SCIDEV LTD — Interim / Quarterly Report 2006

Mar 15, 2006

ABN 25 001 150 849

Superior and Sustainable Metals Production

Gordon Chiu Building J01 Department of Chemical Engineering Maze Crescent University of Sydney NSW 2006 Australia

Phone: 02-9351-6741 Fax: 02-9351-7180 Email: mail@intec.com.au Website: www.intec.com.au ASX code: INL

16 March 2006

Companies Announcements Office Australian Stock Exchange Limited

December 2005 Appendix 4D and Half-Yearly Report

Attached is Intec Ltd's Appendix 4D and Half-Yearly Report for the six months ended 31 December 2005.

Yours faithfully Intec Ltd

Philip R. Wood

Philip R Wood Managing Director and Chief Executive Officer

ABN 25 001 150 849

Half year report in accordance with Appendix 4D

Period ending 31 December 2005

Results for announcement to the market

Revenues from ordinary activities	down	90%	to	70,500
Loss from ordinary activities after taxattributable to membersNet loss for the period attributable tomembers	up	133%	tο	5,321,435
	up	133%	to	5,321,435
Dividends	Amount per security		Franked amountper security
Final dividend		Nil $\phi$		Nil $\epsilon$
Previous corresponding period	Nil $\epsilon$			Nil $\ell$

Record date for determining entitlements to the dividend

Not applicable

Brief explanation of any of the figures reported above and short details of any bonus or cash issue or other item(s) of importance not previously released to the market:

During the half year to 31 December 2005, the Group continued the development and commercialisation of the Intec Processes for base and precious metals.

In particular, the Group's demonstration plant in Burnie was completed and is being commissioned.

Intec Hellyer Metals Pty Ltd (IHM), the wholly-owned subsidiary of INL, owns and operates the Hellyer Metals Project demonstration plant at Burnie, Tasmania (BDP), which is in its commissioning phase at 31 December 2005. Commissioning will have been completed when the BDP achieves 'steady-state', which is now not expected before the June 2006 quarter. Steady-state operation is required to generate the engineering design data for the Hellyer Metals Project bankable feasibility study managed by WorleyParsons, which is now expected to be available during the December 2006 quarter.

Reference is made to the Review of Operations in the Director's Report attached to this Appendix 4D.

NTA Backing

	Half-year ended31 December 2005	Year ended 30 June 2005
Net tangible assets per ordinary share	$1.42$ cents $^{\circ}$	$2.42$ cents

Other comments

Refer to the attached Directors' Report included in the half-year financial report for other comments on results for the period.

• Audit Review: The report is based on the attached half-year financial report, which has been $\blacksquare$ reviewed (audit review report attached).
• $\blacksquare$ Changes in control over entities: There were no entities over which control has been gained or lost during the period.
• Details of dividends and dividend reinvestment plans: No dividends have been declared or $\blacksquare$ proposed and no dividend reinvestment plans exist.
• $\blacksquare$ Details of associates or joint ventures: Intec Ltd has a 22.10% interest in Bass Metals Ltd.
• $\blacksquare$ Foreign entities: Not applicable.

Philip R. Wood

Philip R Wood Managing Director Chief Executive Officer

16 March 2006

ABN 25 001 150 849

Superior and Sustainable Metals Production

Gordon Chiu Building J01 Department of Chemical Engineering Maze Crescent University of Sydney NSW 2006 Australia

Phone: (+61 2) 9351 6741 Fax: (+61 2) 9351 7180 $\label{eq:1} \textrm{Email:} \underline{\textit{mail@intec.com.au}}$ Website: www.intec.com.au ASX code: INL

HALF-YEARLY REPORT

31 DECEMBER 2005

ABN 25 001 150 849

Corporate directory

Directors

Ian W Ross (Acting Chairman) Philip R Wood (Managing Director & Chief Executive Officer) A John Moyes (Technical Director) Kenneth J Severs (Non-executive Director)

Company Secretary

Robert J Waring

Senior Management

Jean-Louis Huens (Chief Operating Officer) Kieran G Rodgers (Chief Financial Officer & Business Development Manager) Michael Ryan (Operations Manager) Andrew R Tong (Senior Research Metallurgist & Laboratory Manager)

Registered Office and Laboratories

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: mail@intec.com.au Website: www.intec.com.au

Intec Hellyer Metals Pty Ltd

39 River Road Burnie TAS 7320 Australia Telephone: (+61 3) 6431 6333 Facsimile: (+61 3) 6431 6896

Intec Hellyer Metals Demonstration Plant

20 River Road Burnie TAS 7320 Australia Telephone: (+61 3) 6431 6333 Facsimile: (+61 3) 6431 6896

The Hellyer Mine

Cradle Mountain Link Road Wynvard Waratah Council District TAS 7321 Australia

Telephone: (+61 3) 6439 1155/1467 Facsimile: (+61 3) 6439 1405

North American Representative Office

[Philip Evans 32 Charles Street Georgetown, Ontario Canada L7G 2Z3

European Representative Office

Kenneth J Severs 'Appletree' Frith Road, Aldington Frith Kent TN25 7HJ United Kingdom

Share Registry

Registries Limited Level 2, 28 Margaret 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: registries@registriesltd.com.au Website: www.registriesltd.com.au

Legal Advisers

Allens Arthur Robinson Level 23, The Chifley Tower 2 Chifley Square Sydney NSW 2000 Australia

Patent Attorneys

Griffith Hack 100 Miller Street North Sydney NSW 2060 Australia

Auditors

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

Australian Stock Exchange Listing

Intec Ltd shares are listed on the Australian Stock Exchange under the code INL. The home branch is Sydney.

ABN 25 001 150 849

Contents

Directors' report
Auditors' independence declaration	3.
Consolidated income statement	4
Consolidated balance sheet	5.
Consolidated statement of changes in equity	6
Consolidated cash flow statement	7.
Notes to the financial statements	8
Directors' declaration	23.
Independent review report	24

Intec Ltd Directors' report

Your Directors present their report on the consolidated entity consisting of Intec Ltd (INL or the Company) and the entities it controlled (the Group) for the half-year ended 31 December 2005.

Directors

The names of the Company's Directors in office during the half-year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated.

Ian W Ross (Acting Chairman) Philip R Wood (Managing Director and Chief Executive Officer) A John Moyes (Technical Director) Kenneth J Severs (Non-Executive Director) Richard H Jenkins (Non-Executive Director) (resigned 14 March 2006)

Review of operations

The net loss of the consolidated entity after providing for income tax amounted to $5,321,435 (2004 $-$ loss $2,281,784).

Intec Hellyer Metals Pty Ltd (IHM), the wholly-owned subsidiary of INL, owns and operates the Hellyer Metals demonstration plant at Burnie, Tasmania (BDP), which was at 31 December 2005, and continues to be at the date of this report, in its commissioning phase. Commissioning will have been completed when the BDP achieves 'steady-state', which is now not expected before the June 2006 quarter. Steady-state operation is required to generate the engineering design data for the Hellyer Metals Project bankable feasibility study (BFS) managed by WorleyParsons (WOR), which is now expected to be available during the December 2006 quarter.

During the December 2005 quarter, the former Resource Finance and Investments Limited changed its name to Bass Metals Ltd (BSM) of which INL is its largest shareholder (22.1%). The results of BSM's initial drilling at both Que River and Mt Charter in the near vicinity of INL's Hellyer Mill have been encouraging.

On 21 October 2005, the Metals and Energy Capital Division of Macquarie Bank Limited (MBL), INL and IHM formally executed the secured $2,500,000 Working Capital Facility Agreement (the "Agreement") and associated legal documentation. In consideration of MBL entering into the Agreement, INL issued call options to MBL for the purchase of 15,000,000 INL shares at 8 cents per share, expiring 30 June 2008. A further issue of 10,000,000 options, on the same terms, was made to MBL on the first drawdown under the Agreement, which occurred on 23 November 2005. Additionally, MBL invested $500,000 to purchase 7,246,377 INL shares at 6.9 cents per share. Both equity and debt funding have been applied principally towards working capital required for the BDP and completion of the BFS.

Events occurring after reporting date

Since the end of the half year the MBL facility has been temporarily increased to $5 million and the repayment date of the $2.5 million initial facility has been extended to 31 March 2007. Since the end of the financial year Intec has drawn down a further $2.55 million under this facility.

On 21 February 2006 the Group signed an agreement with Smorgon Steel Ltd for the transfer and treatment of a 20,500 tonne stockpile of EAF dust located in Melbourne in terms of the Heads of Agreement dated 22 December 2005. Completion of the transfer of the EAF dust stockpile is anticipated in March 2006 and the $2.42 million proceeds, representing an up-front EAF dust treatment fee, will then be received from the Smorgon Steel Group.

Mr Richard Jenkins resigned as a Non-Executive Director of INL on 14 March 2006.

The financial effect of these transactions has not been brought to account at 31 December 2005.

Intec Ltd Directors' report (continued)

No other event has occurred subsequent to 31 December 2005 requiring disclosure in, or amendment to, these financial statements.

Auditors' Independence Declaration

An independence declaration from our auditors, PricewaterhouseCoopers, is included on page 3 of this Directors' report.

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

Philip R. Wood

Philip R Wood Managing Director Chief Executive Officer

Sydney

16 March 2006

PricewaterhouseCoopers ABN 52 780 433 757

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999

Auditors' Independence Declaration

As lead auditor for the review of Intec Ltd for the half-year ended 31 December 2005, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
• b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Intec Ltd and the entities it controlled during the period.

PricewatchouseCooper

PricewaterhouseCoopers

Midulk leverg

MW Chiang Partner

Sydney 16 March 2006

Intec Ltd Consolidated income statement

for the half-year ended 31 December 2005

	Half-year
	31 December2005	31 December2004
	$	$
Revenue from continuing activities		34,139
Other income	70,500	653,475
Revenue from ordinary activities	70,500	687,614
Administration expense	(319,603)	(214, 538)
Depreciation expense	(249, 023)	(116, 553)
Employee benefits expenses	(1, 292, 323)	(1,381,704)
Hellyer demonstration plant expenses	(2,614,349)
Hellyer mill care and maintenance costs	(443,008)	(490, 127)
Occupancy expense	(122,093)	(100, 017)
Patent fees	(196, 810)	(89, 961)
Pilot plant expenses		(392, 945)
Research and development expenses	(30, 556)	(21, 112)
Other expenses	(131,723)	(162, 441)
Share of associates losses accounted for using theequity method (Note 7)	7,553
Loss before income tax expense	(5,321,435)	(2,281,784)
Income tax benefit
Net loss attributable to the members of Intec Ltd	(5,321,435)	(2,281,784)
Earnings per share for loss attributable to theordinary equity holders of the company	cents	cents
Basic loss per share (cents per share)	1.24	0.83
Diluted loss per share (cents per share)	1.24	0.83

The above consolidated income statement should be read in conjunction with the accompanying notes.

Intec Ltd Consolidated balance sheet

as at 31 December 2005

	31 December2005	30 June2005
	$	S
Current assets
Cash and cash equivalents	253,029	4,544,757
Receivables	139,118	204,226
Other current assets	396,054	13,115
Total current assets	788,201	4,762,098
Non-current assets
Receivables	204,360	243,020
Investments in associates accounted for using the
equity method	1,121,799	1,079,320
Property, plant and equipment	6,889,575	5,784,516
Intangible assets	10,000	10,000
Total non-current assets	8,225,734	7,116,856
Total assets	9,013,935	11,878,954
Current liabilities
Payables	1,737,257	1,316,167
Provisions	221,349	151,542
Interest bearing liabilities	820,705
Total current liabilities	2,779,311	1,467,709
Non-current liabilities
Provisions	104,314	105,911
Total non-current liabilities	104,314	105,911
Total liabilities	2,883,625	1,573,620
Net assets	6,130,310	10,305,334
Equity
Contributed equity	45,742,213	45,242,213
Reserves	815,528	169,117
Accumulated losses	(40, 427, 431)	(35, 105, 996)
Total equity	6,130,310	10,305,334

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

Intec Ltd Consolidated statement of changes in equity

For the half-year ended 31 December 2005

	31 December2005	31 December2004
	$	S
Total equity at the beginning of the half-year	10,305,334	2,467,981
Loss for the half-year	(5,321,435)	(2,281,784)
Total recognised income and expense for thehalf-year	(5,321,435)	(2,281,784)
Employee share options recognised in option exercisereserve	98,089
Options issued to Macquarie Bank Limited inconsideration for entering into a financing facilityrecognised in option exercise reserve	513,396
Share of associates reserves accounted for using theequity method	34,926
Transactions with equity holders in their capacity asequity holders
Contributions of equity, net of transaction costs	500,000	11,662,791
Total equity at the end of the half-year	6,130,310	11,848,988
Total recognised income and expense for the half-year
is attributable to the members of Intec Ltd	(5,321,435)	(2,281,784)
	(5,321,435)	(2, 281, 784)

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

Intec Ltd Consolidated cash flow statement

for the half-year ended 31 December 2005

	Half-year
	31 December2005$	31 December2004$
Cash flows from operating activities
Receipts from customers (inclusive of goods andservices tax)		34,139
Payment to suppliers and employees (inclusive ofgoods and services tax)	(4,508,137)	(2,932,287)
Interest received	60,135	73,952
Government grants received		576,760
Other income	10,365	2,763
Net cash (outflows) from operating activities	(4,437,637)	(2,244,673)
Cash flows from investing activities
Acquisition of plant and equipment	(1,354,091)	(184, 360)
Payments for exploration expenditure		(1,221)
Net cash (outflows) from investing activities	(1,354,091)	(185, 581)
Cash flows from financing activities
Proceeds from issue of shares	500,000	11,763,613
Funds received on application for shares in excess ofentitlements to be refunded		257,504
Borrowings	1,000,000
Share issue costs		(358, 326)
Net cash inflows from financing activities	1,500,000	11,662,791
Net increase (decrease) in cash heldCash and cash equivalents at the beginning of the	(4,291,728)	9,232,537
half-year	4,544,757	1,104,494
Cash and cash equivalents at the end of the half-year	253,029	10,337,031

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

for the half-year ended 31 December 2005

Note 1. Statement of significant accounting policies

This general purpose financial report for the interim half year reporting period ended 31 December 2005 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2005 and any public announcements made by Intec Ltd during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

Basis of preparation of half-year financial report

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 periods presented, unless otherwise stated.

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards

This interim financial report is the first Intec Ltd interim financial report to be prepared in accordance with AIFRSs. AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements.

Financial statements of Intec Ltd until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the Intec Ltd interim financial report for the half year ended 31 December 2005, management has amended certain accounting, valuation and consolidation methods applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the comparative figures were restated to reflect these adjustments. The Group has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on the Group's equity and its net income are given in note 8.

Historical cost convention

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

Going Concern

In the six months ended 31 December 2005 the Company and controlled entities continued to commission the Intec Hellyer Metals demonstration plant and progress the related bankable feasibility study and as a result generated operating losses of $5,321,435 and negative cash outflows from operations of $4,437,637. As of balance date, the Company and controlled entities had net assets of $6,130,310 and cash balances of $253,029. The continuing viability of the consolidated entity and its ability to continue as a going concern and meet its debts as they fall due in future years are dependent upon:

the satisfaction of all conditions precedent to the Stockpile Transfer and Treatment Agreement $(i)$ dated 21 February 2006 between Smorgon Steel Ltd and the Company. Upon satisfaction of these conditions precedent the Company will receive a payment of $2,420,000.

for the half-year ended 31 December 2005

• (ii) the Company being successful in negotiating and obtaining additional funding, including capital raising and future debt financing. In this regard the Company currently has obtained debt financing from Macquarie Bank Limited;
• (iii) the Company successfully implementing its business plan and in particular progressing the Intec Hellyer Metals Project; and
• (iv) the Company achieving success in effecting commercial transactions with industry participants.

As a result of these matters, there is significant uncertainty as to whether the Company and its controlled entities will continue as going concerns, and therefore, whether assets will be realised and liabilities and commitments settled in the normal course of business and at the amounts stated in the financial report.

However, the Directors believe that the consolidated entity will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis. The Directors regularly monitor the Company's cash position and on an on-going basis consider a number of strategic and operational plans and initiatives to ensure that adequate funding continues to be available for the Company to meet its business objectives.

At this time, the Directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the financial report at 31 December 2005. Provisions have been made in the financial report relating to the recoverability of the asset carrying amounts. No other adjustments have been made to the financial report relating to the recoverability and classification of the asset carrying amounts or the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern.

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) Accounts payable

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.

(b) Acquisition of assets

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired.

Assets acquired are recorded at the cost of acquisition, being the fair value of assets given up, shares issued or liabilities undertaken, determined as at the date of acquisition plus costs incidental to the acquisition.

for the half-year ended 31 December 2005

In the event that settlement of all or part of the cash consideration given in the acquisition of an asset is deferred, the fair value of the purchase consideration is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

(c) Cash and cash equivalents

For the purpose of the cash flow statement, cash includes:

• cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and
• investments in money market instruments with less than 60 days to maturity.

Borrowings are shown in current liabilities.

(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. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

(e) Depreciation

Depreciation is provided on plant and equipment.

Depreciation provided on plant and equipment is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life. The following estimated useful lives are used in the calculation of depreciation:

Computer equipment	2-3 years
Office furniture and equipment	3-8 years
Plant and equipment	4-7 years

(f) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick 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. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(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 using the projected unit credit method. 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.

for the half-year ended 31 December 2005

(iii) Share-based payments

Share-based compensation benefits are provided to employees via the Intec Ltd Employee Option Plan and an employee share scheme.

Shares options granted before 7 November 2002 and/or vested before 1 January 2005

No expense is recognised in respect of these options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital.

Shares options granted after 7 November 2002 and vested after 1 January 2005

The fair value of options granted under the Intec Ltd Employee 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 determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

(g) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or 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) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(i) 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 national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax

for the half-year ended 31 December 2005

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

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

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

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

Intec Ltd and its wholly-owned Australian controlled entities have not implemented the tax consolidation legislation.

(j) Intangible assets

(i) Intellectual property

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.

(k) Interest-bearing liabilities

Interest-bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Interest-bearing liabilities are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the interest-bearing liabilities using the effective interest method.

Interest-bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(l) Investments

Non-current investments in controlled entities 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. The recoverable amount is assessed from the underlying net assets for other non-listed investments. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.

(m) Loss per share

Basic and diluted loss per share are determined by dividing the net loss after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted number of ordinary shares outstanding during the financial year. No adjustment has been made to the basic loss per share for any options issued by the Company as outlined in note 8 as they are not considered potential ordinary shares at reporting date and are not therefore dilutive.

for the half-year ended 31 December 2005

(n) Principles of consolidation

$(i)$ Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Intec Ltd ("company" or "parent entity") as at 31 December 2005 and the results of all subsidiaries for the half-year then ended. Intec Ltd and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

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

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

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note $1(h)$ ).

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.

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

(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 parent entity financial statements using the cost method and 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. Dividends receivable from associates are recognised in the parent entity's income statement, while in the consolidated financial statements they reduce 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 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 consolidated financial statements

for the half-year ended 31 December 2005

(o) Plant and equipment

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.

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 $1(g)$ .

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(p) Receivables

Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts as they are due for settlement no more than 30 days from recognition.

(q) Research and development policy

Expenditure on research activities is recognised in the income statement as an expense when it is incurred.

Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if the product or service is technically and commercially feasible and adequate resources are available to complete development. Other development expenditure is recognised in the income statement as an expense when it is incurred.

(r) Revenue recognition

(i) Sale of Goods and Disposal of Assets

Revenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has passed control of the goods or other assets to the buyer.

(ii) Interest Income

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

(iii) Management Fees

Management fees are charged to controlled entities on a cost basis for services provided.

(iv) Consulting services

Revenue from consulting services are recognised using the percentage-of-completion method for fixed-fee arrangements or as the services are provided for time-and-materials arrangements.

$(v)$ General

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

for the half-year ended 31 December 2005

Note 2. Equity securities issued

	Half-year			Half-year
	2005	2004	2005	2004
	Shares	Shares	$	$
Issue of ordinary shares during the
half-year:
Placement to institutional investors	7,246,377	101,450,000	500,000	7,000,050
Shareholder share purchase plan	٠	17,854,652	w	1,231,971
Underwriting of shareholder share
purchase plan	$\blacksquare$	53,211,569	×	3,671,592
Transaction costs relating to share
issues			×	(358,326)
	7,246,377	172,516,221	500,000	11,545,287

Note 3. Contingent liabilities

Rehabilitation costs

A controlled entity holds a mining lease (CML 103M/1987) which covers the Hellyer tailings dam and the Hellyer Mill and associated infrastructure.

It is a condition of the mining lease that the company rehabilitate the site on the termination of the mining lease.

The amount of this liability cannot be reliably estimated at this point in time due to significant uncertainties as to the estimated cost of such a programme and the timing of such a programme.

There has been no other change of any contingent liabilities or contingent assets since the last annual reporting date.

Note 4. Events occurring after reporting date

Since the end of the half year the MBL facility has been temporarily increased to $5 million and the repayment date of the $2.5 million initial facility has been extended to 31 March 2007. Since the end of the financial year Intec has drawn down a further $2.55 million under this facility.

On 21 February 2006 the Group signed an agreement with Smorgon Steel Ltd for the transfer and treatment of a 20,500 tonne stockpile of EAF dust located in Melbourne in terms of the Heads of Agreement dated 22 December 2005. Completion of the transfer of the EAF dust stockpile is anticipated in March 2006 and the $2.42 million proceeds, representing an up-front EAF dust treatment fee, will then be received from the Smorgon Steel Group.

Mr Richard Jenkins resigned as a Non-executive Director of the company on 14 March 2006.

The financial effect of these transactions has not been brought to account at 31 December 2005.

No other event has occurred subsequent to 31 December 2005 requiring disclosure in, or amendment to, these financial statements.

for the half-year ended 31 December 2005

Note 5. Segment information

The consolidated entity operates in one business segment and one geographical segment, only being research, development and commercialisation of its hydrometallurgical technology in Australia.

Note 6. Dividends

No dividends have been paid (2004: nil).

Note 7. Investment in associates

The group investment in Bass Metals Ltd reduced from 43.84% at 30 June 2005 to 22.1% on 27 October 2005 on the successful IPO and listing of Bass Metals Ltd (formerly Resource Finance and Investments Ltd) in which the group did not participate.

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

At the date of transition to AIFRS: 1 July 2004

	Note	PreviousAGAAP$	Effect oftransition toAIFRS$	AIFRS$
ASSETS
Current assets
Cash assets		1,104,495		1,104,495
Receivables		67,624		67,624
Other current assets		9,509		9,509
Total current assets		1,181,628	$\overline{\phantom{a}}$	1,181,628
Non-current assets
Receivables		239,500		239,500
Exploration costs		30,000		30,000
Property, plant and equipment		1,688,435		1,688,435
Intangible assets		10,000		10,000
Total non-current assets		1,967,935	$\overline{\phantom{a}}$	1,967,935
Total assets		3,149,563		3,149,563
LIABILITIES
Current liabilities
Payables		515,902		515,902
Provisions		101,034		101,034
Total current liabilities		616,936		616,936
Non-current liabilities
Provisions		64,646		64,646
Total non-current liabilities		64,646	$\tilde{}$	64,646
Total liabilities		681,582		681,582
Net assets		2,467,981		2,467,981
EQUITY
Contributed equity		33,844,159		33,844,159
Accumulated losses		(31,376,178)		(31, 376, 178)
Total equity		2,467,981	$\rightarrow$	2,467,981

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

At the end of the last half-year reporting period under previous AGAAP: 31 December 2004

Note	PreviousAGAAP$	Effect oftransition toAIFRS$	AIFRS$
ASSETS
Current assets
Cash assets	10,337,031		10,337,031
Receivables	208,995		208,995
Other current assets	34,981		34,981
Total current assets	10,581,007		10,581,007
Non-current assets
Receivables	239,500		239,500
Property, plant and equipment	1,756,242		1,756,242
Exploration costs	31,221		31,221
Intangible assets	10,000		10,000
Total non-current assets	2,036,963		2,036,963
Total assets	12,617,970	÷,	12,617,970
LIABILITIES
Current liabilities
Payables	714,183		714,183
Provisions	98,705		98,705
Total current liabilities	812,888	$\rightarrow$	812,888
Non-current liabilities
Provisions	73,598	$\overline{\phantom{a}}$	73,598
Total non-current liabilities	73,598		73,598
Total liabilities	886,486	$\overline{a}$	886,486
Net assets	11,731,484		11,731,484
EQUITY
Contributed equity	45,389,446		45,389,446
Accumulated losses	(33,657,962)		(33,657,962)
Total equity	11,731,484	$\rightarrow$	11,731,484

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

At the end of the last reporting period under previous AGAAP: 30 June 2005

	Note	PreviousAGAAP$	Effect oftransition toAIFRS$	AIFRS$
ASSETS
Current assets
Cash assets		4,544,757		4,544,757
Receivables		204,226		204,226
Other current assets		13,115		13,115
Total current assets		4,762,098		4,762,098
Non-current assets
Receivables		243,020		243,020
Investments accounted for using the
equity method		1,079,320		1,079,320
Property, plant and equipment		5,784,516		5,784,516
Intangible assets		10,000		10,000
Total non-current assets		7,116,856		7,116,856
Total assets		11,878,954	÷.	11,878,954
LIABILITIES
Current liabilities
Payables		1,316,167		1,316,167
Provisions		151,542		151,542
Total current liabilities		1,467,709	$\tilde{}$	1,467,709
Non-current liabilities
Provisions		105,911		105,911
Total non-current liabilities		105,911	$\overline{a}$	105,911
Total liabilities		1,573,620	$\overline{a}$	1,573,620
Net assets		10,305,334	$\overline{a}$	10,305,334
EQUITY
Contributed equity		45,242,213		45,242,213
Reserves	4(a)		169,117	169,117
Accumulated losses	4(a)	(34, 936, 879)	(169, 117)	(35, 105, 996)
Total equity		10,305,334		10,305,334

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

Reconciliation of net loss reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

Reconciliation of loss for the half-year ended 31 December 2004

	Note	Previous	Effect of	AIFRS
		AGAAP	transition to	$
		S	AIFRS
			$
Revenue from ordinary activities		687,614		687,614
Administration expense		(214, 538)		(214, 538)
Depreciation expense		(116, 553)		(116, 553)
Employee benefits expenses		(1,381,704)		(1,381,704)
Engineering and other consultants
expenses		(7,063)		(7,063)
Hellyer mill care and maintenance costs		(490, 127)		(490, 127)
Occupancy expense		(100, 017)		(100, 017)
Patent fees		(89,961)		(89,961)
Pilot plant expenses		(392, 945)		(392, 945)
Research and development expenses		(21, 112)		(21, 112)
Other expenses from ordinary activities		(155, 378)		(155, 378)
Loss from ordinary activities before
income tax expense		(2,281,784)		(2,281,784)
Income tax benefit relating to ordinary
activities
Net loss attributable to the members
of Intec Ltd		(2, 281, 784)		(2,281,784)

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

Reconciliation of net loss reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

Reconciliation of loss for the year ended 30 June 2005

	Note	Previous	Effect of	AIFRS
		AGAAP	transition to	$
		$	AIFRS$
Revenue from ordinary activities		2,214,857		2,214,857
Equity share of losses of associated
entities		(120, 680)		(120,680)
Administration expense		(443, 322)		(443, 322)
Depreciation and amortisation expenses		(208, 949)		(208, 949)
Employee benefits expenses	4(a)	(2,749,007)	(169, 117)	(2,918,124)
Engineering and other consultants
expenses		(21, 727)		(21,727)
Hellyer mill costs		(741, 177)		(741, 177)
Occupancy expense		(214, 447)		(214, 447)
Marketing expense		(153, 052)		(153,052)
Research and development expenses		(377, 134)		(377, 134)
Other expenses from ordinary activities		(746,063)		(746,063)
Loss from ordinary activities before
income tax expense		(3,560,701)	(169, 117)	(3,729,818)
Income tax (expense) benefit relating
to ordinary activities
Net loss attributable to the members
of Intec Ltd		(3,560,701)	(169, 117)	(3,729,818)

Reconciliation of cash flow statement for the year ended 30 June 2005 $(3)$

The adoption of AIFRSs has not resulted in any material adjustments to the cash flow statement.

$(4)$ Notes to the reconciliation

Share-based payments $(a)$

Under AASB 2 Share-based Payment from 1 July 2004 the Group is required to recognise an expense for those options that were issued to employees under the Intec Ltd Option Plan after 7 November 2002 but that had not vested by 1 January 2005. The effect of this is:

$(i)$ At 1 July 2004

For the group there has been no change in accumulated losses.

$(ii)$ At 31 December 2004

For the group there has been no change in accumulated losses.

At 30 June 2005 $(iii)$

For the group there has been an increase in accumulated losses of $169,117 and a corresponding increase in reserves.

Notes to the consolidated financial statements

Note 8. Explanation of transition to Australian equivalents to IFRSs

• $(iv)$ For the half-year ended 31 December 2004 For the group there has been no change in the employee benefits expense.
• $(v)$ For the year ended 30 June 2005

For the group there has been an increase in employee benefits expense of $169,117.

$(b)$ Retained earnings

The effect on accumulated losses of the changes set out above are as follows:

		1 July 2004	31 December 2004	30 June 2005
	Note
Share-based payments	4(a)	$\overline{ }$	-	(169,117
Total adjustment			$\overline{\phantom{a}}$	(169,117)

Intec Ltd Directors' declaration

In the Directors' opinion:

• $(a)$ the financial statements and notes set out on pages 4 to 22 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
  • giving a true and fair view of the consolidated entity's financial position as at $(ii)$ 31 December 2005 and of its performance, as represented by the results of their operations, changes in equity and its cash flows, for the half-year ended on that date; and
• $(b)$ with reference to Note 1, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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

On behalf of the Board

Philip R. Wood

Philip R Wood Managing Director Chief Executive Officer

Sydney

16 March 2006

Independent review report to the members of Intec Ltd

PricewaterhouseCoopers ABN 52 780 433 757

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999

Statement

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the financial report of Intec Ltd:

• does not give a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of Intec Ltd Group (defined below) as at 31 December 2005 and of its performance for the half-year ended on that date, and
• is not presented in accordance with the Corporations Act 2001, Accounting Standard AASB 134: Interim Financial Reporting and other mandatory financial reporting requirements in Australia, and the Corporations Regulations 2001.

This statement must be read in conjunction with the rest of our review report.

Inherent Uncertainty Regarding Continuation as a Going Concern

Without qualification to the statement expressed above, attention is drawn to the following matter.

As a result of the matter described in note 1 to the financial statements, there is significant uncertainty whether Intec Ltd and the Intec Ltd Group will be able to continue as going concerns and therefore whether they will realise their assets and settle their liabilities and commitments in the normal course of business and at the amounts stated in the financial report.

Scope

The financial report and directors' responsibility

The financial report comprises the balance sheet, income statement, statement of changes in equity, cash flow statement, accompanying notes to the financial statements, and the directors' declaration for the Intec Ltd Group (the consolidated entity), for the half-year ended 31 December 2005. The consolidated entity comprises both Intec Ltd (the company) and the entities it controlled during that half-year.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Review approach

We conducted an independent review in order for the company to lodge the financial report with the Australian Securities and Investments Commission. Our review was conducted in accordance with Australian Auditing Standards applicable to review engagements. For further explanation of a review, visit our website http://www.pwc.com/au/financialstatementaudit.

We performed procedures in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the financial report does not present fairly, in accordance with the Corporations Act 2001, Accounting Standard AASB 134: Interim Financial Reporting and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the consolidated entity's financial position, and its performance as represented by the results of its operations and cash flows.

We formed our statement on the basis of the review procedures performed, which included:

• inquiries of company personnel/ the responsible entity's personnel, and
• analytical procedures applied to financial data.

Our procedures include reading the other information included with the financial report to determine whether it contains any material inconsistencies with the financial report.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit, and accordingly, we do not express an audit opinion.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

Our review did not involve an analysis of the prudence of business decisions made by directors or management.

Independence

In conducting our review, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Manatechouseloopers

PricewaterhouseCoopers

Michellelluary MW Chiang

Partner

Sydney 16 March 2006

INTEC LTD

ABN 25 001 150 849

ASX CODE: INL

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: mail@intec.com.au Web: www.intec.com.au