establishing the net present value is charged to the income statement in each accounting period. The amortisation of the discount is shown as a financing cost, rather than as an operating cost.

The initial closure provision together with other movements in the provisions for close down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised within plant and equipment. These costs are then depreciated over the lives of the assets to which they relate.

As noted above, the ultimate cost of environmental remediation is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example, in response to changes in ore reserves or production rates. As a result there could be significant adjustments to the provision for close down and restoration and environmental clean up, which would affect future financial results.

(u) Revenue and other income recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of treatment charges, trade allowances, rebates and amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the

Group’s activities described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

Notes to the Financial Statements

(i) Sale of metal in concentrate

The terms of sale are on a cost, insurance and freight (c.i.f.) basis where all of the risks associated with the product remain with the seller until the product has been delivered to the port of discharge, when title passes to the purchaser.

Metal in concentrate is sold under medium to long term contracts. Sales revenue is only recognised in the income statement on individual sales when persuasive evidence exists that all of the following criteria are met:

the significant risks and rewards of ownership of the product have been transferred to the buyer;
neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the sale will flow to the Group; and
the costs incurred or to be incurred in respect of the sale can be measured reliably.

The conditions are generally satisfied when title passes to the customer. Sales revenue is recognised when the product is delivered to the destination specified by the customer, which is, the port of discharge.

The price of metal in concentrate is determined on a provisional basis at the date of despatch. Adjustments to the sales price occur based on movements in quoted market prices up to the date of final pricing. The period between provisional invoicing and final pricing is typically between 60 and 120 days. Revenue on provisionally priced concentrate is recognised based on the estimated fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity derivative.

At each reporting date provisionally priced zinc, lead and silver are marked to market based on the forward selling price for the quotational period stipulated in the contract. For this purpose, the selling price can be measured reliably for zinc, lead and silver for which there exists active and freely traded commodity markets such as the London Metals Exchange and the value of product sold by

the Group is directly linked to the form in which it is traded on that market.

The marking to market of provisionally priced sales contracts is treated as an embedded derivative with changes in value recorded as an adjustment to deferred sales revenue.

(ii) Other sales of Goods and Disposal of Assets Income from other sales of goods and disposal of other assets is recognised when the Group has passed control of the goods or other assets to the buyer.

(iii) Interest Revenue

Interest revenue is recognised on an accrual basis, taking into account the interest rates applicable to financial assets.

(iv) Management Fees

Management fees are charged to subsidiaries on a cost basis for services provided and recognised as revenue in the income statement of the Company.

(v) Consulting services and treatment fees Revenue from consulting services and treatment fees are recognised using the percentage-ofcompletion method for fixed-fee arrangements or as the services are provided for time-and-materials arrangements.

(vi) Royalty income

Royalty income is recognised progressively over the term of the Hellyer Zinc Concentrate Project Joint Venture at rates specified in the Joint Venture Agreement.

(vii) Lease rental income

(viii) Other income

Other income, which includes government grants and any other forms of government assistance, is recognised on receipt when reasonable assurance that income will be earned is established.

(ix) General All revenue is stated net of goods and services tax (GST).

(v) Rounding of amounts

The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Financial report. Amounts in

the Financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

(w) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing

products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

Notes to the Financial Statements

(i) Segment information Segment information is prepared in conformity with the accounting policies of the entity as disclosed in Accounting Standard AASB 114 Segment Reporting.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, inventories, plant and equipment and goodwill and other intangible assets, net of related provisions,

while assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist primarily of trade and other creditors, employee benefits and provision for employee entitlements and rehabilitation. Segment assets and liabilities do not include income taxes.

(ii) Segment transfers

Segment revenues, expenses and results include transfers between segments. Such transfers are processed on an “arms-length” basis and are eliminated on consolidation.

(x) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

(y) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(z) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2008 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

(iii) AASB-I 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

AASB-I 14 will be effective for annual reporting periods commencing on or after 1 January 2008. It provides guidance on the maximum amount that may be recognised as an asset in relation to a defined benefit plan and the impact of minimum funding requirements on such an asset.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a 'management approach' to reporting on financial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Group has not yet decided when to adopt AASB 8. Application of AASB 8 may result in different segments, segment results and different types of information being reported in the segment note of the financial report. However, at this stage, it is not expected to affect any of the amounts recognised in the financial statements.

The Group currently does not have any defined benefit plans in place and therefore there will be no impact on the financial statements of the Group.

(iv) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made either a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The Group intends to apply the revised standard from 1 July 2009.

(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]

The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of the Group, as the Group already capitalises borrowing costs relating to qualifying assets.

(v) Revised AASB 3 Business Combinations The revised AASB 3 is applicable to annual reporting periods commencing on or after 1 July 2009. It has changed the accounting for certain aspects of business combinations including transaction costs, contingent consideration and accounting for a step acquisition, among others.

Notes to the Financial Statements

The Group intends to apply the revised standard from 1 July 2009.

(vi) AASB 127 Consolidated and separate financial statements

changes the requirements for accounting for transactions with minority interests. Application of this standard is not expected to have a material impact on the Group. The Group intends to apply the revised standard from 1 July 2009.

AASB 27 is applicable to annual reporting periods commencing on or after 1 July 2009. The standard

2 Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, cash flow and fair value interest rate risk and price risk), credit risk, liquidity risk and commodity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by company management and the Board of Directors. Financial risks are identified and evaluated and, where considered necessary, strategies are put in place to investigate and/or minimise such risks. For additional discussion of the Group’s financial risks, refer to Note 33.

(a) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Group is exposed to foreign exchange risk predominantly arising from currency exposures to the US dollar on

its sales of metal in concentrates. Currency protection measures may be deemed appropriate in specific commercial circumstances and are subject to strict limits laid down by the Board. The Group has not entered into any foreign currency hedging contracts during the year.

(b) Credit risk

Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. The Group has policies in place to ensure that sales of product are made to customers with an appropriate credit history. There is negligible credit risk on financial assets, excluding metal in concentrate debtors, of

the Group since there is limited exposure to individual customers or countries and the economic entity’s exposure is limited to the amount of cash, short term deposits and receivables which have been recognised in the balance sheet. Deposits and financial arrangements are held in high rated financial institutions.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed finance facilities. Due to the dynamic nature of the

underlying businesses, the Board aims at maintaining flexibility in funding by keeping committed finance facilities available (Refer notes 33(b)(ii) and 41).

(d) Cash flow and fair value interest rate risk

The Group's interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

The Group does not currently hedge its exposure to movements in variable interest rates.

(e) Commodity price risk

The Group’s normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Board and to rigid internal controls. The Group has not entered into any commodity price hedging contracts during the year. Sales of metal in concentrate are initially recognised in deferred revenue at the date of loading based on a provisional invoice. The commodity prices included in the provisional invoice

are based on London Metal Exchange (LME) market prices current on that date. The final price received is subject to adjustment based on future LME prices in accordance with the terms of individual sales contracts. At each reporting date, the value of the embedded derivative contained in sales contracts which have not been finalised is recognised in the balance sheet as a derivative asset or liability.

Notes to the Financial Statements

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. There are no estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

The preparation of the consolidated financial statements requires management to make judgements and estimates and form assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported revenue and costs during the periods presented therein. On an ongoing basis, management evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and costs. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the results of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and

conditions.

The Group has identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Hellyer Plant & equipment

The Group accounts for its Hellyer plant & equipment on a revaluation basis, which requires a valuation to be performed at least every 3 years. The last valuation was conducted in 2006. In the intervening period, the Group is required to consider factors that may indicate impairment. As discussed in Note 38, the Hellyer plant & equipment were placed on care and maintenance subsequent to year-end. The Group believes that sufficient evidence exists to indicate the carrying value of the Hellyer plant & equipment will be recoverable through the potential sale of these assets. If this potential sales program was not to occur, the Group may be required to impair the assets. Any impairment would first be charged against the revaluation reserve, which is currently carried at $13.6 million. If an impairment charge were to be greater than this amount, the incremental amount would be charged to the profit & loss.

Exploration and evaluation expenditure

The Group’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established.

Any such estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the income statement.

Provision for restoration and rehabilitation

The Group’s accounting policy requires the recognition of provisions for the restoration and rehabilitation of relevant operating sites. The provision recognised represents management’s best estimate of the present value of the future costs required. Significant estimates and assumptions are made in determining the amount of restoration and rehabilitation provisions. Those estimates and assumptions deal with uncertainties such as: changes to the relevant legal and regulatory framework; the magnitude of possible contamination and the timing, extent and costs of required restoration and rehabilitation activity. These uncertainties may result in future actual

expenditure differing from the amounts currently provided.

The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for operating sites are recognised in the balance sheet by adjusting both the restoration and rehabilitation asset and provision. Such changes give rise to change in future depreciation and interest charges. For closed sites, changes to estimated costs are recognised immediately in the income statement.

Notes to the Financial Statements

Revenue recognition

The Group recognises revenue from sales of metal in concentrate at the time the ship reaches it port of discharge based on the provisional invoice issued on the date of departure. The final value of each sale is only known with certainty when the final invoice is issued.

Income taxes

The Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax

provisions in the period in which such determination is made.

4 Segment information

(a) Business segments

The Group operates in the following industries:

(i) Metal in concentrate

Production of metal in concentrate from tailings at the Hellyer minesite. These operations are carried out by the Hellyer Zinc Concentrate Project Joint Venture in which the Group has a 50% interest. The Joint Venture commenced on 1 December 2006.

(ii) Research and Development

The Group continues to undertake research and development activities with respect to the commercialisation of the Intec Process technology including operation of the Burnie demonstration plant and provision of testwork and engineering services to third parties.

(b) Geographical segments

The Group operates in one geographical segment, namely Australia.

(a) Segment reporting – business segments, 2008

(i) Segment Revenue

Sales to external customers Total sales revenue Other revenue Total segment revenue Intersegment elimination Unallocated revenue Consolidated revenue (ii) Segment Result Segment profit/ (loss) Intersegment elimination Unallocated profit/ (loss) Loss before income tax Income tax benefit Loss for the year	Metal in concentrate $’000 R & D $’000 22,267 612	Consolidated $’000 22,879
	22,267 612 4,018 -	22,879 4,018
	26,285 612	26,897
	2,446 (1,800)	- 305
		27,202
		645 - (3,471)
		(2,826) -
		(2,826)

Notes to the Financial Statements

(iii) Segment assets and liabilities

Segment assets 39,780 5,127 Intersegment elimination Unallocated assets Total assets Segment liabilities 11,275 698 Intersegment elimination Unallocated liabilities Total liabilities (iv) Other segment information Metal in concentrate $’000 R & D $’000 Acquisition of plant and equipment 5,278 435 Unallocated Total acquisition Depreciation expense 72 703 (v) Cash flow information Net cash flow from operating activities 8,076 (1,935) Unallocated Total cash flows from operating activities Net cash flow from investing activities (5,278) (435) Unallocated Total cash flow from investing activities Net cash flow from financing activities - - Unallocated Total cash flow from financing activities *(a) Segment reporting – business segments, 2007* (i) Segment Revenue Metal in concentrate $’000 R & D $’000 Sales to external customers 7,915 32 Total sales revenue 7,915 32 Other revenue 1,617 - Total segment revenue 9,532 32 Intersegment elimination Unallocated revenue Consolidated revenue	39,780 5,127 11,275 698 Metal in concentrate $’000 R & D $’000 5,278 435 72 703	44,907 - 4,116
		49,023
		11,973 - -
		11,973
		Consolidated $’000 5,713 303
		6,016 775
		6,141 (3,043)
		3,098 (5,713) (2,001)
		(7,714)
		- 6,860
		6,860
		Consolidated $’000 7,947
	7,915 32 1,617 -	7,947 1,617
	9,532 32	9,564
		- -
		9,564

Notes to the Financial Statements

(ii) Segment Result Metal in concentrate $’000 R & D $’000 Segment profit/ (loss) 3,889 (8,064) Intersegment elimination Unallocated profit/ (loss) Loss before income tax Income tax benefit Loss for the year (iii) Segment assets and liabilities Metal in concentrate $’000 R & D $’000 Segment assets 38,821 8,522 Intersegment elimination Unallocated assets Total assets Segment liabilities 15,994 391 Intersegment elimination Unallocated liabilities Total liabilities (iv) Other segment information Metal in concentrate $’000 R & D $’000 Acquisition of plant and equipment 7,749 442 Unallocated Total acquisition Depreciation expense 857 703 (v) Cash flow information Metal in concentrate $’000 R & D $’000 Net cash flow from operating activities 5,662 (6,659) Unallocated Total cash flows from operating activities Net cash flow from investing activities (5,203) (442) Unallocated Total cash flow from investing activities Net cash flow from financing activities - - Unallocated Total cash flow from financing activities	Consolidated $’000 (4,175) - 1, 431
	(2,744) 1,572
	(1,172)
	Consolidated $’000 47,343 - 3,272
	50,615
	16,385 - -
	16,385
	Consolidated $’000 8,191 -
	8,191
	1,498 Consolidated $’000 (997) (1,308)
	(2,305)
	(5,645) 4,080
	(1,565)
	- 348
	348

Notes to the Financial Statements

5 Revenue
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Sales revenue
Sales of metal in concentrate	22,160	7,857	-	-
Consulting fees	612	32	-	16
EAF dust	305	-	-	-
Treatment Fees	-	2	-	-
Other sales revenue	107	56	22	-
	23,184	7,947	22	16
Other revenue
Interest – subsidiaries (note 35)	-	-	3,715	3,050
Interest – other	237	186	70	145
Hellyer Zinc Concentrate Project Joint Venture
Royalty (note 34 (g) (iii))	2,000	1,167	-	-
Lease revenue	1,781	264	-	-
Management fees – subsidiaries	-	-	-	1,954
	4,018	1,617	3,785	5,149
Total revenue	27,202	9,564	3,807	5,165
6 Other income
Net gain on disposal of other financial assets at
fair value through income statement	-	4,081	-	4,081
Total other income	-	4,081	-	4,081
7 Expenses
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Loss before income tax includes the
following specific expenses:
Depreciation
Plant and equipment	38	100	10	100
Office furniture and equipment	35	27	35	27
Demonstration plant	703	641	-	-
Hellyer plant and equipment	2,514	2,007	-	-
Less amounts capitalised into inventory	(366)	(478)	-	-
Less amounts transferred to cost of goods sold	(2,148)	(799)	-	-
Total depreciation recognised in income
statement	775	1,498	45	127
Finance costs
Interest and finance charges paid/payable	252	156	236	156
Issue of options to financier	-	183	-	183
Finance costs expensed	252	339	236	339
Foreign exchange losses	67	174	-	-
Net loss on disposal of plant and equipment	-	280	-	280
Rental expense relating to operating leases	612	337	335	237
Research and development	436	300	250	234
Superannuation	217	173	79	53

Notes to the Financial Statements

8 Income tax benefit

8 Income tax benefit
*(a)* *Numerical reconciliation of income tax*	*expense (benefit)*	*to prima facie tax payable*
(Loss)/profit from continuing operations before
income tax expense/(benefit)	(2,826)	(2,744)	(165)	4,707
Tax at the Australian tax rate of 30% (2007 -
30%)	(848)	(823)	(50)	1,412
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Entertainment	3	-	2	-
Share of net (profit)/loss of associate	(121)	80	3	-
Share-based payments	121	314	121	314
Tax losses/temporary differences previously not
recognised	845	(1,143)	(76)	(1,726)
Income tax (benefit)/expense	-	(1,572)	-	-
*(b)* *Unrecognised tax losses*
Unused tax losses for which no deferred tax asset
has been recognised	29,936	29,363	7,254	7,185
Potential tax benefit @ 30% (2007 – 30%)	8,981	8,809	2,176	2,156
All unused tax losses were incurred by Australian
entities.

The benefit for tax losses will only be obtained if:

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

In addition, the availability of certain tax losses is subject to the Group successfully establishing deductibility, and in particular, satisfying the continuity of ownership test and the same business test.

(c)

Tax consolidation legislation

The Company and its wholly-owned Australian subsidiaries have not implemented the tax consolidation legislation as of 30 June 2008.

9 Current assets - Cash and cash equivalents

Cash at bank and on hand Deposits at call	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 5,215 2,971 4,323 576 - - - -
	5,215 2,971 4,323 576

(a) Reconciliation to cash at the end of the year

The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows.

(b) Cash at bank and on hand

These are interest bearing at interest rates between 3.60% and 4.75% (2007 – 3.60% and 4.50%) for account balances greater than $500,000.

(c) Deposits at call

The deposits are bearing floating interest rates between 6.55% and 7.30% (2007 – 5.55% to 6.41%). These deposits have an average maturity of 30 days.

Notes to the Financial Statements

10 Current assets - Trade and other receivables

Trade debtors GST receivables Other receivables Prepayments	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 1,191 4,841 20 - 111 301 - 8 27 32 20 30 65 56 58 56
	1,394 5,230 98 94

11 Current assets - Inventories at cost

11 Current assets - Inventories at cost
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Metal in concentrate	2,003	174	-	-
Spares and reagents	1,060	540	-	-
Goods in transit	-	2,603	-	-
Work in progress	167	117	-	-
	3,230	3,434	-	-
12 Current assets – Derivative financial	instruments
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Current assets – Embedded derivatives	-	301	-	-
Total current derivative financial instrument
assets	-	301	-	-

(a) Instruments used by the Group

The Group is party to derivative financial instruments in the normal course of business in respect of its exposure to variations in the final price of metal in concentrate sold compared to the price indicated on the provisional invoice.

The gain or loss from remeasuring at balance date

the embedded derivative instruments at fair value is recognised in deferred sales revenue. In the year ended 30 June 2008 no gains or losses were recognised (2007 - gain of $301,000). Gains or losses relating to embedded derivatives are transferred to the income statement at the time revenue is recognised.

(b) Credit risk exposures

Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. This arises with amounts receivable from unrealised gains or losses on derivative financial instruments. At balance date $Nil (2007: $4,657,000) is receivable (Australian dollar equivalents) by the Group in respect of sales for which final invoices have not been issued at year end.

(c) Interest rate risk exposures

There is no interest component to the embedded derivatives and therefore there is minimal interest rate exposure.

Notes to the Financial Statements

13 Current assets – Financial assets at fair value though income statement

13 Current assets – Financial assets	at fair value though income statement
At beginning of year Additions Disposals At end of year	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 - - - - 4,081 - 4,081 - (4,081) - (4,081)
	- - - -

14 Non current assets – Receivables

Loans to associates Loans to subsidiaries Provision for diminution in value Tenement security deposits	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 23 - 14 - - - 47,375 43,424 - - (7,374) (6,818) 1,111 1,211 121 121
	1,134 1,211 40,136 36,727

(a) Fair values

The fair values of receivables of the Group equal the carrying values.

(b) Interest rate risk

The Group is exposed to interest rate risk to the extent that tenement security deposits are interest bearing while receivables are non-interest bearing.

(c) Credit risk

The Group deals with a small number of customers in relation to sales of metal in concentrate. Credit risk is assessed for each customer on an individual basis. Refer to note 2 for more information on the risk management policy of the Group.

(d) Tenement security deposits

These deposits are bearing floating interest rates between 6.55% and 7.30% (2007 – 5.55% to 6.41%). These deposits have an average maturity of 30 days.

15 Non current assets - Investments accounted for using the equity method

Shares in associate (note 36)	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 4,069 3,202 - -

(a) Shares in associates

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are carried at cost by a subsidiary, Intec Hellyer Metals Pty Ltd (refer to note 36).

(b) Investments in related parties

Refer to notes 35, 36 and 37 for information on the carrying amount of investments in subsidiaries, associates and joint ventures respectively.

16 Non current assets - Other financial assets

Shares in subsidiaries (note 35), at cost Provision for diminution in value	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 - - 6,036 6,036 - - (6,036) (6,036)
	- - - -

These financial assets are carried at cost.

Notes to the Financial Statements

17 Non current assets - Plant and equipment

Consolidated At 1 July, 2006 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2007 Opening net book amount Additions Depreciation charge Disposals Closing net book amount At 1 July 2007 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2008 Opening net book amount Additions Depreciation charge Disposals Closing net book amount At 30 June 2008 Cost or fair value Accumulated depreciation Net book amount Parent entity At 1 July 2006 Cost Accumulated depreciation Net book amount Year ended 30 June 2007 Opening net book amount Additions Depreciation charge Disposals Closing net book amount At 1 July 2007 Cost or fair value Accumulated depreciation Net book amount	Hellyer plant and equipment Office equipment Plant and equipment Demon- stration Plant Plant and equipment under construction Total $’000 $’000 $’000 $’000 $’000 $’000 20,738 154 819 5,529 - 27,240 - (137) (426) (411) - (974)	Hellyer plant and equipment Office equipment Plant and equipment Demon- stration Plant Plant and equipment under construction Total $’000 $’000 $’000 $’000 $’000 $’000 20,738 154 819 5,529 - 27,240 - (137) (426) (411) - (974)
	20,738 17 393 5,118 - 26,266
	20,738 17 393 5,118 - 26,266 5,757 66 - 378 1,990 8,191 (2,007) (27) (100) (641) - (2,775) - - (280) - - (280)
	24,488 56 13 4,855 1,990 31,402
	26,495 220 165 5,908 1,990 34,778 (2,007) (164) (152) (1,053) - (3,376)
	24,488 56 13 4,855 1,990 31,402
	24,488 56 13 4,855 1,990 31,402 4,925 23 364 401 - 5,713 (2,514) (35) (38) (703) - (3,290) - - - - - -
	26,899 44 339 4,553 1,990 33,825
	31,420 232 525 6,309 1,990 40,476 (4,521) (188) (186) (1,756) - (6,651)
	26,899 44 339 4,553 1,990 33,825
		Office equipment Plant and equipment Total $’000 $’000 $’000 154 819 973 (137) (426) (563)
		17 393 410
		17 393 410 66 - 66 (27) (100) (127) - (280) (280)
		56 13 69
		220 165 385 (164) (152) (316)
		56 13 69

Notes to the Financial Statements

Year ended 30 June 2008 Opening net book amount Additions Depreciation charge Disposals Closing net book amount At 30 June 2008 Cost or fair value Accumulated depreciation Net book amount 18 Non current assets - Exploration expenditure Consolidated 2008 $’000 Costs carried forward in respect of areas of interest in exploration and evaluation phases 146 Movement for year: Balance at beginning of year 2,854 Exploration expenditure written off (2,708) Acquisition of subsidiaries - Expenditure during the year - Balance at end of year 146 19 Non current assets - Intangible assets Intellectual property Consolidated $’000 At 1 July 2006 Cost 10 Accumulated impairment - Net book amount 10 Year ended 30 June 2007 Opening net book amount 10 Additions - Impairment charge - Closing net book amount 10 At 1 July 2007 Cost 10 Accumulated impairment - Net book amount 10 Year ended 30 June 2008 Opening net book amount 10 Additions - Impairment charge - Closing net book amount 10 At 30 June 2008 Cost 10 Accumulated impairment - Net book amount 10	Year ended 30 June 2008 Opening net book amount Additions Depreciation charge Disposals Closing net book amount At 30 June 2008 Cost or fair value Accumulated depreciation Net book amount 18 Non current assets - Exploration expenditure Consolidated 2008 $’000 Costs carried forward in respect of areas of interest in exploration and evaluation phases 146 Movement for year: Balance at beginning of year 2,854 Exploration expenditure written off (2,708) Acquisition of subsidiaries - Expenditure during the year - Balance at end of year 146 19 Non current assets - Intangible assets Intellectual property Consolidated $’000 At 1 July 2006 Cost 10 Accumulated impairment - Net book amount 10 Year ended 30 June 2007 Opening net book amount 10 Additions - Impairment charge - Closing net book amount 10 At 1 July 2007 Cost 10 Accumulated impairment - Net book amount 10 Year ended 30 June 2008 Opening net book amount 10 Additions - Impairment charge - Closing net book amount 10 At 30 June 2008 Cost 10 Accumulated impairment - Net book amount 10	56 13 69 23 - 23 (35) (10) (45) - - -
		44 3 47
		232 161 393 (188) (158) (346)
		44 3 47
		Parent entity 2007 2008 2007 $’000 $’000 $’000 2,854 - 7
	2,854 (2,708) - -	- 7 - - (7) - 2,840 - - 14 - 7
	146	2,854 - 7
		Parent entity $’000 - -
	10 10 - -	- - - -
	10	-
	10 -	- -
	10	-
	10 - -	- - -
	10	-
	10 -	- -
	10	-

Notes to the Financial Statements

20 Current liabilities – Trade and other payables

	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Trade payables	3,382	1,860	413	49
Other payables	80	469	105	193
Interest payable	100	-	100	-
Provision for employee entitlements	461	184	202	85
	4,023	2,513	820	327
21 Current liabilities – Borrowings
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Borrowings
Secured Bank Loan	1,350	-	1,350	-
	1,350	-	1,350	-
22 Current liabilities – Deferred revenue
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Current portion of deferred revenue amounts
Royalty revenue (note 34 (g) (iii))	2,000	2,000	-	-
Sales revenue	-	6,149	-	-
Lease rental revenue (note 34 (g) (iv))	520	140	-	-
	2,520	8,289	-	-

23 Non current liabilities – Deferred revenue

Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Non current portion of deferred revenue amounts Royalty revenue (note 34 (g) (iii)) 833 2,833 - - Lease rentals revenue (note 34 (g) (iv)) 1,257 341 - - 2,090 3,174 - - 24 Non current liabilities – Provisions Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 *(a) Balances* Employee benefits - 172 - 64 Other - 79 - - Rehabilitation 1,990 1,990 - - 1,990 2,241 - 64 *(b) Movements in provisions* Other Rehabilitation $’000 $’000 Balance 1 July 2007 79 1,990 Provided during year Released during year (79) - Balance 30 June 2008 - 1,990	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Non current portion of deferred revenue amounts Royalty revenue (note 34 (g) (iii)) 833 2,833 - - Lease rentals revenue (note 34 (g) (iv)) 1,257 341 - - 2,090 3,174 - - 24 Non current liabilities – Provisions Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 *(a) Balances* Employee benefits - 172 - 64 Other - 79 - - Rehabilitation 1,990 1,990 - - 1,990 2,241 - 64 *(b) Movements in provisions* Other Rehabilitation $’000 $’000 Balance 1 July 2007 79 1,990 Provided during year Released during year (79) - Balance 30 June 2008 - 1,990	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Non current portion of deferred revenue amounts Royalty revenue (note 34 (g) (iii)) 833 2,833 - - Lease rentals revenue (note 34 (g) (iv)) 1,257 341 - - 2,090 3,174 - - 24 Non current liabilities – Provisions Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 *(a) Balances* Employee benefits - 172 - 64 Other - 79 - - Rehabilitation 1,990 1,990 - - 1,990 2,241 - 64 *(b) Movements in provisions* Other Rehabilitation $’000 $’000 Balance 1 July 2007 79 1,990 Provided during year Released during year (79) - Balance 30 June 2008 - 1,990
	1,990	2,241 - 64
		Other Rehabilitation $’000 $’000
		79 1,990 (79) -
		- 1,990

Notes to the Financial Statements

(c) Nature and purpose of provision

(i) Rehabilitation

It is a requirement of the granting of the Hellyer mining lease that the holder rehabilitate the mining lease following cessation of operating activities to the satisfaction of the Minister.

Management has estimated that the liability for rehabilitation is $1,990,000.

25 Non current liabilities – Deferred income tax liability

Deferred income tax liability on temporary difference arising on revaluation of Hellyer plant and equipment recognised directly in equity Reduction of deferred tax liability due to amortisation of revaluation of the Hellyer Plant during the year Offset by deferred income tax assets recognised in the income statement in respect of: Revenue tax losses Temporary differences	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 4,811 5,845 - - (493) (541) - - (4,318) (5,304) - - - - - -
	- - - -

The tax losses and temporary differences have been recognised to the extent that a deferred income tax liability exists.

26 Contributed equity

(a) Share capital

*(a)* *Share capital*
Notes Ordinary shares (b)(c) Fully paid Total contributed equity *(b)* *Movements in ordinary share capital*	Parent entity Parent entity 2008 2007 2008 2007 Shares Shares $’000 $’000 671,519,848 559,599,873 64,782 59,666 671,519,848 559,599,873 64,782 59,666
	671,519,848

Date Details Number of shares Issue price $’000 2008 1-7-2007 Balance at start of year 559,599,873 59,666 27-6-2008 New Shares issued under Entitlements Issue 111,919,975 5.0 5,116 30-6-2008 Balance at end of year – Company 671,519,848 64,782 Consolidated 30-6-2008 Less share of associates capital raising costs expensed directly in equity (307) 30-6-2008 Balance at end of year – Consolidated 671,519,848 64,475		Number of shares Issue price $’000
		559,599,873 59,666 111,919,975 5.0 5,116
		671,519,848 64,782
		671,519,848 64,475

The purpose of the Entitlements Issue was to allow the Company a source of future funding to continue to expand its development program and replenish capital in light of some major items of expenditure, of a capital nature, incurred over the year.

Notes to the Financial Statements

Date	Details	Number of	Issue price	$’000
		shares
2007
1-7-2006	Balance at start of year	535,445,463		56,768
	Exercise of options	2,403,130	6.9	166
	Exercise of options	740,000	11.0	81
	Exercise of options	1,011,280	10.0	101
	Share placement – acquisition of Intec Zeehan
	Residues Pty Ltd (formerly Encore Metals NL)	20,000,000	12.0	2,400
30-6-2007	Transfer of amounts from share based payments
	reserve on exercise of options			127
30-6-2007	Reversal of accrual of transaction costs relating
	to costs incurred in the previous year			23
30-6-2007	Balance at end of year – Company	559,599,873		59,666
Consolidated
	Less share of associates capital raising costs
30-6-2007	expensed directly in equity			(243)
30-6-2007	Balance at end of year – Consolidated	559,599,873		59,423

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Options

Information relating to the Intec Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 40.

27 Options

Consolidated and parent entity

2008

Issue
Date
Expiry
Date
Exercise
Price1
16.07.2002
16.07.2007
$0.2376
20.11.2002
16.07.2007
$0.2376
28.11.2005
30.06.2008
$0.0800
30.04.2006
30.06.2008
$0.0800
26.11.2003
26.11.2008
$0.0913
1999 to 2000 30.06.2009
$0.4876
27.06.2008
31.12.2009
$0.0800
27.06.2008
31.12.2009
$0.0800
05.04.2005
24.02.2010
$0.0603
16.11.2005
24.02.2010
$0.0603
25.08.2006
30.08.2011
$0.1013
15.11.2006
30.08.2011
$0.1013
14.11.2007
25.09.2012
$0.1413
31.01.2008
25.09.2012
$0.1413
Total Options on issue

Number
on issue
30 June 2007
Granted
during
year
Lapsed
during
year
Exercised
during
year
Number
on issue
30 June
2008
2,363,150
-
(2,363,150)
-
Nil
4,281,947
-
(4,281,947)
-
Nil
25,000,000
-
(25,000,000)
-
Nil
20,000,000
-
(20,000,000)
-
Nil
3,177,916
-
-
-
3,177,916
1,275,000
-
-
-
1,275,000
- 111,919,975
-
- 111,919,975
-
20,000,000
-
-
20,000,000
2,406,289
-
-
-
2,406,289
3,462,725
-
-
-
3,462,725
4,610,000
-
-
-
4,610,000
2,600,000
-
-
-
2,600,000
-
4,700,000
-
-
4,700,000
-
6,350,000
-
-
6,350,000
69,177,027 142,969,975
(51,645,097)
- 160,501,905

Notes to the Financial Statements

2007

Issue
Date
Expiry
Date
Exercise
Price1
16.07.2002
16.07.2007
$0.24625
20.11.2002
16.07.2007
$0.24625
28.11.2005
30.06.2008
$0.0800
30.04.2006
30.06.2008
$0.0800
26.11.2003
26.11.2008
$0.1000
1999 to 2000 30.06.2009
$0.49625
05.04.2005
24.02.2010
$0.0690
16.11.2005
24.02.2010
$0.0690
25.08.2006
30.08.2011
$0.1100
15.11.2006
30.08.2011
$0.1100
Total Options on issue

Number on
issue
30 June 2006
Granted
during
year
Lapsed
during
year
Exercised
during
year
Number
on issue
30 June
2007

2,363,150
-
-
-
2,363,150

4,281,947
-
-
-
4,281,947
25,000,000
-
25,000,000
-
20,000,000
-
-
20,000,000
4,189,196
-
-
(1,011,280)
3,177,916

1,275,000
-
-
-
1,275,000
4,809,419
-
-
(2,403,130)
2,406,289
3,462,725
-
-
-
3,462,725
-
5,350,000
-
(740,000)
4,610,000
-
2,600,000
-
-
2,600,000
45,381,437
27,950,000
-
(4,154,410)
69,177,027

All options have been issued pursuant to the Intec Option Plan (Refer note 40) except for the following:

(i) The options expiring in 2009 were issued pursuant to specific contracts with former Directors and a former employee.

(ii) The options expiring on 31 December 2009 were issued in accordance with the Entitlements Issue to shareholders of 111,919,975 New Shares together with 111,919,975 free attaching New Options issued on a 1 for 1 basis.

28 Reserves


*(a)* *Reserves* Share-based payments reserve Asset revaluation reserve (b) Movements Share-based payments reserve Balance 1 July Option expense (refer note 40(b)) Transfer to share capital (options e Share of associates reserves Balance 30 June Asset revaluation reserve Balance 1 July Increase on independent valuation minesite Deferred tax liability in respec valuation Balance 30 June Total reserves	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 2,552 2,126 2,485 2,084 13,638 13,638 - - 16,190 15,764 2,485 2,084 2,126 768 2,084 768 402 1,443 402 1,443 xercised) - (127) - (127) 24 42 (1) - 2,552 2,126 2,485 2,084 13,638 13,638 - - of Hellyer - - - - t of the - - - - 13,638 13,638 - - 16,190 15,764 2,485 2,084	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 2,552 2,126 2,485 2,084 13,638 13,638 - -
		16,190 15,764 2,485 2,084
		2,126 768 2,084 768 402 1,443 402 1,443 - (127) - (127) 24 42 (1) -
		2,552 2,126 2,485 2,084
		13,638 13,638 - -
		16,190 15,764 2,485 2,084
	quipment was carried out at 30 June 2006 by Ian Hyman, C.A. A.A.P.I. d Shane Welsh A.V.A.A. Certified Practising Valuer of Hyman Asset

The valuation of the Hellyer plant and equipment was carried out at 30 June 2006 by Ian Hyman, C.A. A.A.P.I. F.Y.I.A., Certified Practising Valuer, and Shane Welsh A.V.A.A. Certified Practising Valuer of Hyman Asset Management Pty Limited.

Notes to the Financial Statements

(c) Nature and purpose of reserves Share based payments reserve

The share based payments reserve records the value of options issued by the Company. The consolidated share based payments reserve includes the Group’s share of the reserves of its associated company, Bass Metals Ltd.

The value of options issued under the Intec Option Plan to directors, employees and consultants has been recognised as an employment expense in the income statement.

NL) has been recognised as an additional cost of acquiring the exploration tenements of that company and included in the exploration expenditure asset.

Asset revaluation reserve

The asset revaluation reserve records the increase in value of the Hellyer plant and equipment on the receipt of an independent valuation, which was reduced by the deferred income tax liability which arises on the revaluation.

The value of the right to acquire further Intec shares granted pursuant to the acquisition of Intec Zeehan Residues Pty Ltd (formerly Encore Metals

29 Accumulated losses

Movements in accumulated losses were as follows:

	Consolidated	Consolidated	Parent	entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Balance 1 July	(40,789)	(39,617)	(24,668)	(29,375)
Net (loss) /profit for the year	(2,826)	(1,172)	(165)	4,707
Balance 30 June	(43,615)	(40,789)	(24,833)	(24,668)

30 Key management personnel disclosures

(a) Directors

The following persons were Directors of the Company during the financial year:

(i) Chairman – Non-executive	A J Moyes, Technical Director
T A Jones (appointed as Chairman 1 January 2008)	K G Rodgers, Finance Director and Chief Financial
I W Ross (resigned 31 December 2007)	Officer
(ii) Executive directors	(iii) Non-executive Directors
P R Wood, Managing Director and Chief Executive	K J Severs
Officer	J R G Bell

(b) Other key management personnel

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

Name Position B A Banister Chief Operating Officer (appointed 25 February, 2008) D W Clark Financial Controller (appointed 17 March, 2008) J L Huens Chief Operating Officer (resigned 2 November, 2007) D J Purdie Senior Process Engineer (appointed 19 May, 2008) D L Sammut Corporate Development Manager A R Tong Senior Research Metallurgist and Laboratory Manager

(c) Key management personnel compensation

Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments	Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ 1,687,019 1,327,652 932,053 707,650 141,196 111,976 73,249 56,177 - - - - 433,548 478,319 280,081 307,028 2,261,763 1,917,947 1,285,383 1,070,855

Notes to the Financial Statements

(d) Equity instrument disclosures relating to key management personnel

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

Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the remuneration report on pages 18 to 20.

(ii) Option holdings

The numbers of options over ordinary shares in the company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below.

2008 Name	Balance at the start ofthe year	Granted during the year as compensation	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Intec Ltd
P R Wood A J Moyes T A Jones K G Rodgers I W Ross K J Severs J R G Bell	4,831,188 4,015,118 - 2,376,783 729,783 1,071,010 -	2,500,000 1,200,000 150,000 1,200,000 500,000 500,000 300,000	- - - - - - -	(1,488,673) (1,438,906) 753,800 (480,897) - (4,811) 166,000	5,842,515 3,776,212 903,800 3,095,886 1,229,783 1,516,199 466,000	5,842,515 3,776,212 903,800 3,095,886 1,229,783 1,516,199 466,000
Other key management personnel of the Group
B A Banister D W Clark J L Huens D J Purdie D L Sammut A R Tong	- - 1,711,886 - - 995,287	- - 250,000 - 500,000 500,000	- - - - - -	42,000 40,000 - - 69,093 -	42,000 40,000 1,961,886 - 569,093 1,495,287	42,000 40,000 1,961,886 - 569,093 1,495,287

2007 Name	Balance at the start of the year	Granted during the year as compensation	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Intec Ltd
P R Wood A J Moyes T A Jones I W Ross K J Severs K G Rodgers J R G Bell	3,631,888 3,315,118 - 329,783 771,010 1,926,783 -	1,200,000 700,000 - 400,000 300,000 900,000 -	- - - - - (450,000) -	- - - - - - -	4,831,888 4,015,118 - 729,783 1,071,010 2,376,783 -	4,831,888 4,015,118 - 729,783 1,071,010 2,376,783 -
Other key management personnel of the Group
J L Huens D L Sammut	1,111,886 -	600,000 -	- -	- -	1,711,886 -	1,711,886 - 995,287
A R Tong	395,287	600,000	-	-	995,287

(iii) Share holdings

The number of shares in the company held at the end of the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

Notes to the Financial Statements

2008 Name	Balance at the start of the year	Received during the year on the exercise of options	Other changes during the year	Balance at the end of the Year
Ordinary shares
Directors of Intec Ltd
P R Wood A J Moyes T A Jones I W Ross K J Severs K G Rodgers J R G Bell	2,170,770 1,550,033 1,269,075 617,919 1,444,918 263,464 770,000	- - - - - - -	679,398 310,007 753,800 - 299,984 92,693 166,000	2,850,168 1,860,040 2,022,875 617,919 1,744,902 356,157 936,000
Other key management personnel of the Group
B A Banister D W Clark J L Huens D J Purdie D L Sammut A R Tong	- - - - - -	- - - - - -	252,000 70,000 - - 414,558 -	252,000 70,000 - - 414,558 -
2007 Name	Balance at the start of the year	Received during the year on the exercise of options	Other changes during the Year	Balance at the end of the Year
Ordinary shares
Directors of Intec Ltd
P R Wood A J Moyes T A Jones I W Ross K J Severs K G Rodgers J R G Bell	1,522,770 1,550,033 419,075 217,919 1,444,918 263,464 770,000	- - - - - 450,000 -	648,000 - 850,000 400,000 - (450,000) -	2,170,770 1,550,033 1,269,075 617,919 1,444,918 263,464 770,000
Other key management personnel of the Group
J L Huens D L Sammut A R Tong	- - -	- - -	- - -	- - -

31 Contingencies

(a) Contingent liabilities

The parent entity and Group had contingent liabilities at 30 June 2008 in respect of:

R&D Start grant repayable component

The Group received an R&D Start grant from the Federal Government which is partly repayable contingent upon the successful commercialisation of the technology for which the R&D Start grant was made. The original contingent liability that may be repaid is $1,832,085. The repayment rate is set at 30% of the revenues generated from the

technology annually until the repayable component has been repaid. Interest is currently accruing on this amount, and the current contingent liability including interest is $3,257,294 (2007 - $3,109,761).

There are no other contingent liabilities of the Group.

32 Commitments

(a) Capital commitments

There are no commitments for capital expenditure at the reporting date.

(b) Lease commitments

Operating leases

The Group leases various offices and warehouses under non cancellable operating leases expiring within two years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

Notes to the Financial Statements

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 15 110 - - - 15 - - - - - -
	15 125 - -

The Group also leases various plant and machinery under cancellable operating leases. The Group is required to give six months notice for termination of these leases.

(c) Joint Venture capital commitments

The Hellyer Zinc Concentrate Project Joint Venture did not have any capital commitments at 30 June 2008. (2007 – nil).

(d) Tenement commitments

There are no minimum annual expenditure requirements attached to the tenements held by the Group. Details of tenements held are shown in the Schedule of Tenements.

33 Financial Instruments

(a) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are

recognised, with respect to each class of financial asset, financial liability and equity instrument are disclosed in Note 1 and Note 2 to the financial statements.

(b) Categorisation of financial instruments

The Group and the parent entity hold the following financial instruments:

	Consolidated		Parent Entity
	Carrying amount		Carrying amount
	2008	2007	2008	2007
Financial assets	$’000	$’000	$’000	$’000
Cash and cash equivalents	5,215	2,971	4,323	576
Receivables	2,528	6,441	40,234	36,821
Derivative Financial Instrument	-	301	-	-
Financial assets at fair value through the income
statement	-	-	-	-
	7,743	9,713	44,557	37,397
Financial liabilities
Trade and Other Payables (Note 20)	3,382	1,860	413	49
Other Payables	80	469	105	193
Interest Payables	100	-	100	-
Interest Bearing Liabilities	1,350	-	1,350	-
	4,912	2,329	1,968	242

Notes to the Financial Statements

(c) Financial risk management objectives and policies

The main risks arising from the Group's financial instruments are credit risk, liquidity risk, market risk and cash flow and fair value interest rate risk. The Directors review and approve policies for managing each of these risks which are summarised below.

(i) Credit risk The Group’s exposure to credit risk arises from the potential default of counterparties on their contractual obligations resulting in a financial loss to the Group. Credit risk is monitored on a regular basis. Provision for impairment of financial assets is calculated based on past experience, and current and expected changes in client credit ratings. In addition, the Group does not engage in hedging of its financial assets.

The Group has policies in place to ensure that sales of product are made to customers with an appropriate credit history. There is negligible credit risk on financial assets, excluding metal in concentrate debtors. Metal in concentrate debtors cause a concentration of credit risk as there is a small number of debtors and a low volume of high value sales. Exposure to individual customers or countries is limited to the amount of cash, short term deposits and receivables recognised at balance date and is minimised by using recognised financial intermediaries as counterparties and established letters of credit.

The Group does not hold either collateral as security or credit enhancements relating to any of its financial assets. As at the reporting date, there is no evidence to indicate that any of the financial assets were impaired. There are no financial assets that have had their terms renegotiated so as to

prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated.

(ii) Liquidity risk

Liquidity risk arises when the Group is unable to meet its financial obligations as and when they fall due. The Group generally settles financial obligations within thirty (30) days and in the event of a dispute make payments within thirty (30) days from the date of resolution.

The Group's financing activities are managed centrally by maintaining an adequate level of cash and cash equivalents to finance the Group's operations. The Group’s surplus funds are also managed centrally by placing them with reputable financial institutions.

The risk implied from the values shown in the following table, reflects a balanced view of cash inflows and outflows. Trade payables and other financial liabilities originate from the financing of assets used in the Group’s ongoing operations such as property, plant and equipment and investments in working capital, inventories and trade receivables.

Borrowings are a secured bank facility of $5,000,000 of which $3,650,000 is represented as a Bank Guarantee in favour of the Victorian Government for the EAF dust storage facility at Foostcray, Victoria. The balance of the $5,000,000 facility is a fully drawn amount of $1,350,000. The total facility of $5,000,000 is due to be repaid by 31 December, 2008.

Interest rate exposure and maturity analysis of financial liabilities

Consolidated			Interest	rate exposure	rate exposure		Maturity dates	Maturity dates
	Weighted
	average						Less		3
	effective		Fixed	Variable	Non-		than		months
	interest	Carrying	interest	interest	interest	Nominal	1	1-3	– 1	1-5
	rate	amount	rate	rate	bearing	amount	month	months	year	years
2008	%
Payables:
Trade Creditors &
Accruals	-	3,462	-	-	3,462	-	3,462	-	-	-
Other Payables	10.8	100	-	-	100	-	-	100	-	-
Interest bearing liabilities:
Borrowings	10.8	1,350	-	1,350	-	-	-	-	1,350	-
		4,912	-	1,350	3,742	-	3,462	100	1,350	-
2007
Payables:
Trade Creditors &
Accruals	-	2,329	-	-	2,329	-	2,329	-	-	-
Other Payables	-	-	-	-	-	-	-	-	-	-
Interest bearing liabilities:
Borrowings	-	-	-	-	-	-	-	-	-	-
	-	2,329	-	-	2,329	-	2,329	-	-	-

Notes to the Financial Statements

Parent			Interest	rate exposure	rate exposure		Maturity dates	Maturity dates
	Weighted
	average						Less		3
	effective		Fixed	Variable	Non-		than		months
	interest	Carrying	interest	interest	interest	Nominal	1	1-3	– 1	1-5
	rate	amount	rate	rate	bearing	amount	month	months	year	years
2008	%
Payables:
Trade Creditors &
Accruals	-	518	-	-	518	-	518	-	-	-
Other payables	10.8	100	-	-	100	-	-	100	-	-
Interest bearing liabilities:
Borrowings	10.8	1,350	-	1,350	-	-	-	-	1,350	-
	-	1,968	-	1,350	618	-	518	100	1,350	-
2007
Payables:
Trade Creditors &
Accruals	-	242	-	-	242	-	242	-	-	-
Other payables	-	-	-	-	-	-	-	-	-	-
Interest bearing liabilities:
Borrowings	-	-	-	-	-	-	-	-	-	-
	-	242	-	-	242	-	242	-	-	-

(iii) Market risk

Foreign currency risk

The Group is exposed to foreign currency risk through its receivables and payables relating to the sale of metal in concentrate and purchases of supplies and consumables from overseas that are denominated in foreign currencies, principally the US dollar. Hence, the Group’s balance sheet can be

affected by movements in the Australian dollar/US dollar exchange rate.

At 30 June 2008, the Group had the following exposure to USD foreign currency:

USD Financial Assets Cash and cash equivalents Receivables Derivative Financial Instruments Financial assets at fair value through the income statement Financial liabilities Trade Creditors & Other Payables Interest Bearing Liabilities Net exposure	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000 2 9 - - 132 4,657 - - - - - - - - - - 869 - - - - - - -
	(735) 4,666

Based on the financial instruments held at 30 June 2008, had the Australian dollar weakened/ strengthened by 10% against the US dollar with all other variables held constant, the Group's post-tax profit for the year would have been $74,000 higher/lower (2007 – $467,000 higher/lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.

Profit is less sensitive to movements in the Australian dollar/US dollar exchange rates in 2008 than 2007 because of the decreased amount of US dollar denominated receivables. Other components of equity would have been $74,000 higher/lower

(2007 – $467,000 higher lower) had the Australian dollar weakened/strengthened by 10% against the US dollar arising from translation of the US dollar denominated financial instruments. Equity is less sensitive to movements in the Australian dollar/US dollar exchange rates in 2008 than 2007 because of the decreased amount of US dollar denominated receivables. The Group’s exposure to other foreign exchange movements is not material.

Commodity price risk

The Group is exposed to future movements in the price of zinc and lead. The Group’s normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits

Notes to the Financial Statements

laid down by the Board and to rigid internal controls. The Group has not entered into any commodity price hedging contracts during the year.

Commodity prices received by the Group are based on London Metal Exchange (LME) market prices for zinc and lead. Based on metal in concentrate receivables and payables held at 30 June 2008, had the LME market price for zinc and lead weakened/strengthened by 10% with all other variables held constant, the Group's post-tax profit for the year would have been $87,000 higher/ $550,000 lower (as a fall in sales would mean inventory is recorded at net realisable value rather than at its cost) (2007 – $467,000 lower/higher).

Profit is less sensitive to movements in the LME market price for zinc and lead in 2008 than 2007 because of the decreased amount of metal in concentrate receivables at balance date and increased amount of metal in concentrate payables. Other components of equity would have been $87,000 higher/ $550,000 lower (as a fall in sales would mean inventory is recorded at net realisable value rather than at its cost) (2007 – $467,000 lower/higher) had the LME market price for zinc and lead weakened/strengthened by 10%.

Equity is less sensitive to movements in the LME market price for zinc and lead in 2008 than 2007 because of the decreased amount of metal in concentrate receivables at balance date and the increased amount of metal in concentrate payables.

(iv) Cash flow and Fair value interest rate risk The Group's income statement is affected by changes in interest rates due to the impact of such changes on interest income and interest expense from bank balances and interest-bearing loans respectively.

The Group's policy is to obtain the most favourable interest rates available. The Group has not used any derivatives to mitigate its interest rate risk exposure.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date.

At 30 June 2008 if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Sensitivity disclosure analysis

	Post Tax Profit		Equity
	Higher/(Lower)		Higher/(Lower)
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Consolidated
+1% (100 Basis points)	(9)	-	(9)	-
-.5% (50 Basis points)	5	-	5	-
Parent
+1% (100 Basis points)	(11)	-	(11)	-
-.5% (50 Basis points)	6	-	6	-

(d) Fair value

The fair values of financial assets and financial liabilities are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on

discounted cash flow analysis.

The Consolidated entity considers that the carrying amount of financial assets and financial liabilities recorded in the financial report to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full.

(e) Debt/Equity Management

The Group funds its exploration, development and operating activities using both debt and equity. The mix of debt and equity is determined by consideration of regulatory, commercial and risk factors as well as tax efficiencies and the impact on

earnings per share. The Company prepares detailed medium to long term cash forecasts and determines funding requirements accordingly. Equity is ordinary shares, not preference capital.

Notes to the Financial Statements

34 Related party transactions

(a) Parent entities

The parent entity within the Group is Intec Ltd.

(b) Subsidiaries

Interests in subsidiaries are set out in note 35.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 30. There were no outstanding loans with key management personnel.

(d) Transactions with subsidiaries

The following transactions occurred with related parties:

*(e)* *Loans to subsidiaries* (i) Management fees and expense recovery Intec Ltd on-charged certain expenses to its subsidiaries. The amounts charged were determined on the basis of an allocation of costs to projects specifically concerned with the activities of those subsidiaries. (ii) Royalties A subsidiary, Intec Copper Pty Ltd (ICPL) charged royalty fees to another subsidiary, Intec Hellyer Metals Pty Ltd (IHM), for the use of technology developed by ICPL in the construction and operation of the Burnie demonstration plant by IHM. (iii) Interest Intec Ltd charged interest on its loans to subsidiaries during the year. The interest rate applicable to intercompany loans is the ATO benchmark interest rate. Intec Copper Pty Ltd Intec Hellyer Metals Pty Ltd Intec Zeehan Residues Pty Ltd (iv) Treatment costs A subsidiary, Intec Hellyer Metals Pty Ltd (IHM) charged treatment costs to another subsidiary, Intec Zeehan Residues Pty Ltd (IZR) for the treatment of material through the demonstration plant. Beginning of the year Loans advanced/(received) Interest charged Management fees charged End of year Less provision for doubtful debts Carrying value at end of year Movement in provision for doubtful debts Beginning of year Provided during year End of year	2008 2007 $ $ - 2,065,087 1,384,456 711,043 532,186 549,206 3,144,686 2,484,349 38,276 16,120 - 349,995 2008 2007 $ $ 43,423,775 27,975,804 (167,703) 10,333,209 3,715,147 3,049,675 - 2,065,087
	46,971,219 43,423,775
	(6,969,710) (6,818,200)
	40,001,509 36,605,575
	6,818,200 6,344,859 151,510 473,341
	6,969,710 6,818,200

Provisions for doubtful debts have been raised in relation to outstanding balances, and an expense has been recognised in respect of debts due from subsidiaries, which may be considered doubtful based on the net assets of each subsidiary.

Notes to the Financial Statements

(f) Transactions with associates

Bass Metals Ltd

*(f)* *Transactions with associates* Bass Metals Ltd
Intec Hellyer Metals Pty Ltd received payments from Bass Metals Ltd relating to
the provision of various services at the Hellyer minesite and director’s fees and
expenses.	113,134	50,625
*(g)* *Transactions with joint venture*
	2008	2007
(i) Cash calls	$	$
Cash calls made in respect of operating expenses of the Hellyer Zinc
Concentrate Project Joint Venture (HZCPJV) by Intec Hellyer Metals Pty Ltd
(IHM).	13,685,533	7,016,120
(ii) Initial cost of plant
The Hellyer plant and equipment was refurbished prior to the commencement of
the HZCPJV and under the terms of the HZCPJV agreement this expenditure is
treated by the Group as deferred royalty revenue.	6,000,000	6,000,000
(iii) Royalty received – current year
Royalty received by IHM’s joint venture partner by means of a reduction in
deferred royalty revenue.
Not later than one year	2,000,000	1,166,667
Later than one year and no later than five years	833,000	2,833,000
	2,833,000	3,999,667
(iv) Assets purchased and lease rentals
Under the terms of the HZCPJV agreement the HZCPJV reimburses the Group for
the acquisition of fixed assets at the time at which they are acquired thereby
allowing the Group to retain full ownership of the fixed assets employed in the
HZCPJV. The Group has adopted an accounting policy with respect to these
reimbursements which defers the associated revenue and amortises the revenue
over the life of the HZCPJV.
• Assets purchased, including the dredge and transformer, for which
reimbursements have been received	6,084,085	1,809,332
• Rental receipts treated as deferred revenue	4,303,377	1,545,471
• Rental receipts recognised as income during the year	1,780,708	263,861
• Lease rental payments receivable:
- not later than one year	519,988	140,132
- later than one year and no later than five years	1,256,638	340,320
- later than five years
	1,776,626	480,452

(h) Terms and conditions

All transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties. The average interest

rate on loans during the year was 8.05% (2007 – 8.55%). Outstanding balances are unsecured and are repayable in cash.

35 Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(s):

Notes to the Financial Statements

		Country of	Country of
Name of entity		incorporation		Class	of shares		Equity holding
							2008	2007
Investments held by Intec Ltd							%	%
Intec Copper Pty Ltd		Australia		Ordinary			100	100
Intec Hellyer Metals Pty Ltd		Australia		Ordinary			100	100
Intec International Projects Pty Ltd		Australia		Ordinary			100	100
Investments held by Intec Hellyer Metals Pty Ltd
Intec Zeehan Residues Pty Ltd (formerly Encore
Metals NL)		Australia		Ordinary			100	100
36 Investments in associates
*(a)* *Carrying amounts*
Information relating to associates is set out below.
Name of company Principal activity	Ownership interest			Consolidated			Parent	entity
	2008		2007	2008		2007	2008	2007
		%	%	$’000		$’000	$’000	$’000
Listed
Bass Metals Ltd Minerals Exploration		23.16	23.25	4,069		3,202	-	-
Unlisted
Intec Exploration Pty
Ltd Minerals Exploration		50.00	-		-	-	-	-
Each associated company is incorporated in Australia and its			reporting	date is	30 June.
						Consolidated
						2008		2007
						$’000		$’000
*(b)* *Movements in carrying amounts*
Carrying amount at the beginning of the financial year						3,202		932
Acquisition of shares in associate						1,708		2,687
Adjustment on change in % shareholding							-	(2)
Share of capital raising costs							(63)	(156)
Share of increase in reserves							24	7
Share of gains/(losses) after income tax							403	(266)
Impairment of investment						(1,205)		-
Carrying amount at the end of the financial year (shown as investment				at cost)		4,069		3,202
*(c)* *Fair value of listed investments in*	*associates*
Bass Metals Ltd						4,069		6,669
Based on share price of $0.17 (2007 – $0.34)	at end of year
*(d)* *Share of associates’ losses*
Profit/(loss) before income tax							403	(266)
Income tax expense							-	-
Adjustment on change in % shareholdings							-	(2)
Profit/(loss) after income tax							403	(268)

Notes to the Financial Statements

(e) Summarised financial information of associates

2008 Bass Metals Ltd Intec Exploration Pty Ltd 2007 Bass Metals Ltd Intec Exploration Pty Ltd	Group’s share of: Assets Liabilities Revenues Profit/Loss $’000 $’000 $’000 $’000 6,056 895 2,687 403 5 10 - -
	3,378 193 85 (268) - - - -

Each subsidiary has been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission.

Intec Ltd and its subsidiaries have not entered into any deeds of cross guarantee.

37 Investments in joint ventures

Jointly controlled operation

A subsidiary, Intec Hellyer Metals Pty Ltd, entered into an unincorporated joint venture with Polymetals (Hellyer) Pty Ltd called the Hellyer Zinc Concentrate Project Joint Venture to process tailings through the Hellyer Mill to produce metal in concentrate. The subsidiary has a 50% participating interest in this Joint Venture and is entitled to 50% of its output of metal in concentrate. The Group’s interests in the assets employed in the Joint

Venture are included in the consolidated balance sheet, in accordance with the accounting policy described in note 1(s), under the following classifications:

For capital expenditure commitments relating to the Hellyer Zinc Concentrate Project Joint Venture refer to note 32.

	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Current assets
Cash and cash equivalents	499	912	-	-
Receivables	1,630	225	-	-
Inventories	2,476	685	-	-
Other current assets	2,527	1,165	-	-
Total current assets	7,132	2,987	-	-
Liabilities
Trade creditors	2,328	1,523	-	-
Provisions	160	133	-	-
Total liabilities	2,488	1,656	-	-

38 Events occurring after the balance sheet date

Hellyer Zinc Concentrate Project

The Group assumed full ownership and operational control of the Hellyer Zinc Concentrate Project from 1 August 2008 for nominal consideration, subject to reconciliation of joint venture financial accounts at the change over date. Final settlement of the joint venture occurred prior to 30 September 2008, resulting in a net payment by the Group of $700,000 to Polymetals (Hellyer) Pty Ltd. In addition, Polymetals (Hellyer) Pty Ltd retains certain rights to receive additional payments if certain specific assets are sold for total consideration above an agreed amount. Subsequently, on 8 September 2008 the Group announced suspension of operations of the Hellyer Zinc Concentrate Project and the intention to put

the Hellyer facilities onto a care and maintenance status.

Electric Arc Furnace dust (EAF dust)

As a consequence of the impact of severe weather conditions during July 2008 on the EAF dust storage facility at the Hellyer minesite, the Environmental Protection Authority of Tasmania (the EPA), by letter received 11 August 2008, withdrew until further notice approval for delivery of EAF dust to the Hellyer minesite, until satisfactory remedial actions were undertaken. The Company advised OneSteel Limited on 9 September 2008 that it was no longer able to accept EAF dust with immediate effect.

Notes to the Financial Statements

Metals Recycling Project

On 19 September 2008, the Company reached inprinciple agreement with a key third party that is expected to materially assist in the development of the Metals Recycling Project. While the nature of the in-principle agreement remains confidential pending the formalisation of a legally binding Agreement, the Company believes that its implementation will provide material advantages to the Metals Recycling Project.

However, a definitive decision to proceed with the Intec Hellyer Metals Recycling Project is dependent on certain financial, commercial and technical outcomes that are yet to be achieved.

39 Loss per share


*(a)* *Basic loss per share* Loss attributable to the ordinary equity h *(b)* *Diluted loss per share* Loss attributable to the ordinary equity h *(c)* *Reconciliations of loss used i* Basic loss per share Loss attributable to the ordinary equity h calculating basic loss per share Diluted loss per share Loss attributable to the ordinary equity h calculating diluted loss per share *(d)* *Weighted average number of* Weighted average number of ordinary sh calculating basic and diluted loss per sha	olders of the company olders of the company *n calculating earnings per sh* olders of the company used in olders of the company used in *shares used as the denomin* ares used as the denominator re	*are* *ator* in	Consolidated 2008 2007 Cents Cents (0.51) (0.21)
			(0.51) (0.21)
			Consolidated 2008 2007 $’000 $’000 (2,826) (1,172)
			(2,826) (1,172)
			Consolidated 2008 2007 Number Number 549,703,762 549,397,131
	*lassification of securities* the Intec considered e not been included in share. No determinati relating to t

(e) Information concerning the classification of securities

Options

Options granted to employees under the Intec Option Plan and to other entities are not considered to be potential ordinary shares and have not been

included in the determination of diluted loss per share. No options have been included in the determination of basic loss per share. Details relating to the options are set out in note 26.

40 Share based payments

(a) Employee Option Plan

The establishment of the Intec Option Plan was approved by shareholders at the 2001 Annual General Meeting. All Directors, employees and consultants are eligible to participate in the Intec Option Plan.

ordinary share. The exercise price of the options is the current market price on the date the options are granted as determined by the Board.

Set out below are summaries of options granted under the plan:

Options are granted under the Intec Option Plan for no consideration. Options are granted for a five year period and vest immediately unless otherwise stated. Options granted under the Intec Option Plan carry no dividend or voting rights. When exercisable, each option is convertible into one

Notes to the Financial Statements

Grant date	Expiry date	Exercise price1	Value per option at grant date	Date exercisable
16 July 2002 20 November 2002 26 November 2003 1999 – 2000 5 April 2005 16 November 2005 25 September 2006 15 November 2006 31 January 2008 14 November 2007	16 July 2007 16 July 2007 26 November 2008 30 June 2010 24 February 2010 24 February 2010 30 August 2011 30 August 2011 25 September 2012 25 September 2012	$0.2376 $0.2376 $0.0913 $0.4876 $0.0603 $0.0603 $0.1013 $0.1013 $0.1413 $0.1413	- - $0.0247 - $0.0363 $0.0283 $0.0670 $0.1299 $0.054 $0.071	16 July 2002 20 November 2002 16 November 2003 1 January 2001 5 April 2005 26 November 2005 25 September 2006 15 November 2006 31 January 2008 14 November 2007

No options were forfeited during the periods covered by the above tables.

The weighted average share price at the date of options exercised during the year ended 30 June 2008 was $Nil (2007 – $0.196) as no options were exercised.

The weighted average remaining contractual life of share options outstanding at the end of the period was 1.75 years (2007 – 1.40 years).

The assessed fair value at grant date of options granted under the Intec Option Plan is allocated equally over the period from grant date to vesting

date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using option valuation models that take into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The model inputs for options granted during the year ended 30 June 2008 and 30 June 2007 included:

		2008	2008
(a)	options are granted for no consideration
(b)	exercise price	$0.1500	$0.1500
(c)	grant date	14 November 2007	31 January, 2008
(d)	expiry date	25 September 2012	25 September 2012
(e)	share price at grant date	$0.12	$0.12
(f)	expected price volatility of the company’s shares	53.0%	53.0%
(g)	expected dividend yield	0.0%	0.0%
(h)	risk-free interest rate	6.55%	6.55%

		2007	2007
(a)	options are granted for no consideration
(b)	exercise price	$0.1100	$0.1100
(c)	grant date	25 September 2006	15 November 2006
(d)	expiry date	30 August 2011	30 August 2011
(e)	share price at grant date	$0.125	$0.195
(f)	expected price volatility of the company’s shares	48.7%	52.4%
(g)	expected dividend yield	0.0%	0.0%
(h)	risk-free interest rate	6.0%	6.0%

Shares provided on exercise of remuneration options

No ordinary shares (2007-450,000) in the Company were provided as a result of the exercise of remuneration options to Directors.

(b) Expenses arising from share based payment transactions

Total expenses arising from share based payment transactions recognised during the period were as follows:

Notes to the Financial Statements

Options issued under Intec Option Plan1 Options issued to Macquarie Bank Limited2 Rights issued to Encore Metals NL shareholders3	Consolidated Parent entity 2008 2007 2007 2007 $’000 $’000 $’000 $’000 402 865 402 865 - 183 - 183 - 395 - 395
	402 1,443 402 1,443

1 Recognised as employee benefit expense in the income statement.
2 Recognised as borrowing costs in the income statement.

3 Recognised as cost of investment in subsidiaries in the parent company balance sheet and cost of acquiring exploration tenements in the consolidated balance sheet.

41 Non cash investing and financing activities

	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
*(a)* *Non-cash financing and investing activities*
Acquisition of Intec Zeehan Residues Pty Ltd
(formerly Encore Metals NL)	-	2,795	-	-
Assets acquired on entering into Hellyer Zinc
Concentrate Project Joint Venture	-	4,263	-	-
Recognition of provision for rehabilitation	-	1,990	-	-

(b) Financing arrangements

The Group has a working capital finance facility with Macquarie Bank Limited

Secured Working capital finance facility Total amounts advanced under working capital facility as at 30 June 2008 Total current borrowings	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 5,000 4,500 5,000 4,500
	1,350 - 1,350 -
	1,350 - 1,350 -

The working capital finance facility is repayable at call and bears interest at 10.8% per annum (2007 – 8.4%).

The working capital finance facility may be drawn at any time and is subject to annual review with the next annual review due on 31 December 2008.

Security

Macquarie Bank Limited holds the following as security for the finance facility:

A fixed and floating charge over all of the present and future undertaking, assets and rights of Intec Hellyer Metals Pty Ltd, including all real and personal property, choses in action, goodwill, uncalled and called but unpaid capital; and
A mortgage over all securities in Bass Metals Ltd held by Intec Hellyer Metals Pty Ltd.

(i) Interest rate risk exposures The Group’s exposure to interest rate risk arises predominantly from liabilities bearing variable interest rates. At 30 June 2008 no such liabilities were in place.

(ii) Fair values The fair values of borrowings at balance date equal the carrying values.

Notes to the Financial Statements

The carrying amounts of assets pledged as security for current borrowings:

Current *Fixed and Floating charge* Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Total current assets pledged as security Non-current *Fixed and Floating charge* Equity investment in Bass Metals Ltd Plant and equipment Total non-current assets pledged as security Total assets pledged as security	Consolidated Parent entity 2008 2007 2008 2007 $’000 $’000 $’000 $’000 465 - - - 862 - - - 755 - - - - - - -
	2,082 - - -
	4,069 - - - 33,442 - -
	37,511 - - -
	39,593 - - -

42 Reconciliation of (loss)/profit after income tax to net cash flows from operating activities

activities
	Consolidated		Parent entity
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
Operating (loss)/profit after income tax	(2,826)	(1,172)	(165)	4,707
Non cash items and non operating cash flows
included in income statement
Prior period error	-	-	-	168
Depreciation and amortisation	775	1,498	45	127
Depreciation as part of cost of sales	2,312	1,277	-	-
Exploration expenditure written off	2,698	-	-	-
Inventory impairment expense	114	-	-	-
Diminution in value of investments in associates	1,205	-	-	-
Diminution in loans to subsidiaries	-	-	152	473
Expense recovery from subsidiaries	-	-	(627)	(111)
Management fees charged to subsidiaries	-	-	-	(1,954)
Interest charged to subsidiaries	-	-	(3,715)	(3,050)
Share based payment expenses	402	1,048	402	880
Net profit/(loss) on sale of non current assets	(3)	280	(3)	280
Net profit on sale of investments	-	(4,081)	-	(4,081)
Equity share of (profits)/losses of associated
entities	(403)	268	-	-
	4,274	(882)	(3,911)	(2,561)
Changes in assets and liabilities
Decrease/(increase) in receivables	3,913	(4,958)	4	(39)
Decrease/(increase) in inventories	204	(3,434)	-	-
Decrease/(increase) in derivative asset	301	(301)	-	-
Increase/(decrease) in exploration expenditure	-	(59)	(7)	(7)
Increase/(decrease) in trade creditors	1,510	1,516	493	26
Decrease/(increase) in provisions	(251)	162	64	32
Increase/(decrease) in deferred revenue	(6,853)	7,223	-	-
Deferred income tax asset recognised in income
statement	-	(1,572)	-	-
Net cash (outflow) from operating activities	3,098	(2,305)	(3,357)	(2,549)

Director’s Declaration

43 Auditor’s remuneration

		Consolidated	Consolidated
		2008	2007
		$	$
Assurance services
1.	Audit services
	PricewaterhouseCoopers Australian firm:
	Audit and review of financial reports and other audit work under the
	Corporations Act 2001	186,500	173,490
Total remuneration for audit services		186,500	173,490
2.	Other assurance services
	PricewaterhouseCoopers Australian firm:	-	-
	Audit of transition to AIFRS	-	-
Total remuneration for other assurance services		-	-
Total remuneration for assurance services		186,500	173,490
	Taxation services
	PricewaterhouseCoopers Australian firm:
	Tax compliance services, including review of company income tax returns	13,500	18,400
Total remuneration for taxation services		13,500	18,400

Directors’ Declaration

In the directors’ opinion:

(a) the financial statements and notes set out on pages 23 to 66 are in accordance with the Corporations Act 2001 , including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the company’s and Group's financial position as at 30 June 2008 and of its performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
(c) The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 .

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

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Philip R Wood Director Sydney 30 September 2008

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Tenements

Schedule of Tenements

The Group held at 30 June 2008 the following tenements:

Tenement	Tenement		Expiry	Area	Security	Annual
number	name		date	Km2	deposits	expenditure
					held	commitments
					$’000	$’000
Tenements held by Intec Hellyer Metals Pty Ltd
Consolidated
Mining Lease
103M/19871	Hellyer	2 January 2009		16.95	990	-
Tenements held by Intec Zeehan Residues Pty Ltd
Retention
Licence
RL 3/1996	Zeehan	28 March 2010		1.00	5	-
Tenements held 50% by Intec Ltd and		50% by	Intec Exploration	Pty Ltd
Exploration
Licence
Application
ELA3034	Thuddungera		-	122.20	-	-

1 The below ground exploration rights to this tenement are held by Bass Metals Ltd by way of a Sub-Lease Agreement.

Shareholder Information

Shareholder Information

The shareholder information set out below was applicable as at 29 September 2008.

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Class of equity security Ordinary shares Number of shareholders Number of shares 97 16,655 235 905,422 407 3,445,228 1,827 80,295,157 966 586,857,948
	3,532 671,519,848

At the prevailing market price of shares ($0.021) there were 2,221 shareholders with less than a marketable parcel of ordinary shares worth $500 (being 23,809 shares).

B. Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

Name
ANZ NOMINEES LIMITED
ORIAN HOLDING CORP
OREGON NOMINEES PTY LTD
ALLIANCES RESOURCES LIMITED
NATIONAL NOMINEES LIMITED
AD CHRISTIE PTY LTD
LINTARN PTY LTD
MR WILLIAM E CONWAY
MR MICHAEL JOHN MCKENZIE
SMACER PTY LTD
BRYAN WELCH PTY LTD
REACH OUT PTY LTD
MACQUARIE BANK LIMITED
JVH COTTON PTY LTD
METCORP FINANCIAL PTY LTD
MR STEPHEN STONE
BATROSA CONCRETE PRODUCTS PTY LTD
WENDELINI PTY LIMITED
COMSEC NOMINEES PTY LIMITED
PLYMOUTH HOLDINGS INC
Total of Top 20 share holdings
Other shareholders
Total ordinary shares

Ordinary shares
Number held
Percentage of
issued shares
42,367,676
6.309
41,174,840
6.132
14,235,000
2.120
9,542,640
1.421
9,045,931
1.347
6,300,000
0.938
6,167,000
0.918
6,055,714
0.902
6,045,455
0.900
6,000,000
0.893
6,000,000
0.893
5,572,460
0.830
5,116,207
0.762
5,109,091
0.761
4,500,000
0.670
4,182,316
0.623
4,000,000
0.596
3,881,500
0.578
3,793,404
0.565
3,771,808
0.562

192,861,042
28.720
478,658,806
71.280

671,519,848
100.000%

Shareholder Information

C. Substantial holders

Substantial holders in the company are set out below:

Substantial Shareholder (extracts from Substantial Shareholder Number held Shareholding	Substantial Shareholder (extracts from Substantial Shareholder Number held Shareholding
Register)
	Percentage
Ordinary shares ANZ Nominees Limited 42,367,676 6.309 Orian Holding Corp 41,174,840 6.132

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:

(a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

(b) Options

No voting rights.

E. Summary of options issued

	No of	No of Options % Options
	options	Holders held Issued
Options expiring 26 November 2008 with an
exercise price of $0.913 3,177,916 12
Option holders with more than 20% of class Anthony John Moyes 753,537 23.7%
Options expiring 30 June 2009 with an exercise price of
$0.4876 1,275,000 6
Option holders with more than 20% of class Steven Joseph Koroknay 400,000 31.37% DenisMichael Hanley 400,000 31.37%
Options expiring 31 December 2009 with an
exercise price of $0.0800 111,919,975 1,141
Options expiring 31 December 2009 with an exercise price of $0.0800 20,000,000 1 Option holders with more than 20% of class Veritas SecuritiesLtd 20,000,000 100%
Options expiring 24 February 2010 with an
exercise price of $0.0603 5,869,014 15
Option holders with more than 20% of class Nil
Options expiring 30 August 2011 with an exercise price of $0.1013 7,210,000 22
Option holders with more than 20% of class Nil
Options expiring 27 September 2012 with an exercise price of $0.1413 4,700,000 23
Option holders with more than 20% of class Nil
Options expiring 27 September 2012 with an exercise price of $0.1413 with a Trigger Price Threshold of $0.25 6,350,000 7
Option holders with more than 20% of class Philip Ronald Wood 2,500,000 39.37%

These options are unquoted equity securities

Corporate Governance

Corporate Governance Statement

The Board of Directors of the Company (the Board) is responsible for the corporate governance of the Company and its controlled entities.

Corporate governance is a matter of high importance in the Company and is undertaken with due regard to all of the Company’s stakeholders and its role in the community.

The Board periodically reviews its policies and procedures against the ‘Principles of Good Corporate Governance and Best Practice Recommendations’ published by the ASX Corporate Governance Council.

Unless explicitly stated otherwise the Directors believe that the Company complies with the major principles and the underlying guidelines.

The Board has approved and adopted the following policies and charters with which directors and management are required to comply, and which, inter alia, contain the information recommended by the ASX Best Practice Recommendations Guidelines to be made available to shareholders/investors. These policies and Charters can be read on the Company’s website www.intec.com.au under ‘About Us – Corporate Governance’.

ASX BEST PRACTICE RECOMMENDATIONS

The table below contains each of the ASX Best Practice Principles and Guidelines. Where the Company has complied with the principles and guidelines during the reporting period this is indicated with a tick �. Where the Company has

failed to comply with a particular recommendation this is indicated with a cross � and the Company’s reasons are set out below the corresponding guideline within the table.

Note			Complied
Principle	1	To lay solid foundations for management and oversight
Guideline	1.1	Formalise and disclose the functions reserved to the Board and those	�
		delegated to management.
Principle	2	Structure the Board to add value
Guideline	2.1	A majority of the Board should be independent directors.	�
Guideline	2.2	The Chairman should be an independent director.	�
Guideline	2.3	The roles of Chairman and Chief Executive Officer/Managing Director	�
		should not be exercised by the same individual.
Guideline	2.4	The Board should establish a nomination committee.	�
Guideline	2.5	Provide the information set out in Guide to reporting in Principle 2.	�
		During the year an independent director resigned and has not been
		replaced at the date of this report. Intec is mindful of this departure and
		aims to remedy the situation in due course.
Principle	3	Promote ethical and responsible decision making
Guideline	3.1	Establish a code of conduct to guide the Directors, the Chief Executive	�
		Officer (or equivalent), the Chief Financial Officer (or equivalent) and any
		other key executives as to:
		3.1.1 The practices necessary to maintain confidence in the Company’s	�
		integrity; and
		3.1.2 The responsibility and accountability of individuals for reporting and	�
		investigating reports of unethical practices.
Guideline	3.2	Disclose the policy concerning trading in Company securities by Directors,	�
		officers and employees. Refer to policy set out below.
Guideline	3.3	Provide the information set out in Guide to reporting on Principle 3.	�

Corporate GovernanceDirectors’ Declaration

Principle	4	Safeguard integrity in financial reporting
Guideline	4.1	Require the Chief Executive Officer (or equivalent) and the Chief Financial	�
		Officer (or equivalent) to state in writing to the Board that the Company’s
		financial report present a true and fair view, in all material respects, of the
		Company’s financial condition and operational results and are in
		accordance with relevant accounting standards.
Guideline	4.2	The Board should establish an Audit Committee.	�
			�
Guideline	4.3	Structure the Audit Committee so that it consists of:
		• only non-executive Directors;	�
		• a majority of independent directors;	�
		• an independent Chairman who is not the Chairman of the Board; and	�
		• at least 3 members	�
Guideline	4.4	The Audit Committee should have a formal Charter.	�
Guideline	4.5	Provide the information set out in Guide to reporting on Principle 4.	�
Principle	5	Make timely and balanced disclosure
Guideline	5.1	Establish written policies and procedures designed to ensure compliance with ASX Listing Rules disclosure requirements and to ensure	�
		accountability at a senior management level for that compliance.
Guideline	5.2	Provide the information set out in Guide to reporting on Principle 5.	�
Principle	6	Respect the rights of shareholders
Guideline	6.1	Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at	�
		general meetings.
Guideline	6.2	Request the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit	�
		and the preparation and content of the auditors report.
Principle	7	Recognise and manage risk
Guideline	7.1	The Board or appropriate board committee should establish policies on risk	�
		oversight and management.
Guideline	7.2	The Chief Executive Officer (or equivalent) and the Chief Financial Officer	�
		(or equivalent) should state to the Board in writing that:
		7.2.1 The statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is	�
		founded on a sound system of risk management and internal
		compliance and control which implements the policies adopted by
		the Board; and
		7.2.2 The company’s risk management and internal compliance and control system is operating efficiently and effectively in all material	�
		aspects.
Guideline	7.3	Provide the information indicated in Guide to reporting on Principle 7.	�
Principle	8	Encourage enhanced performance
Guideline	8.1	Disclose the process for performance evaluation of the Board, its	�
		Committees and individual directors, and key executives.

Corporate Governance

Principle	9	Remunerate fairly and responsibly
Guideline	9.1	Provide disclosure in relation to the Company’s remuneration policies to	�
		enable investors to understand:
		• the cost and benefits of those policies; and	�
		• the link between remuneration paid to Directors and key executives and	�
		corporate performance.
Guideline	9.2	The Board should establish a remuneration committee.	�
Guideline	9.3	Clearly distinguish the structure of Non-executive Directors remuneration	�
		from that of executives.
Guideline	9.4	Ensure that payment of equity based executive remuneration is made in	�
		accordance with thresholds set in plans approved by shareholders.
Guideline	9.5	Provide the information set out in Guide to reporting on Principle 9.	�
Principle	10	Recognise the legitimate interests of shareholders
Guideline	10.1	Establish and disclose a code of conduct to guide compliance with legal and	�
		other obligations to legitimate stakeholders.

Securities Trading Policy

The Company’s Securities Trading Policy is set out on the website www.intec.com.au as below.

Directors, employees and key consultants may only deal in the Company’s shares during ‘window periods’ nominated for this purpose from time to time by the Managing Director and Chief Executive Officer, or failing him the Chairman. However, Directors, employees and key consultants are prohibited from buying or selling Intec shares at any time if they are aware of price sensitive information that has not been made public.

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Corporate Directory

Directors

Chairman Trevor A Jones Managing Director and Chief Executive Officer Philip R Wood Technical Director A John Moyes Finance Director and Chief Financial Officer Kieran G Rodgers Non-executive Directors Kenneth J Severs James R G Bell

Company Secretaries

Robert J Waring David W Clark

Senior Management

Chief Operating Officer Brian A Banister Corporate Development Manager Dave L Sammut Senior Research Metallurgist and Laboratory Manager Andrew R Tong

Notice of Annual General Meeting

The Annual General Meeting of Intec Ltd will be held in 'The Partners Room', at the offices of Allens Arthur Robinson

Level 28, Deutsche Bank Place, Corner of Hunter and Phillip Streets Sydney NSW 2000 Australia on Tuesday 18 November 2008 at 5.30 p.m.

Registered Office and Corporate Headquarters

Gordon Chiu Building J01 Department of Chemical Engineering Maze Crescent University of Sydney NSW 2006 Australia Telephone: (+61 2) 9351 6741 Facsimile: (+61 2) 9351 7180 Email: [email protected] Website:www.intec.com.au

Sydney City Office

Level 13, Macquarie House 167 Macquarie Street Sydney NSW 2006 Australia Telephone: (+61 2) 8667 3038

Intec Hellyer Metals Pty Ltd PO Box 666 10-12 River Road Burnie TAS 7320 Australia Telephone: (+61 3) 6431 9867 Facsimile: (+61 3) 6431 3629

Melbourne EAFD Storage Site 433-451 Somerville Road West Footscray VIC 3012 Australia

West Australian Representative Office Mr Stephen Stone 173 Hamersley Road Subiaco WA 6008 Australia Telephone: (+61 (0)) 418 804 564

Chinese Representative Office Suite 1310, The Hub 1068 East XingGang Road Guangzhou China Telephone: (+86 (0)208) 923 6813 Facsimile: (+86 (0)208) 988 3738

North American Representative Office Mr Phil Evans 32 Charles Street Georgetown Ontario L7G 2Z3 Canada Telephone and Facsimile: (+1 905) 873 4985

European Representative Office Mr Kenneth Severs ‘Appletree’ Frith Road Aldington Frith Kent TN25 7HJ United Kingdom Telephone and Facsimile: (+44 1233) 721 328

Share Registry Registries Limited Level 7, 207 Kent Street Sydney NSW 2000 Australia PO Box R67 Royal Exchange Sydney NSW 1223 Australia Telephone: (+61 2) 9290 9600 Facsimile: (+61 2) 9279 0664 Email: [email protected] Website: www.registriesltd.com.au

Auditors

PricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street Sydney NSW 1171 Australia

Legal Advisers

Allens Arthur Robinson Level 28, Deutsche Bank Place Corner of Hunter and Phillip Streets Sydney NSW 2000 Australia

Patent Attorneys

Griffith Hack 100 Miller Street North Sydney NSW 2060 Australia

Intec Hellyer Metals Demonstration Plant

20 River Road Burnie TAS 7320 Australia Telephone: (+61 3) 6431 1835 Facsimile: (+61 3) 6431 3594

Stock Exchange Listings

Intec Ltd shares are listed on the Australian Stock Exchange (Code: INL), the Deutsche Boerse (Code:INF) and the OTCQX/Pink Sheets LLC (Code: ICLJY)

The Hellyer Mine

Cradle Mountain Link Road Waratah District West Coast TAS 7321 Australia Telephone: (+61 3) 6439 1155 Facsimile: (+61 3) 6439 1405

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www. intec .com.au

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AI assistant

SCIDEV LTD — Annual Report 2008

65761_rns_2008-09-30_2109b4b8-c2e9-4736-92cc-1ac326e8bc48.pdf

Intec Ltd Contents

Page

Cover: The Intec Logo

Letter from the Chairman and Managing Director & CEO

Dear Intec Shareholder

30 September 2008

Figure 1: Correlation of the INL share price and A$ zinc price

The Intec Process

Technology Overview

Multiple Metals

Purification

Leach Step

Multiple Products

Low Impact

Smelting

Overseas Opportunity

Strong Potential Returns

Clean Production

Proven Production Process

Access To Metal Resources

Project Highlights - Australia

Hellyer Zinc Conc. Project

Browns Sulphide Project

Project Highlights - International

Global Projects

Russia Project

Iran Project

Outotec Collaboration

Sardinia Project

Market Review

Company Details

Top 10 Shareholders

2007-2008 Highlights

Review of Operations

Intec Metals Recycling Project

Project Update

timeline to commencement.

Burnie Research Facility

Figure 2: Metal Recoveries at the HZCP

Hellyer Zinc Concentrate Project

Bass Metals

Intec Exploration

Outotec Agreement

Veolia Environmental Services Agreement

China Representative Office

Directors’ Report

Directors

A John Moyes B.A. (Chem) (Macquarie) Technical Director

Ian W Ross

Chairman (resigned on 31 December 2007)

Philip R Wood B.A. (Syd), Ll.B. (Syd), A.S.I.A., Dip. L.C.F. (Sorbonne) Managing Director and Chief Executive Officer

Kenneth J Severs B.Sc., C.Eng., P.Eng., F.I.Chem. E. Non-executive Director

Kieran G Rodgers B.E. (Hons.) Min. (UNSW), M.B.A. (IMD) Finance Director & Chief Financial Officer

James R G Bell B.A. (Syd), Ll.B. (Syd) Non-executive Director

Company Secretaries

Robert J Waring B.Ec., C.A., F.C.I.S., F.Fin., F.A.I.C.D. Company Secretary

Meetings of Directors

Retirement, election and continuation in office of Directors

Principal activities

Dividends Intec Ltd

Review of operations

Significant changes in the state of affairs

Matters subsequent to the end of the financial year

Hellyer Zinc Concentrate Project

Electric Arc Furnace dust (EAF dust)

Intec Metals Recycling Project

Likely developments and expected results of operations

Environmental regulation

Remuneration report

A Principles used to determine the nature and amount of remuneration

Non-executive Directors

Executive pay

Base pay

Intec Option Plan

B Details of remuneration

Amounts of remuneration

J L Huens – Chief Operating Officer D J Purdie – Senior Process Engineer D L Sammut – Corporate Development Manager

SCIDEV LTD Annual Report 2008