==> picture [477 x 469] intentionally omitted <==

Mozambi Coal

MOZAMBI COAL LTD annual report for the year ended 30 June 2011

Corporate Directory

DIRECTORS

SHARE REGISTRY

Michael Griffiths Non Executive Chairman

Shiv Madan Managing Director Alex Neuling Executive Director Robert Hemphill Non Executive Director

COMPANY SECRETARY

Alex Neuling Ryan Broom (Appointed 6 May 2011)

Advanced Share Registry Services 150 Stirling Hwy Nedlands WA 6009 Tel: (08) 9389 8033 Fax: (08) 9389 7871

AUDITORS

HLB Mann Judd Level 4, 130 Stirling Street Perth WA 6000 Tel: (08) 9227 7500 Fax: (08) 9227 7533

REGISTERED OFFICE

Level 2, 640 Murray Street West Perth WA 6005 Tel: (08) 9321 0774 Fax: (08) 6314 1557 Email: [email protected] Web: www.mozambicoal.com

SOLICITORS

Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000

BANKERS

National Australia Bank Limited Level 1, 1238 Hay Street WEST PERTH WA 6005

SECURITIES EXCHANGE LISTING

Australian Securities Exchange Home Exchange: Perth, Western Australia Code: MOZ

==> picture [596 x 56] intentionally omitted <==

Chairman’s Report	2
Operations Report	3
Directors’ Report	12
Auditors’ Independence Declaration	26
Independent Auditors’ Report	27
Directors’ Declaration	29
Consolidated Statement of Comprehensive Income	30
Consolidated Statement of Financial Position	31
Consolidated Statement of Changes In Equity	32
Consolidated Statement of Cash Flows	33
Notes to the Financial Statements	34
Corporate Governance Statement	64
Additional ASX Information	67

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

CHAIRMAN’S REPORT

Dear Shareholder,

Over the past 12 months, your Company has successfully transformed from a mining equipment company to a junior coal explorer with a number of quality coal projects in the Zambeze coal basin in Mozambique, one of the most exciting emerging coal regions of the world.

Having completed the re-listing process in March 2011, including a name change to Mozambi Coal Limited, your Company had successfully met a number of key milestones by year-end.

Firstly, the Company raised sufficient funds to commence meaningful exploration in Mozambique including the establishment of a regional office in Tete and the recruitment of an experienced coal geologist to run our operations.

We have successfully drilled part of the Tete West (3245L) project as planned and on budget. Whilst we did not intersect thick coking coal seams, lower quality coal seams were intersected and our technical team will further assess the overall outcome of this scout drilling and consider the results and potential in relation to the rest of the license area.

In July, management successfully completed a transaction for the option to acquire a third Exploration License area (2738L) at Songo, also to the west of Tete in northern Mozambique. This license has potential to host significant Lower Karoo coal seams and preparations to commence first pass “scout” drilling are well advanced.

Airborne geophysics is also scheduled to cover all our existing tenure to assist in target definition and this work should be completed during the spring.

The outlook for your Company for the next 12 months is very bright. We are currently well funded with 2 untouched license areas covering 65km[2] of coal bearing sediments. Both Licenses are considered to have high potential of hosting Lower Karoo coal and we expect to drill the Songo (2738L) license over the coming months with drilling on the remaining license expected for 2012. In addition, we hope to acquire additional high quality licenses in the Tete region through our strong “in-country” presence. Management has built a good reputation in Mozambique as being genuine explorers seeking to find resources to add significant value to your shareholding.

Thank you for your support over the past 12 months and we look forward to the future.

==> picture [100 x 46] intentionally omitted <==

MIKE GRIFFITHS Chairman

2 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

OPERATIONS REPORT

Overview

During August 2010 the Company advised that legal and technical due diligence relating to the Company’s acquisition of Dugal Pty Ltd (“Dugal”) had been successfully concluded. Subsequently, in November 2010, Shareholders voted overwhelmingly to approve the acquisition of Dugal and a change in the Company’s activities to become a coal exploration company. Shareholders also approved a number of other transactions, including the consolidation of the Company’s capital on the basis of one new share for every ten shares previously on issue, the appointment of Mr Shiv Madan to the Board and a performance rights incentive plan. In accordance with the ASX Listing Rules, following approval of the change in activities, trading in the Company’s shares was suspended, pending re-compliance with Listing Rules 1 & 2.

After raising $4,000,000 at an issue price of $0.20 per share in a heavily oversubscribed prospectus offering the Company was reinstated to official quotation on the ASX on 1 March 2011 under its new name and with a new ASX code “MOZ”.

Summary of licences

With the acquisition of Dugal, the Company acquired the right to earn a 70% interest in 2 coal licences (3245L and 3246L) in the Zambeze Coal Basin in Mozambique, one of the worlds largest undeveloped coal basins. The acquisition of the licence interests was completed in May 2011 once second tranche payments to the vendors were made.

On 14 July 2011, the Company announced that it had entered into an agreement to acquire an 80% interest in a third exploration licence (2738L). This licence is also located within the Zambeze Coal Basin and has greatly increased the Company’s presence in the region.

==> picture [412 x 324] intentionally omitted <==

Figure 1: Location Map of Tete Province, Mozambique

MOZAMBI COAL LTD | annual report 2011 3

==> picture [596 x 56] intentionally omitted <==

OPERATIONS REPORT (CONT’D)

2738L

Summary

License 2738 (“Songo” project) is located 115km west of the city of Tete in the Songo district. It is situated approximately 25km southwest of Jindal Steel and Power Limited (BOM: 532286) license 1218L where a 700 million tonne coal reserve has been identified and 30km south of Eurasian Natural Resources Corporation (LON: ENRC) license 871L where a 1 billion tonne Joint Ore Reserves Committee (JORC) compliant coal resource has been identified. Ground verification of 2378L confirms the potential for 25.8km[2] of Lower Karoo coal bearing sediment of the Zambeze basin.

==> picture [348 x 421] intentionally omitted <==

Figure 2: Geological Map of 2738L showing focus of future exploration activities

Geology

Local geology includes a package of Lower Karoo Matinde Formation (Sandstone-Marl), Lower and Upper Karoo Cádzi Formation (Sandstone), Upper Karoo Rio Mazoe Formation (Basalt) and Upper Karoo Bangomateta (Rhyolite).

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Target Mineralisation

The Songo licence has a target mineralisation of between 1.86 and 2.32 Bt* with a CV ranging from 5,000 to 5,600kcal/ kg. The 25.8km[2] area situated in the south-eastern part of the Songo License could be underlain by Productive Series coal bearing strata with potential to host from 1.8Mt to 2.3Mt per km[2] per 1m thickness of coal with a thermal coal range of Calorific Value (“CV”) from 5,000-5,600kcal/kg . This target mineralisation is represented if the 40-50m thickness of lower coal measures is present.

Target Mineralisation estimates are conceptual in nature as there has been insufficient exploration to define a mineral resource under JORC Code guidelines and it is uncertain whether further exploration will result in the determination of a mineral resource. This conceptual target may or may not be outlined with future work, either in whole or in part.

Exploration

The Company’s plan is to focus on the 25.8km[2] area of potential Lower Karoo in the southeast of the licence. Initially, the Company plans to conduct an exploration programme comprising scout drilling of approximately 3,000 to 5,000m of HQ diamond core drilling, which will include downhole geophysical analysis. In addition, the Company plans to conduct airborne geophysics over the southeast section of the licence. After the completion of this initial programme, the Company may elect to conduct further exploration.

Environmental permits for drilling were received in September 2011 and permits to conduct aerial surveys over the licence area were received in October 2011. A drilling contract and downhole geophysics contract were signed in early October 2011. Both the aerial survey and the drilling programme are expected to commence during October 2011 with completion expected during Q4 2011 or early Q2 2012 depending on weather conditions.

MOZAMBI COAL LTD | annual report 2011 5

==> picture [596 x 56] intentionally omitted <==

OPERATIONS REPORT (CONT’D)

3246L

Summary

The project area is located 45km southeast of Vale S.A.’s Moatize mine (NYSE:VALE (ADR)). The refurbished Moatize-Biera railway passes 12km to the east of the project area and the license has 40km2 of Upper Karoo Formation (sediments and volcanics) that potentially overlie the Matinde Formation and Productive Coal Series of the Lower Karoo.

==> picture [305 x 217] intentionally omitted <==

Figure 3: Landsat Image of License 3246L

Geology

Measured dips near the railway line and dips on the road approaching the northern boundary indicate that Coal Measures may extend to as deep as 1,000 metres beneath the surface. The thickness of these units is unknown. Field observations indicated a horizontal to very gentle south-westerly dip of massive outcropping coarse grained sandstone. The depth of the Productive Coal Series is estimated to be approximately 400-600m below the surface.

==> picture [295 x 212] intentionally omitted <==

Figure 4: Geological Map of 3246L

6 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Target Mineralisation

Exploration License 3246L has a potential target mineralisation of between 2.88 and 3.60Bt* with a CV ranging from 5,0005,600kcal/kg. The 40km[2] area could be underlain by Lower Karoo Productive Series coal bearing strata with potential to host from 1.8Mt to 2.3Mt per km[2] per 1m thickness of coal with a thermal coal range of CV from 5,000-5,600kcal/kg. The target mineralisation is represented if the 40-50m thickness of lower coal measures is present.

Target Mineralisation estimates are conceptual in nature as there has been insufficient exploration to define a mineral resource under JORC Code guidelines and it is uncertain whether further exploration will result in the determination of a mineral resource. This conceptual target may or may not be outlined with future work, either in whole or in part.

Exploration

First pass drilling was expected to commence during the later part of 2011. However, following the acquisition of licence 2738L, the Company has elected to prioritise its first available drill rig towards the exploration of licence 2738L. As a result, first-pass drilling on licence 3246L is not expected to commence until 2Q 2012.

The Company will, however, conduct airborne geophysics over licence 3246L in 4Q 2011 and received aerial permitting in October 2011.

MOZAMBI COAL LTD | annual report 2011 7

==> picture [596 x 56] intentionally omitted <==

OPERATIONS REPORT (CONT’D)

3245L

Summary

Exploration License 3245L is located 12km west of the city of Tete, and immediately southwest of Rio Tinto’s “Zambeze Project” (Licence 946L) where a 9.0 billion tonne JORC compliant coal resource has been identified. The 3km[2] area in the northeast corner of Exploration licence 3245L has been targeted for exploration based on ground verification that confirmed the potential for Lower Karoo sediments.

==> picture [341 x 222] intentionally omitted <==

Figure 5: Target Area for Initial Drill Programme on License 3245L

Geology

Lower Karoo is represented by the Matinde Formation occurring to the north of the license, striking west-northwest to east-southeast with dips ranging from 12-30 ⁰ to the southwest. Large outcrops of coarse grained white sandstone and inter-bedded carbonaceous mudstone outcrop on the banks of the Atinde River to the north of license overlying the Matinde Formation which represent lower portions of the Upper Karoo series.

==> picture [289 x 211] intentionally omitted <==

Figure 6: Geological Map of 3245L

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Target Mineralisation

The initial target mineralisation for the licence was between 216 and 270Mt* with a CV ranging from 5,000-5,600kcal/ kg. This was based on an assessment that the 3km[2] area could be underlain by Productive Series coal bearing strata with potential to host from 1.8Mt to 2.3Mt per km[2] per 1m thickness of coal with a thermal coal range of CV from 5,000-5,600kcal/ kg. This target mineralisation is represented if the 40-50m thickness of lower coal measures is present. However, based on initial results from the first-pass drilling programme, the Company is likely to revise its target mineralisation estimate for Tete West downwards.

Target Mineralisation estimates are conceptual in nature as there has been insufficient exploration to define a mineral resource under JORC Code guidelines and it is uncertain whether further exploration will result in the determination of a mineral resource. This conceptual target may or may not be outlined with future work, either in whole or in part.

Exploration

The Company has concentrated its initial exploration programme on the northeast corner of 3245L. First-pass drilling commenced during May 2011 and was completed during August 2011. A total of 5 drillholes were completed for a total of 1,365m. To date, a total of 35 samples from 3 drillholes have been submitted to ALS Witlabs laboratories in South Africa. A further 17 samples from the final 2 drillholes are being prepared for assay. Results from the first 3 drillholes have been analysed and collated below.

Following the completion of assaying, correlation of the seams and estimation of quality of each seam will be finalised. The Company may elect to conduct further exploration drilling in 2012. In addition, airborne geophysics over the licence is planned for completion during 4Q 2011. Permitting for aerial surveys over the licence was granted in October 2011.

==> picture [298 x 356] intentionally omitted <==

Figure 7: Drilling underway on Tete West project

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

OPERATIONS REPORT (CONT’D)

Results

First past stratigraphic diamond drilling of the northeast corner of the Tete West Project has been completed with the successful intersection of some Karoo Coal Seams. The coal seams encountered in the licence area are generally thin and the quality is average for the Tete Province. The Company is incorporating the drilling results into its geological model for the licence area.

A total of five diamond drillholes have been completed using a Longyear 38 drill rig supplied by Agua Terra Limitada. Collar details of the drillholes are detailed below (Table 1).

Table 1: Drillhole Collar Details.

==> picture [483 x 26] intentionally omitted <==

----- Start of picture text -----

Borehole ID East North Elevation Depth (m)
----- End of picture text -----

Borehole ID	East	North	Elevation	Depth (m)

BH C1	544136	8214877	224	427.33
BH C2	543270	8214848	235	190.40
BH C3	543740	8214835	243	411.62
BH C4	543349	8214852	234	139.28
BH C5	543349	8214998	236	196.32
Total				1364.95m

Detailed geological logging of the core is underway to determine the stratigraphic position of the intersected coal seams with the view to correlate this information with other known coal seams in the region.

Results for 35 samples have been received to date with 17 assays pending. The samples were tested for proximate analysis on an air dried basis. The results were grouped and weight averaged for each drillhole to produce the average quality. Correlation of the seams and estimation of quality of each seam will be finalised once the remaining results are received. These theoretical total cumulative coal parameters are presented below.

Table 2: Main Weighted Average Coal Quality Results.

==> picture [482 x 29] intentionally omitted <==

----- Start of picture text -----

Cumulative coal CV%
Hole ID IM% Ash% VM% FC% TS% SI RD
seams thickness MJ/Kg
----- End of picture text -----

Hole ID	Cumulative coal seams thickness	IM%	Ash%	VM%	FC%	CV% MJ/Kg	TS%	SI	RD

C1	4.15m	1.07	59.14	15.99	23.80	13.12	2.06	1.73	1.92
C2	8.00m	1.10	62.09	15.85	20.97	11.35	2.30	1.56	1.98
C3	5.15m	1.50	58.39	17.64	22.47	13.15	2.60	1.52	1.94

Note 1:

Sampling for coal is undertaken for each drillhole. Based on physical properties sample plies are made as per standard sampling procedures. The coal samples collected were packed in air tight plastic bags and labelled clearly before sending to the local ACT-UIS Laboratorios de Mocambique, LDA laboratory for sample preparation.

The prepared sample pulps were then sent to Witlab (Pty) Ltd, an ALS group Coal Testing facility in South Africa who are an ISO 17025;2005 certified laboratory with the accreditation valid until November 2015.

The samples were tested for Proximate analysis on air dried basis including inherent moisture (IM%), ash (%), volatile matter (VM%), fixed carbon (FC%), calorific value (CV MJ/kg), total sulphur (TS%), swelling index (SI) and relative density equivalent to specific gravity (RD).

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Competent Person Statement

The information in this report that relates to exploration target, tonnages and grades is based on data compiled by Mr Brian J. Varndell B.Sc.(Spec Hons Geol), FAusIMM, a geologist with more than 35 years experience in mineral exploration and mining and more than 25 years experience in mineral asset valuation. Mr Varndell has sufficient experience which is relevant to the style of mineralisation and the type of deposit under consideration to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Varndell consents to the inclusion in this document of the matters based on his information in the form and contexts in which they appear.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT

Your Directors present their report on the consolidated entity consisting of Mozambi Coal Limited (“the Company” or “MOZ”) and the entities it controlled during the financial year ended 30 June 2011 (“Consolidated Entity” or “Group”).

Directors

The names of the Directors of Mozambi Coal Limited in office during the financial year and until the date of this report are:

Mr Michael Griffiths

Mr Shiv Madan – appointed 1 March 2011

Mr Alex Neuling

Mr Robert Hemphill

Principal activities

The principal activity of the Company during the financial year was coal exploration in Mozambique.

Summary review of operations

Results

For the financial year ended 30 June 2011 the Group recorded a net loss of $2,196,473 (2010: $696,156) split between continuing and discontinuing operations as follows:

	2011 $	2010 $
Loss after tax From continuing operations From discontinued operations Total	(1,522,164) (765,828) (674,309) 69,672
	(2,196,473) (696,156)

On 18 August 2010 the Company advised that legal and technical due diligence relating to the Company’s call option agreement with Dugal shareholders had been successfully concluded and that the Company had provided notice of exercise of that option, subject to conditions precedent including shareholder approval and reinstatement to trading of the Company’s securities following re-compliance with the ASX Listing Rules.

Subsequently, on 30 November 2010, Shareholders voted overwhelmingly to approve the acquisition of Dugal and a change in the Company’s activities to become a coal exploration company. Shareholders also approved a number of other transactions, including the consolidation of the Company’s capital on the basis of one new share for every ten shares previously held, the appointment of Mr Shiv Madan to the Board and a performance rights incentive plan. In accordance with the Listing Rules, following approval of the change in activities, trading in the Company’s shares was suspended, pending re-compliance with Listing Rules 1 & 2.

Shortly afterwards the Company lodged a prospectus to raise up to $4,000,000 at an issue price of $0.20 per share (including maximum oversubscriptions) which closed heavily oversubscribed. The Company was reinstated to official quotation on 1 March 2011.

Since being reinstated to official quotation, the Company has commenced its initial exploration programme on its licenses in Mozambique.

First pass scout drilling completed at Tete West intersected high ash coal seams of the Karoo formation. Some results are still pending and exploration of the higher potential coal bearing licenses are on track for first pass drilling later in 2011.

Significant changes in state of affairs

There were no significant changes in the state of affairs of the Group during the year other than as noted above or elsewhere in this report.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Information on Directors

Mr Michael Griffiths– Non executive Chairman

Qualifications – B.Sc , Dip Ed, MAusIMM, GAICD.

Special responsibilities - Member of audit, remuneration and nomination committees

Other current directorship of Listed Public Companies Chalice Gold Mines Limited

Currie Rose Resources Inc (a Canadian listed company)

Former directorships (of Listed Public Companies) in last three years – Sub-Sahara Resources NL

Interests in Shares and Options over Shares in Group Companies – 600,000 performance rights (subject to vesting hurdles)

Michael was appointed a director of the Company on 14 April 2010. Michael has over 25 years experience within the minerals exploration and energy sector in Australia and Africa, is a Geologist and a member of AusIMM and a Graduate of the Australian Institute of Company Directors.

As a director he has overseen the discovery of significant gold discoveries in both Tanzania and Eritrea and his exploration experience includes the discovery of significant gold resources in the Tanami Desert region of the Northern Territory of Australia. Prior to moving into the minerals sector, Michael spent the first 2 years of his career as a coal geologist in central Queensland.

Mr Shiv Madan – Managing Director

Qualifications – Bcom, MBA

Special responsibilities – none

Other current directorship of Listed Public Companies – none

Former directorships (of Listed Public Companies) in last three years – none

Interests in Shares and Options over Shares in Group Companies 10,320,000 fully paid ordinary shares 10,320,000 unlisted options 2,580,000 performance shares 1,000,000 performance rights (subject to vesting hurdles)

Shiv is Managing Director of Mozambi Coal Limited and has some 14 year’s experience in investment banking and management consulting. As an investment banker he held a number of senior roles throughout Europe and Asia Pacific spanning commodities and fixed income trading, capital markets advisory and syndication. Shiv was previously head base metals trader at Dresdner Kleinwort where he managed the bank’s client and proprietary trading in London Metal Exchange derivatives. Earlier he held roles in capital markets with Dresdner Kleinwort, Lehman Brothers and Daiwa Securities, and was responsible for raising over US$ 10 billion in capital for clients including the World Bank and Toyota. Shiv commenced his career as a Strategy Consultant with Andersen Consulting. Most recently he was a Director of Dugal Pty Ltd (100% acquired by Mozambi Coal Limited) and he was responsible for acquiring the Company’s exploration licences in Mozambique, where he has significant experience and high level relationships.

MOZAMBI COAL LTD | annual report 2011 13

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT (CONT’D)

Mr Alex Neuling – Executive Director & Company Secretary

Qualifications – CA, ACIS, BSc

Special responsibilities - Member of audit and nomination committees

Other current directorship of Listed Public Companies – None.

Former directorships (of Listed Public Companies) in last three years - Eureka Energy Limited.

Interests in Shares and Options over Shares in Group Companies 550,000 fully paid ordinary shares 400,000 performance rights (subject to vesting hurdles)

Alex is a Chartered Accountant and Chartered Secretary with over 10 years corporate and financial experience. This experience includes 6 years as director, chief financial officer & or secretary of various ASX listed companies in the energy, mineral exploration, biotechnology and mining services sectors. Prior to those roles, Alex worked at Deloitte in London and Perth. Alex also holds an Honours degree in Chemistry from the University of Leeds in the United Kingdom and is principal of Erasmus Consulting Pty Ltd, which provides company secretarial and financial management consultancy services to a variety of ASX-listed companies.

Mr Robert Hemphill – Non-executive Director

Qualifications – B. Bus, CA

Special responsibilities: Chair of audit, remuneration and nomination committees, lead independent director

Other current directorship of Listed Public Companies - None.

Former directorships (of Listed Public Companies) in last three years - None.

Interests in Shares and Options over Shares in Group Companies 100,000 fully paid ordinary shares 225,000 performance rights (subject to vesting hurdles)

Robert has more than 16 year’s experience in financial accounting, taxation and business advisory services both domestically and internationally. Robert completed a Bachelor of Business at Charles Sturt University, is a member of the Institute of Chartered Accountants in Australia and a registered tax agent. Robert is a director / company secretary of a number of public and private companies, although he holds no other directorships of Australian listed companies.

Mr Ryan Broom – Company Secretary

Qualifications – B. Com, CA

Ryan has over 10 year’s experience as an auditor and accountant and has previously held senior finance roles with BDO Chartered Accountants and Byrnecut Mining as well as Africa-focused explorers Indago Resources Limited (IDG) and Tusker Gold Limited (TKA). Ryan holds a Bachelor of Commerce from Curtin University and is a member of the Institute of Chartered Accountants in Australia.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Meetings of Directors

The following table sets out the number of meeting of the Company’s directors held during the year ended 30 June 2011, and the number of meetings attended by each director.

==> picture [482 x 18] intentionally omitted <==

----- Start of picture text -----

Directors’ Meetings Committee Meetings
----- End of picture text -----

	Directors’ Meetings	Directors’ Meetings	Committee Meetings	Committee Meetings

	Eligible to attend	Attended	Audit	Remuneration
Mr Michael Grifths	5	5	*	*
Mr Shiv Madan	4	4	*	*
Mr Robert Hemphill	5	5	*	*
Mr Alex Neuling	5	5	*	*

The Board as a whole undertakes the function of the audit and remuneration committees in line with the relevant committee charter.

Share options

At the date of this report the following unlisted options have been granted over unissued capital.

==> picture [483 x 18] intentionally omitted <==

----- Start of picture text -----

Type Number Exercise Price Expiry Date
----- End of picture text -----

1 2 3 4 6 7 TOTAL	9,700,000 20c 31/12/2011 20,000,000 25c 21/02/2014 250,000 35c 30/06/2014 250,000 45c 30/06/2014 250,000 55c 30/06/2014 2,500,000 30c 22/06/2013 32,950,000

Performance rights

At the date of this report the following performance rights have been granted.

==> picture [482 x 18] intentionally omitted <==

----- Start of picture text -----

Type Number Hurdle Price Expiry Date
----- End of picture text -----

1A 1B 1C 2A 2B 2C 3A 3B 3C	338,250 $0.28 21/02/2012 348,500 $0.38 21/02/2012 338,250 $0.45 21/02/2012 198,000 $0.31 21/02/2013 204,000 $0.42 21/02/2013 198,000 $0.50 21/02/2013 198,000 $0.31 21/02/2014 204,000 $0.42 21/02/2014 198,000 $0.50 21/02/2014 2,225,000

MOZAMBI COAL LTD | annual report 2011 15

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT (CONT’D)

REMUNERATION REPORT – AUDITED

This remuneration report outlines the director and executive remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the Parent and the Group receiving the highest remuneration.

For the purposes of this report, the term ‘executive’ encompasses the chief executive, senior executives, asset managers and secretaries of the Parent and the Group.

Details of key management personnel (including the five highest paid executives of the Company and the Group)

(i) Directors

Michael Griffiths Non-Executive Chairman Shiv Madan Managing Director (Appointed 1 March 2011) Alex Neuling Executive Director & Company Secretary Robert Hemphill Non-Executive Director

(ii) Executives

Chalamaiah Kondragunta General Manager - Exploration (1 January 2011) Ryan Broom Chief Financial Officer & Company Secretary (Appointed 2 May 2011)

Remuneration committee

The remuneration committee of the board of directors of the Company is responsible for determining and reviewing remuneration arrangements for the directors and executives. The remuneration committee assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality, high performing director and executive team.

Remuneration philosophy

The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. To this end, the charter adopted by the remuneration committee aims to align rewards with achievement of strategic objectives. The remuneration framework applied provides for a mixture of fixed and variable pay and a blend of short and long term incentives as appropriate.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-executive directors

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at General Meeting. The Company’s policy is to remunerate non-executive directors at market rates (for comparable companies) for time, commitment and responsibilities. Fees for non-executive directors are not linked to the performance of the Company, however to align directors’ interests with shareholders’ interests, directors are encouraged to hold shares in the Company, and subject to approval by shareholders, are permitted to participate in the Employee Share Option Plan.

Retirement benefits and allowances

No retirement benefits or allowances are paid or payable to directors of the Company (other than statutory or mandatory superannuation contributions, where applicable).

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Executives

Base pay

Executives are offered a competitive level of base pay which comprises the fixed (unrisked) component of their pay and rewards. Base pay for senior executives is reviewed annually to ensure market competitiveness. There are no guaranteed base pay increases included in any senior executives’ contracts.

Short term incentives

Payment of short term incentives is dependent on the achievement of key performance milestones as determined by the remuneration committee. For the periods ended 30 June 2010 and 2011, these milestones required performance in relation to key strategic, non-financial measures linked to drivers of performance in future reporting periods.

A sign on bonus of $40,000 was payable in respect of the year to 30 June 2011 to Shiv Madan. No other bonuses have been paid or are payable in respect of the year to 30 June 2011. There have been no forfeitures of bonuses by key management personnel during the current or prior periods and no cash bonuses remained unvested at year-end.

Long Term Incentives - Share-based compensation

Both performance rights and share options have been issued to Directors and executives as part of their remuneration. Share-based compensation instruments are not issued based on performance criteria, however, they are issued with vesting conditions and exercise prices set specifically to increase goal congruence between Directors, executives and shareholders.

Performance rights and options granted under the Plan carry no dividend or voting rights.

The company currently has no policy in place to limit an individual’s risk exposure in relation to the issue of company securities as remuneration

Link to Group Performance

There was no performance-based remuneration paid to Directors in the financial year.

Service agreements

The Company has entered into a consultancy agreement with Shiv Madan, in his capacities as Managing Director. A summary of the terms of the agreement are as follows:

Term of agreement – 3 years.
Fee of $24,000 per month
Signing bonus of $20,000 on commencement plus $20,000 after 3 months from commencement
Discretionary bonus of up to $120,000 per annum at the discretion of the Board
Fee subject to annual review by the Board
Subject to a three month termination period

The Company has entered into a consultancy agreement with Alex Neuling, in his capacities as Director and Company Secretary. The agreement is between Mozambi Coal Limited and Erasmus Consulting Pty Ltd (“Erasmus”), an associated company of Mr Alex Neuling.

Material terms of the contract with Erasmus are as follows:

Term of agreement – indefinite
Consultancy fee varying, depending on work performed, subject to a minimum of $2,250 plus GST per month (excluding Directors Fees)
Subject to a three month termination period

The Company has entered into a consultancy agreement with Chalamaiah Kondragunta. A summary of the terms of the agreement are as follows:

Term of agreement – 3 years.
Fee of US$12,000 per month
Fee subject to annual review by the Board
Subject to a three month termination period

MOZAMBI COAL LTD | annual report 2011 17

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT (CONT’D)

The Company has entered into a service agreement with Ryan Broom. A summary of the terms of the agreement are as follows:

No fixed term;
Base salary of $170,000 per annum
Statutory superannuation on base salary
Yearly reviews
Subject to a two month termination period

Non-executive Directors are currently entitled to a minimum monthly fee of $3,000 plus GST.

Remuneration of key management personnel and the five highest paid executives of the Company and Group

==> picture [481 x 80] intentionally omitted <==

----- Start of picture text -----

Post-employment Share-based
Short-term benefits benefits payment
Perfor-
Non- mance Perfor-
Cash salary monetary Super- Retirement Rights/ mance-
and fees Cash bonus benefits annuation benefits Options Total related
2011 $ $ $ $ $ $ $ %
----- End of picture text -----

Non-executive directors
Michael Grifths
Robert Hemphill
Sub-total non-executive
directors
Executive directors
Shiv Madan
Alex Neuling
Sub-total executive
directors
Other executives
Chalamaiah Kondragunta
Ryan Broom
Sub-total other executives
Total Key Management
Personnel**

53,670
-
-
4,819
-
26,768
85,257
-
36,000
-
-
-
-
14,155
50,155
-
89,670
-
-
4,819
-
40,923
135,412
-
201,000
40,000i
-
-
-
40,953
281,953
-
143,875
-
-
-
-
25,164
169,039
-
344,875
40,000
-
-
-
66,117
450,992
-
60,000
-
-
-
-
57,540
117,540
-
28,333
-
-
2,550
-
28,771
59,654
-
88,333
-
-
2,550
-
86,311
177,194
522,878
40,000
-
7,369
-
193,351
763,598
-

Prior to his appointment to the Board of the Company, Mr Madan was retained as a consultant. The above amounts include all remuneration paid before and after his appointment as Managing Director.

** Amounts shown as remuneration for Mr Neuling are fees paid to Erasmus Consulting Pty Ltd (“Erasmus”), a Company controlled by Mr Neuling which provides, Company Secretarial, Accounting, Financial and general management services as well as administrative support to the Company. The amounts include payments for services provided by Mr Neuling and by other members of staff employed or retained by Erasmus.

*** Appointed 1 January 2011

**** Appointed 2 May 2011

i Bonus was not performance related and was payable upon signing contract

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

==> picture [484 x 79] intentionally omitted <==

----- Start of picture text -----

Share-
Post-employment based
Short-term benefits benefits payment
Non- Perfor-
Cash salary monetary Super- Retirement mance-
and fees Cash bonus benefits annuation benefits Options Total related
2010 $ $ $ $ $ $ $ $
----- End of picture text -----

Non-executive directors
Michael Grifths	7,500	-	-	-	-	-	7,500	-
Robert Hemphill	24,000	-	-	-	-	-	24,000	-
Ashley Pattison*	28,600	-	-	-	-	-	28,600	-
Sub-total non-executive directors	60,100	-	-	-	-	-	60,100	-
Executive directors
Alex Neuling**	106,481	-	-	-	-	-	106,481	-
Sub-total executive directors	106,481	-	-	-	-	-	106,481	-

Total Key Management Personnel	166,581	-	-	-	-	-	166,581	-

*Resigned 14th April 2010

**Amounts shown as remuneration for Mr Neuling are fees paid to Erasmus Consulting Pty Ltd (“Erasmus”), a Company controlled by Mr Neuling which provides, Company Secretarial, Accounting, Financial and general management services as well as administrative support to the Company. The amounts include payments for services provided by Mr Neuling and by other members of staff employed or retained by Erasmus.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT (CONT’D)

Share Based Compensation

Performance Rights

Details of performance rights provided as remuneration to each Director of Mozambi Coal Limited and each of the key management personnel of the parent entity and Group are set out below. When exercisable, each performance right is convertible into one ordinary share of Mozambi Coal limited.

==> picture [482 x 29] intentionally omitted <==

----- Start of picture text -----

Number of performance rights Number of performance rights
granted during the year vested during the year
----- End of picture text -----

	Number of performance rights granted during theyear	Number of performance rights granted during theyear	Number of performance rights vested during theyear	Number of performance rights vested during theyear

Non-Executive Directors	30 June 11	30 June 10	30 June 11	30 June 10
Michael Grifths	600,000	-	198,000	-
Robert Hemphill	225,000	-	74,250	-
Executive Directors
Shiv Madan	1,000,000	-	330,000	-
Alex Neuling	400,000	-	132,000	-

Options

Details of options over ordinary shares provided as remuneration to each Director of Mozambi Coal Limited and each of the key management personnel of the parent entity and Group are set out below. When exercisable, each option is convertible into one ordinary share of Mozambi Coal limited.

	Number of options granted during theyear	Number of options granted during theyear	Number of options vested during theyear	Number of options vested during theyear
Other key managementpersonnel	30 June 11	30 June 10	30 June 11	30 June 10
Chalamaiah Kondragunta	500,000	-	500,000	-
Ryan Broom	250,000	-	250,000	-

Vesting Conditions of Performance Rights

The terms and conditions of each grant of performance rights effecting remuneration in the current and future reporting periods is as follows:

==> picture [481 x 29] intentionally omitted <==

----- Start of picture text -----

Vesting Fair value per
Tranche Grant date Number Hurdle price Expiry date right at grant date % vested
----- End of picture text -----

Tranche	Grant date	Number	Vesting Hurdleprice	Expiry date	Fair value per right atgrant date	% vested

1A	21/02/2011	338,250	$0.28	21/02/2012	$0.108	100%
1B	21/02/2011	348,500	$0.38	21/02/2012	$0.054	0%
1C	21/02/2011	338,250	$0.45	21/02/2012	$0.027	0%
2A	21/02/2011	198,000	$0.31	21/02/2013	$0.09	0%
2B	21/02/2011	204,000	$0.42	21/02/2013	$0.072	0%
2C	21/02/2011	198,000	$0.50	21/02/2013	$0.045	0%
3A	21/02/2011	198,000	$0.31	21/02/2014	$0.126	0%
3B	21/02/2011	204,000	$0.42	21/02/2014	$0.117	0%
3C	21/02/2011	198,000	$0.50	21/02/2014	$0.072	0%

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Vesting Conditions of Options

The terms and conditions of each grant of options effecting remuneration in the current and future reporting periods is as follows:

Grant date	Number	Vesting date	Expiry date	Exerciseprice	Fair value per option atgrant date	% vested
30/06/2011	250,000	30/06/2011	30 June 2014	$0.35	$0.128	100
30/06/2011	250,000	30/06/2011	30 June 2014	$0.45	$0.114	100
30/06/2011	250,000	30/06/2011	30 June 2014	$0.55	$0.103	100

MOZAMBI COAL LTD | annual report 2011 21

==> picture [596 x 56] intentionally omitted <==

Last exercise date	21/02/2012	21/02/2012	21/02/2012	21/02/2013	21/02/2013	21/02/2013	21/02/2014	21/02/2014	21/02/2014	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2013	21/02/2013	21/02/2013	21/02/2014	21/02/2014	21/02/2014	21/02/2012	21/02/2012	21/02/2012
Vesting Hurdle Price	$0.28	$0.38	$0.45	$0.31	$0.42	$0.50	$0.31	$0.42	$0.50	$0.28	$0.38	$0.45	$0.28	$0.38	$0.45	$0.31	$0.42	$0.50	$0.31	$0.42	$0.50	$0.28	$0.38	$0.45
Expiry date	21/02/2012	21/02/2012	21/02/2012	21/02/2013	21/02/2013	21/02/2013	21/02/2014	21/02/2014	21/02/2014	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2012	21/02/2013	21/02/2013	21/02/2013	21/02/2014	21/02/2014	21/02/2014	21/02/2012	21/02/2012	21/02/2012
% compensa- tion for year consisting of performance rights	31.4%	-	-	-	-	-	-	-	-	28.2%	-	-	14.5%	-	-	-	-	-	-		-	14.9%	-	-
% of grant forfeited	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%
% of grant vested	100%	0%	0%	100%	0%	0%	100%	0%	0%	100%	0%	0%	100%	0%	0%	100%	0%	0%	100%	0%	0%	100%	0%	0%
No. vested during the year	66,000	-	-	66,000	-	-	66,000	-	-	74,250	-	-	66,000	-	-	132,000	-	-	132,000	-	-	132,000	-	-
FV per option at grant date	$0.108	$0.054	$0.027	$0.09	$0.072	$0.045	$0.126	$0.117	$0.072	$0.108	$0.054	$0.027	$0.108	$0.054	$0.027	$0.09	$0.072	$0.045	$0.126	$0.117	$0.072	$0.108	$0.054	$0.027
Date granted	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011	21/02/2011
No. granted during the year	66,000	68,000	66,000	66,000	68,000	66,000	66,000	68,000	66,000	74,250	76,500	74,250	66,000	68,000	66,000	132,000	136,000	132,000	132,000	136,000	132,000	132,000	136,000	132,000
Tranche	1A	1B	1C	2A	2B	2C	3A	3B	3C	1A	1B	1C	1A	1B	1C	2A	2B	2C	3A	3B	3C	1A	1B	1C
Name	Michael Grifths									Robert Hemphill			Shiv Madan									Alex Neuling

22 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Last exercise date	30 June 2014	30 June 2014	30 June 2014	30 June 2014	30 June 2014	30 June 2014
First exercise date	30/06/2011	30/06/2011	30/06/2011	30/06/2011	30/06/2011	30/06/2011
Expiry date	30 June 2014	30 June 2014	30 June 2014	30 June 2014	30 June 2014	30 June 2014
% compensa- tion for year consisting of options	48.9%	-	-	48.2%	-	-
% of grant forfeited	0%	0%	0%	0%	0%	0%
% of grant vested	100%	100%	100%	100%	100%	100%
No. vested during the year	166,667	166,667	166,666	83,333	83,333	83,334
FV per option at grant date	$0.128	$0.114	$0.103	$0.128	$0.114	$0.103
Date granted	30/06/2011	30/06/2011	30/06/2011	30/06/2011	30/06/2011	30/06/2011
No. granted during the year	166,667	166,667	166,666	83,333	83,333	83,334
Tranche	1	2	3	1	2	3
Name	Chalamaiah Kondragunta			Ryan Broom

Value of performance rights lapsed at the date of lapse $	-	-	-	-	Value of options lapsed at the date of lapse $	-	-
Value of performance rights exercised at the exercise date $	-	-	-	-	Value of options exercised at the exercise date $	-	-
Value of performance rights granted at the grant date $	26,768	14,155	40,953	25,164	Value of options granted at the grant date $	57,540	28,771
Name	Michael Grifths	Robert Hemphill	Shiv Madan	Alex Neuling	Name	Chalamaiah Kondragunta	Ryan Broom

MOZAMBI COAL LTD | annual report 2011 23

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ REPORT (CONT’D)

Shares issued on exercise of compensation options

None (2010: None).

Dividends

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2011 (2010: None).

Subsequent events

On 14 July 2011, the Company announced that it had entered into a Memorandum of Understanding (“MOU”) with Xiluva Mineral Resources Limitada (“Xiluva”) to acquire 80% of exploration licence 2738L in the Tete province, Mozambique. Key terms of the MOU are as follows:

Payment of US$25,000 to Xiluva upon signing MOU for surface tax and bonds;
Payment of US$250,000 to Xiluva on submission of an application requesting the transfer of 2738L to the National Directorate of Mines in Mozambique; and
A final payment of US$1,250,000 to Xiluva upon successful transfer of 2738L and the completion of legal and technical due diligence by Mozambi.

The Company also negotiated a private placement with major shareholder Polo Resources Plc on the following terms:

The issue of 7,500,000 ordinary shares at A$0.25 to raise A$1,875,000.
The issue of 2,500,000 unlisted options with an exercise price of $0.30 expiring in 2 years from the date of issue.

There have been no other matters or circumstances since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Company or Consolidated Entity in future financial years.

Likely Developments

The Group intends to continue its exploration activities on its existing tenements and to acquire further suitable tenements for exploration and/or development as opportunities arise.

Environmental regulation

The Group has a policy of exceeding or at least complying with its environmental performance obligations. During the financial year, the Group did not materially breach any particular or significant Commonwealth, State, Territory or other regulation in respect to environmental management.

Indemnification and insurance of Officers and Auditors

Since the end of the year, the Group has paid a premium in respect of a contract insuring the directors and secretary of the Group (as named above), against liabilities incurred as such a director, secretary or executive officer to the extent permitted by the Corporation Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor.

Proceedings on behalf of company

No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceeding to which the Group is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Group was not a party to any such proceedings during the year.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Non-audit services

The Board of Directors is satisfied that the provision of non-audit services performed during the year by the entity’s auditors is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001. The directors are satisfied that the services disclosed (refer Note 19) did not compromise the external auditor’s independence for the following reasons:

The nature of the services provided do not compromise the general principles relating to auditors independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board.
The directors are satisfied that the provision of non audit services, specifically taxation compliance services, is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

Auditor’s Independence Declaration

The Auditor’s independence declaration is included on page 26 of the financial report.

Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001.

On behalf of the Directors

==> picture [100 x 46] intentionally omitted <==

Michael Griffiths Chairman Perth, Western Australia 16 September 2011

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [188 x 80] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Mozambi Coal Limited (formerly RTL Corporation Limited) for the year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:

a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) any applicable code of professional conduct in relation to the audit.

==> picture [125 x 50] intentionally omitted <==

Perth, Western Australia 16 September 2011

N G NEILL Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: [email protected]. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

==> picture [15 x 14] intentionally omitted <==

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT

==> picture [189 x 80] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT

To the members of Mozambi Coal Limited (formerly RTL Corporation Limited)

Report on the Financial Report

We have audited the accompanying financial report of Mozambi Coal Limited (“the company”), which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

In Note 1(c), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial report complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation

==> picture [16 x 14] intentionally omitted <==

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT (CONT’D)

==> picture [189 x 80] intentionally omitted <==

Matters relating to the electronic presentation of the audited financial report

This auditor’s report relates to the financial report and remuneration report of Mozambi Coal Limited for the financial year ended 30 June 2011 included on Mozambi Coal Limited’s website. The company’s directors are responsible for the integrity of the Mozambi Coal Limited website. We have not been engaged to report on the integrity of this website. The auditor’s report refers only to the financial report and remuneration report identified in this report. It does not provide an opinion on any other information which may have been hyperlinked to/from the financial report. If users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report and remuneration report to confirm the information contained in this website version of the financial report.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion:

(a) the financial report of Mozambi Coal Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(c).

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the Remuneration Report of Mozambi Coal Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001.

==> picture [140 x 32] intentionally omitted <==

HLB MANN JUDD Chartered Accountants

==> picture [110 x 44] intentionally omitted <==

Perth, Western Australia 16 September 2011

N G NEILL Partner

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

DIRECTORS’ DECLARATION

In the opinion of the directors of Mozambi Coal Limited (the ‘Company’):
a. the accompanying financial statements and notes and the additional disclosures are in accordance with the Corporations Act 2001 including:
- i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of it’s performance for the year then ended; and
- ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations regulations 2001; and
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.
This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011.

This declaration is signed in accordance with a resolution of the Board of Directors.

==> picture [100 x 47] intentionally omitted <==

Michael Griffiths Chairman Perth, Western Australia 16 September 2011

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

==> picture [482 x 45] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
Note $ $
----- End of picture text -----

Revenue Operating Costs Ofce Costs Corporate Management Costs Corporate Compliance Costs Finance Costs Evaluation Expenses Impairment of exploration expenditure Share Based Payments Foreign Exchange Loss Other Expenses from Ordinary Activities Loss before Income Tax Beneft 2 Income Tax Beneft 3 Loss after Tax from Continuing Operations (Loss) / Proft after Tax from Discontinued Operations 4 Net Loss for the year Other Comprehensive Income Exchange diferences on translation of foreign operations Total Comprehensive loss for the year Proft attributable to: Owners of the parent Non-controlling interests Total comprehensive income attributable to: Owners of the parent Non-controlling interests Lossper share (centsper share)	226,229 32,888 - (264,886) (77,379) (10,483) (368,113) (209,159) (259,596) (136,564) - (2,792) (82,668) - (350,000) - (193,288) - (100,448) - (316,901) (174,832)
	(1,522,164) (765,828) - -
	(1,522,164) (765,828) (674,309) 69,672
	(2,196,473) (696,156)
	2,501 -
	(2,193,972) (696,156)
	(2,102,792) (696,156) (93,681) -
	(2,196,473) (696,156)
	1,751 - 750 -
	2,501 -

Basic / diluted loss per share 5 Basic /diluted loss per share from continuing operations 5	(2.76) (1.40) (1.91) (1.60)

The accompanying notes form part of these financial statements

30 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

==> picture [475 x 48] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
Notes $ $
----- End of picture text -----

Notes	2011 $ 2010 $
Current Assets Cash and cash equivalents 6 Trade and other receivables 7 Assets classifed as held for sale 4 Total Current Assets Non-Current Assets Property, plant and equipment 8 Deferred exploration expenditure 9 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 10 Amounts due under contract 11 Total Current Liabilities Non-Current Liabilities Amounts due under contract 11 Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 12 Reserves 13(a) Accumulated losses 13(b) Parent entity interest Non-controlling interest Total Equity	3,235,888 1,421,581 26,846 88,840 125,000 667,466
	3,387,734 2,177,887
	5,055 176,798 8,985,246 -
	8,990,301 176,798
	12,378,035 2,354,685
	(281,551) (111,628) (843,312) -
	(1,124,863) (111,628)
	(1,115,123) -
	(1,115,123) -
	(2,239,986) (111,628)
	10,138,049 2,243,057
	28,607,928 20,718,431 2,586,267 385,269 (20,963,435) (18,860,643)
	10,230,760 2,243,057 (92,711) -
	10,138,049 2,243,057

The accompanying notes form part of these financial statements

MOZAMBI COAL LTD | annual report 2011 31

==> picture [596 x 56] intentionally omitted <==

Consolidated
Notes
Issued Capital
Accumulated Losses
Reserves
Total
Non-controlling
interests
Total
Balance as at 1 July 2009
19,086,488
(18,164,487)
385,269
1,307,270
-
1,307,270
Proft for the year
-
(696,156)
-
(696,156)
-
(696,156)
Total comprehensive income for the year
-
(696,156)
-
(696,156)
-
(696,156)
Shares issued during the year (net of
cancellations)
1,703,704
-
-
1,703,704
-
1,703,704

Less transaction costs
(71,761)
-
-
(71,761)
-
(71,761)
Balance at 30 June 2010
20,718,431
(18,860,643)
385,269
2,243,057
-
2,243,057
Balance as at 1 July 2010
20,718,431
(18,860,643)
385,269
2,243,057
-
2,243,057
Proft for the year
-
(2,102,792)
-
(2,102,792)
(93,681)
(2,196,473)
Exchange diferences arising on translation
of foreign operations
-
-
1,751
1,751
750
2,501
Total comprehensive income for the year
-
(2,102,792)
1,751
(2,101,041)
(92,931)
(2,193,972)
Shares issued during the year
8,245,000
-
-
8,245,000
-
8,245,000
Less transaction costs
(355,503)
-
-
(355,503)
-
(355,503)
Shares issued to non-controlling interests
-
-
-
-
220
220
Recognition of share-based payments
-
-
2,199,247
2,199,247
-
2,199,247
Balance at 30 June 2011
28,607,928
(20,963,435)
2,586,267
10,230,760
(92,711)
10,138,049

32 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

==> picture [486 x 58] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
Note $ $
----- End of picture text -----

Note	2011 $ 2010 $
Cash fows from operating activities	Infows/(Outfows) - 11,242 (1,351,933) (720,239) - 72,800 (1,351,933) (636,197) (5,179) (15,705) (867,402) - 283,662 94,243 (228,549) - 94,213 32,888 (723,255) 111,426 4,195,000 1,900,254 (305,505) (71,315) - (2,792) 3,889,495 1,826,147 1,814,307 1,301,376 1,421,581 120,205 3,235,888 1,421,581
Proceeds from customers Payments to suppliers and employees Income tax receipts Net cash applied to operating activities 6 Cash fows from investing activities
Payments for property, plant & equipment Payment for acquisition of subsidiary net of cash acquired Proceeds from disposal of fxed assets classifed as held for sale Payments for exploration expenditure Interest received Net cash provided by/ (applied to) investing activities Cash fows from fnancing activities
Proceeds from share issues Share issue costs Finance costs Net cash provided by fnancing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 6

The accompanying notes form part of these financial statements

MOZAMBI COAL LTD | annual report 2011 33

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

Note 1: Statement of significant accounting policies

(a) Basis of Preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law.

The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated. The financial statements are for the consolidated entity consisting of Mozambi Coal Limited and its subsidiaries.

The financial report has also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets.

The Company is a listed public company, incorporated and operating in Australia. The entity’s principal activity is coal exploration in Mozambique (as more fully described in the Directors’ Report & Note 16).

(b) Adoption of new and revised standards

Changes in accounting policies on initial application of Accounting Standards

In the year ended 30 June 2011, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period.

It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies.

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2011. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

(c) Statement of Compliance

The financial report was authorised for issue on 16 September 2011.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(d) Basis of Consolidation

The consolidated financial statements comprise the separate financial statements of Mozambi Coal Limited and its subsidiaries as at 30 June each year (the Group or Consolidated Entity). Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition.

Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial position. Losses are attributed to the non-controlling interest even if that results in a deficit balance.

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised within equity attributable to owners of Mozambi Coal Limited.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(e) Critical accounting judgements and key sources of estimation uncertainty

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Assets classified as held for sale

In the year ended 30 June 2011, the carrying value of assets held for sale ($125,000) reflects the Board’s assessment of recoverable amount, being the higher of value in use and fair value less costs to sell based on various assumptions and expectations regarding future events. As such, the carrying value is necessarily subjective in nature and may be subject to revision based on actual circumstances and events.

Share-based payment transactions:

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black and Scholes model.

(f) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer.

(ii) Rendering of services

Revenue from the rendering of services is recognised by reference to the stage of completion of the contract.

(iii) Interest income

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(g) Borrowing Costs

Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

(h) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(i) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

(j) Trade and other receivables

Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are generally due for settlement within periods ranging from 15 days to 30 days.

Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Group in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Group. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance.

The amount of the impairment loss is recognised in the statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income.

(k) Derecognition of financial assets and financial liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either:
(a) has transferred substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(l) Impairment of financial assets

The Group assesses at each reporting date whether a financial asset or group of financial assets is impaired.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount

36 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

of the asset is reduced either directly or through use of an allowance account.

The amount of the loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Financial assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

(iii) Available-for-sale investments

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss for the period. Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(m) Foreign currency translation

Both the functional and presentation currency of Mozambi Coal Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

All exchange differences in the consolidated financial report are taken to profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

The functional currency of the foreign operation, Dugal Resources Lda, is MZN.

As at the balance date the assets and liabilities of these subsidiaries are translated into the presentation currency of Mozambi Coal Limited at the rate of exchange ruling at the balance date and their statements of comprehensive income are translated at the weighted average exchange rate for the year.

The exchange differences arising on the translation are taken directly to a separate component of equity, being recognised in the foreign currency translation reserve.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.

(n) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

MOZAMBI COAL LTD | annual report 2011 37

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax consolidation legislation

Mozambi Coal Limited and its 100% owned Australian resident subsidiary have implemented the tax consolidation legislation. Current and deferred tax amounts are accounted for in each individual entity as if each entity continued to act as a taxpayer on its own.

Mozambi Coal Limited recognises both its own current and deferred tax amounts and those current tax liabilities, current tax assets and deferred tax assets arising from unused tax credits and unused tax losses which it has assumed from its controlled entities within the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts payable or receivable from or payable to other entities in the Group. Any difference between the amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) controlled entities in the tax consolidated group.

(o) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising

38 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(p) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:

• Plant and equipment – over 3 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

(i) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cashgenerating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value.

An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in profit or loss for the year in the cost of sales line item.

(ii) Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(q) Financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-forsale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

(i) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iv) Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.

(r) Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for on a prospective basis.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

(s) Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

(t) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months.

(u) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

(v) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

(w) Issued capital

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.

(x) Earnings per share

Basic earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted for:

costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(y) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Mozambi Coal Limited.

(z) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

MOZAMBI COAL LTD | annual report 2011 41

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of the disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of comprehensive income.

(aa) Business combinations

The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or business under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisitiondate fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified as either equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(ab) Share-based payment transactions

(i) Equity settled transactions:

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Mozambi Coal Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 5).

(ac) Exploration and evaluation

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

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

(ii) at least one of the following conditions is also met:
(a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or
(b) exploration and evaluation activities in the area of interest have not at the balance 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.

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.

(ad) Parent entity financial information

The financial information for the parent entity, Mozambi Coal Limited, disclosed in note 20 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Mozambi Coal Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

(ii) Share-based payments

The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

MOZAMBI COAL LTD | annual report 2011 43

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 2: Revenue and Expenses

==> picture [483 x 44] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

	Consolidated 2011 $ 2010 $
(a) Revenue Continuing Operations Interest Income Loan forgiveness Discontinued Operations Gain on Market Value of cancelled shares (b) Expenses Loss before income tax has been determined after charging: Continuing Operations Depreciation Operating Lease Rentals Impairment of exploration expenditure Discontinued Operations Loss on disposal of fxed assets Impairment of assets held for sale Note 3: Income Tax Income tax recognised in proft or loss The major components of tax expense are: Current tax expense/(income) Adjustments recognised in the current year in relation to the current tax of prior years Total tax expense/(income) Attributable to: Continuing operations Discontinued operations	94,213 32,888 132,015 - - 197,000 (124) (121,727) - (132,243) (350,000) - (8,566) (33,977) (508,400) (93,351)
	- - - -
	- -
	- - - -

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 3: Income Tax (Cont’d)

==> picture [484 x 66] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
The prima facie income tax expense on pre-tax accounting profit from operations
reconciles to the income tax expense in the financial statements as follows:
----- End of picture text -----

The prima facie income tax expense on pre-tax accounting proft from operations reconciles to the income tax expense in the fnancial statements as follows:	Consolidated 2011 $ 2010 $
Accounting loss before tax from continuing operations Proft before tax from discontinued operations Accounting loss before income tax Income tax beneft calculated at 30% Share based payments Non-deductible expenses Non-assessable income Capital raising costs deductible Income tax losses not brought to account Income tax beneft from continuing operations reported in the consolidated income statement Income tax beneft attributable to discontinued operations	(1,522,164) (765,828) (674,309) 69,672
	(2,196,473) (696,156)
	658,941 208,847 57,986 - 248,714 - (39,605) - (39,522) - (431,368) (208,847)
	- -
	- -

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in this tax rate since the previous reporting period. The Group has tax losses arising in Australia of $3,499,985 (2010: $3,068,617) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. The availability of these losses is subject to the satisfaction of either the same business or continuity of ownership tests.

Deferred tax assets have not been recognised in respect of these items because it is not sufficiently probable that future taxable profit will be available against which the Group can utilise the benefits thereof.

MOZAMBI COAL LTD | annual report 2011 45

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 4: Discontinued Operations

The Company announced on 20 May 2009 that it would be seeking shareholder approval for the disposal of the rights to the Mine Mixers Intellectual Property. Subsequently, on 25 June 2009 the Company announced that it had executed a conditional Heads of Agreement with Every Day Mine Services Operations Pty Ltd (“EDMSO”) pursuant to which EDMSO would purchase the Mine Mixers Intellectual Property in return for the cancellation of all MOZ shares issued to EDMSO upon MOZ’s acquisition of the technology. The disposal was approved by shareholders at a General Meeting held on 2 September 2009.

Under the transaction with EDMSO, the Consolidated Entity has retained the Mine Mixers tangible assets and the right to sell or operate and hire its completed Mine Mixers. Accordingly the activities directly associated with the operation and rental of those assets have been classified as continuing operations.

Disclosures in relation to the discontinued businesses are as follows:

==> picture [483 x 47] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

	2011 $ 2010 $
Revenue Depreciation Compliance costs Impairment write-downs Other expenses / income Proft/(Loss) before tax from discontinued operations Income tax beneft Proft/(Loss )for the year from discontinued operations Cash fows from discontinued operations: Net cash fows from / (applied to) operating activities Net cash fows from / (applied to) investing activities Net cash fows from / (applied to) fnancing activities Net cash fows	- 197,000 (60,864) - (279) - (508,400) (93,351) (104,766) (33,977)
	(674,309) 69,672 - -
	(674,309) 69,672
	(182,344) 11,242 294,562 157,468 (109,513) -
	2,705 168,710

The assets comprising the operations classified as held for sale at balance date are the Group’s inventories of 3 modified and unmodified JCB 718 dump trucks. There were 4 JCB 718 dump trucks held for sale as at 30 June 2010. The inventories are carried at cost, less provision for impairment and have a net carrying value of $125,000.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 5: Loss per share

==> picture [484 x 43] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
Cents per share Cents per share
----- End of picture text -----

	Consolidated 2011 Cents per share 2010 Cents per share
Basic / diluted loss per share: Continuing operations Discontinued operations Total basic loss per share Loss after tax (used in calculation of basic / diluted loss per share) Adjustment for discontinued operations Loss from continuing operations after tax (used in calculation of basic / diluted loss per share from continuing operations	(1.91) (1.60) (0.85) 0.20
	(2.76) (1.40)
	(2,196,473) (696,156) 674,309 (69,672)
	(1,522,164) (765,828)

	Consolidated	Consolidated
	2011 No.	2010 No.
Weighted average number of ordinary shares used as the denominator in calculating basic / diluted loss per share	79,577,348 48,114,476

As the entity is loss-making in both the current and prior year, no potential ordinary shares are considered to be dilutive as they would act to decrease the loss per share (& loss per share from continuing activities).

The options on issue (note 12) represent potential ordinary shares but are not dilutive and accordingly have been excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share.

MOZAMBI COAL LTD | annual report 2011 47

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 6: Cash and Cash Equivalents

==> picture [482 x 60] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

	2011 $ 2010 $
Cash at bank and on hand Cash at bank earns interest at foating rates based on daily bank deposit rates (i) Reconciliation to Statement of Cash Flows: Cash and cash equivalents (ii) Reconciliation of loss for the year to net cash outfows from operating activities Loss for the year (Gain)/loss on sale or disposal of non-current assets Loss on cancelled shares Depreciation Interest paid Interest received Loans forgiven Impairment of assets Foreign Exchange loss Share based payments Increase/(decrease) in debtors Increase/(decrease) in creditors and accruals Net cash used in operating activities	3,235,888 1,421,581 3,235,888 1,421,581
	3,235,888 1,421,581
	(2,196,473) (696,156) (8,566) 34,477 - (197,000) 60,988 121,727 - 2,792 (94,213) (32,888) (132,015) - 858,400 93,351 2,501 - 193,288 - (49,639) 93,858 13,796 (56,358)
	(1,351,933) (636,197)

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 7: Current Trade & Other Receivables

==> picture [485 x 44] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

Trade receivables	-	72,475
Other receivables	26,846	16,365
	26,846	88,840
Note 8: Plant & Equipment
Cost	5,179	365,182
Accumulated depreciation and impairment	(124)	(188,384)
Net carrying amount	5,055	176,798
A reconciliation of movements in plant & equipment during the current & prior fnancial year is as follows:
Opening balance	176,798	304,318
Depreciation	(124)	(121,727)
Disposals	-	-
Additions	5,179	-
Impairment write-down	-	(5,793)
Transferred to assets held for sale	(176,798)	-
Closing balance	5,055	176,798
Note 9: Deferred Exploration Expenditure
Opening balance	-	-
Additions as a result of business combinations	8,985,591	-
Expenditure during the year	349,655	-
Impairment	(350,000)	-
Closing balance	8,985,246	-

Capitalised exploration and evaluation expenditure represents the accumulated cost of acquisition and subsequent cost of exploration and evaluation of the properties.

Ultimate recoupment of these costs is dependent on the successful development and commercial exploitation, or alternatively sale, of the respective areas of interest.

MOZAMBI COAL LTD | annual report 2011 49

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 10: Trade & Other Payables

	Consolidated	Consolidated
	2011 $	2010 $
Trade Creditors & Accruals Related party payables Total Trade & Other Payables	(153,881) (85,128) (127,670) (26,500)
	(281,551) (111,628)

Trade payables are non-interest bearing and are normally settled on 30-day terms.

Related party payables as at balance date relate to Company Secretarial and consulting fees owed to Erasmus Consulting Pty Ltd (an entity associated with Mr Alex Neuling, a Director, which is owed $51,670 (2010: $13,500)) and Varuna Capital LLC (an entity associated with Mr Shiv Madan, a Director, which is owed $76,000 (2010: Nil)). No interest is currently being levied on these payables.

Note 11: Amounts due under contract

==> picture [482 x 43] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

Current Opening balance Due to the vendors on acquisition of exploration licences Closing balance Non-Current Opening balance Due to the vendors on acquisition of exploration licences	- - (843,312) -
	(843,312) -
	- - (1,115,123) -
	(1,115,123) -

*Balances represent amounts payable under contract to the vendors of exploration licences 3245L and 3246L upon satisfaction of the conditions of the contract. Under the agreement, the Group will be required to pay US$500,000 for every 50,000,000 tonnes of commercially exploitable mineral resource identified on the areas covered by the exploration licences up to a maximum of US$3,000,000.

Management’s expectation, based on information currently available, including an independent geologist’s report is that the liability will eventually be paid in full. The liability has been recognised at the present value of estimated future cash flows.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 12: Contributed Equity

Share Capital

	Consolidated	Consolidated	Consolidated	Consolidated
	2011 Shares	2010 Shares	2011 $	2010 $
Ordinary shares issued and fully paid Total Contributed Equity	106,707,732 645,575,724 28,607,928 20,718,431
	28,607,928 20,718,431

Movements in the Share Capital during the current and prior financial years are as follows:

Ordinary Shares

==> picture [484 x 18] intentionally omitted <==

----- Start of picture text -----

Date No. Issue Price $
----- End of picture text -----

Balance as at 1 July 2009 Shares issued (tranche 1 of placement) 2 Dec 2009 Shares cancelled / redeemed 2 Sept 2009 Share issue (tranche 2 of placement part 1) 5 Feb 2010 Share issue (tranche 2 of placement part 2) 11 Feb 2010 Options exercised Various Options exercised Various Costs of issue Balance as at 30 June 2010 Options exercised Various 1:10 Share consolidation # 30 Nov 2010 Capital raising 21 Feb 2011 Issued in lieu of cash for capital raising fees 21 Feb 2011 Consideration for Dugal Pty Ltd 21 Feb 2011 Options exercised Various Cost of issue Balance as at 30 June 2011	387,926,289 33,867,628 $0.005 (49,250,000) - 174,123,662 $0.005 52,275,000 $0.005 20,000,000 $0.01 26,633,145 $0.015 - 645,575,724 5,000,000 $0.013 (585,517,992) - 20,000,000 $0.20 1,000,000 $0.05 20,000,000 $0.20 650,000 $0.20 - 106,707,732	19,086,488 169,338 (197,000) 870,618 261,375 200,000 399,497 (71,885)
		20,718,431
		65,000 - 4,000,000 50,000 4,000,000 130,000 (355,503)
		28,607,928

At the 2010 annual general meeting, shareholders approved a consolidation of the Company’s share capital on the basis of one new share for every ten previously on issue.

MOZAMBI COAL LTD | annual report 2011 51

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 12: Contributed Equity (Cont’d)

Options

The Company has the following classes of options on issue as at reporting date:

==> picture [482 x 29] intentionally omitted <==

----- Start of picture text -----

2011 2010
Type No. No. Exercise Price Expiry Date
----- End of picture text -----

1 2 3 4 5 6 Total	- 500,000 13c 10/10/2011 9,700,000 10,350,000 20c 31/12/2011 20,000,000 - 25c 21/02/2014 250,000 - 35c 30/06/2014 250,000 - 45c 30/06/2014 250,000 - 55c 30/06/2014 30,450,000 10,850,000

The options are not listed and carry no dividend or voting rights. Upon exercise, each option is convertible into one ordinary share to rank pari passu in all respects with the Company’s existing fully paid ordinary shares

Movements in the number of options on issue during the current and prior financial years are as follows:

==> picture [483 x 18] intentionally omitted <==

----- Start of picture text -----

Grant Date No. Type
----- End of picture text -----

Balance as at 30 June 2009 Tranche 1 of Placement 2 December 2010 Trance 2 of Placement 11 February 2011 Options Exercised Share issue Options Exercised Balance as at 30 June 2010 Options Exercised (pre-consolidation) 1:10 Share consolidation Options Exercised (post consolidation) Consideration for Dugal Pty Ltd Options issued to employees and consultants Balance as at 30 June 2011	25,000,000 16,933,814 2 113,199,331 2 (26,633,145) 2 (20,000,000) 1 108,500,000 (5,000,000) 1 (93,150,000) (650,000) 2 20,000,000 3 750,000 4,5,6 30,450,000

1,150,000 shares were issued during the year to 30 June 2011 as a result of the exercise of options (2010: 4,663,315).

52 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 13: Reserves and accumulated losses

(a) Reserves

	Consolidated	Consolidated
	2011 $	2010 $
Option Reserve Balance at beginning of year Share based payments Balance at end of year	385,269 385,269 2,199,247 -
	2,584,516 385,269

The option reserve has historically been used to record the fair value of share-based payments made by the Company to employees and directors as part of their remuneration.

Foreign currency translation reserve Balance at beginning of year Currency translation diferences Non controlling interest Balance at end of year	- - 2,501 - (750) -
	1,751 -

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Total Reserves (b) Accumulated Losses At the beginning of the fnancial year Loss for the year Balance at end of fnancial year	2,586,267 385,269
	(18,860,643) (18,164,487) (2,102,792) (696,156)
	(20,963,435) (18,860,643)

MOZAMBI COAL LTD | annual report 2011 53

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 14: Financial Instruments

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The Group’s overall strategy remains unchanged from 2010.

The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

None of the Group’s entities are subject to externally imposed capital requirements.

Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax, and general administrative outgoings.

Gearing levels are reviewed by the Board on a regular basis in line with its target gearing ratio, the cost of capital and the risks associated with each class of capital.

==> picture [483 x 54] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
(b) Categories of financial instruments
----- End of picture text -----

(b) Categories of fnancial instruments	2011 $	2010 $
Financial assets
Loans and receivables	26,846	88,650
Cash and cash equivalents	3,235,888	1,421,581
Financial liabilities
Trade & other payables	(281,551)	(111,628)

(c) Financial risk management objectives

The Group is exposed to market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group seeks to minimise the effect of these risks, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and nonderivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

(d) Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, commodity prices and exchange rates. The Group enters into a variety of derivative financial instruments to manage its exposure to foreign currency and commodity price risk including foreign exchange forward contracts to hedge the exchange rate and commodity price risk arising on its production.

There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period.

(e) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters. No forward contracts or other hedging instruments have been used during the current or prior year as the Group’s foreign exchange exposure is not considered to be sufficiently material to justify such activities.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the balance date expressed in Australian dollars are as follows:

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

	Liabilities	Liabilities	Assets	Assets
	2011	2010	2011	2010
US dollars	(131,181) - 170,635 -

Foreign currency sensitivity analysis

The Group is exposed to US Dollar (USD) currency fluctuations.

The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number indicates an increase in profit or loss and other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity and the balances below would be negative.

Hypothetical 10% strengthening of AUD

Hypothetical 10% strengthening of AUD
Increase / (decrease) in loss after tax	3,385
Increase / (decrease) in equity	3,385
Hypothetical 10% weakening of AUD
Increase / (decrease) in loss after tax	(3,385)
Increase / (decrease) in equity	(3,385)

(f) Interest rate risk

As at and during the year ended on balance date the Group had no significant interest-bearing assets or liabilities other than liquid funds on deposit. As such, the Group’s income and operating cash flows (other than interest income from funds on deposit) are substantially independent of changes in market interest rates. The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below.

	Consolidated	Consolidated
	2011 $	2010 $
Financial Assets Cash assets Floating rate Weighted average efective interest rate 4.26% (2010: 4.5%).	3,235,888 1,421,581

MOZAMBI COAL LTD | annual report 2011 55

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 14: Financial Instruments (Cont’d)

Group and Parent Company sensitivity

Based on the financial instruments held at reporting date, with all other variables assumed to be held constant, the table below sets out the notional effect on consolidated loss after tax for the year and equity at reporting date under varying hypothetical changes in prevailing interest rates:

Hypothetical 80 basis point increase
Increase / (decrease) in loss after tax	25,887
Increase / (decrease) in equity	25,887
Hypothetical 80 basis point decrease
Increase / (decrease) in loss after tax	(25,887)
Increase / (decrease) in equity	(25,887)

(g) Credit risk

The Group seeks to trade only with recognised, trustworthy third parties and it is the Group’s policy to perform credit verification procedures in relation to any customers wishing to trade on credit terms with the Group. The Group has no significant concentrations of credit risk.

(h) Liquidity risk

Prudent liquidity management involves the maintenance of sufficient cash, marketable securities, committed credit facilities and access to capital markets. It is the policy of the board to ensure that the Group is able to meet its financial obligations and maintain the flexibility to pursue attractive investment opportunities through keeping committed credit lines available where possible, ensuring the Group has sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules.

Maturities of financial liabilities

Group - As at reporting date the Group had total financial liabilities of $371,349 (2010: $111,628), comprised of non interest-bearing payables to related parties, trade creditors and accruals with a maturity of less than 6 months.

(i) Net fair value

The carrying amount of financial assets and liabilities recorded in the financial statements approximate their fair value as at 30 June 2011.

Note 15: Commitments and Contingencies

Operating lease commitments – Group as lessee

The Group previously entered into a commercial sale and leaseback arrangement over the first completed Mine Mixer (MM1) during the first half of the financial year ended 30 June 2010. The lease security incorporates the second Mine Mixer (MM2). All leases were paid out during the year ended 30 June 2011.

	Consolidated	Consolidated
	2011 $	2010 $
Within one year	- 59,867
	- 59,867

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 16: Segment Reporting

Segment Information

The Group has adopted AASB 8 Operating Segments which requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance. The Directors of Mozambi Coal Limited reviews internal reports prepared as consolidated financial statements and strategic decisions of the Group are determined upon analysis of these internal reports.

During the period, the Group operated predominantly in one business and geographical segment being coal exploration in Mozambique in addition to its discontinued mine services technology business. Accordingly, under the ‘management approach’ outlined, two operating segments have been identified. Comparative numbers have been amended to reflect a change in business. All previous segments previously reported relating to Mine Services Technology and the evaluation of new projects have now been classified as discontinued operations.

Business segments

The following table’s present revenue and profit information and certain asset and liability information regarding business segments for the year ended 30 June 2011.

==> picture [485 x 86] intentionally omitted <==

----- Start of picture text -----

Continuing Discontinued
Operations Operations
Coal Exploration Mine Services New Corporate/ Consolidation
– Mozambique Technology Projects Unallocated Adjustments Consolidated
----- End of picture text -----

	Corporate/ Unallocated Consolidation Adjustments Consolidated Coal Exploration – Mozambique Mine Services Technology New Projects
Segment Revenue Segment Expenses Depreciation Impairment of available for sale assets Impairment of exploration expenditure Foreign exchange loss Share based payments Segment result Segment Assets Fixed Assets Assets held for sale Deferred exploration expenditure Segment Liabilities	- - - 226,228 - 226,228
	- (60,864) - (124) - (60,988) - (508,400) - - - (508,400) (350,000) - - - - (350,000) (11,873) - - (88,575) - (100,448) - - - (193,288) - (193,288) (413,680) (674,309) - (1,108,484) - (2,196,473)
	- - - 5,055 - 5,055 - 125,000 - - - 125,000 - - - - 8,985,246 8,985,246
	(328,073) (1,408,881) - (1,160,039) 657,007 (2,239,986)

MOZAMBI COAL LTD | annual report 2011 57

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 16: Segment Reporting (Cont’d)

The following table’s present revenue and profit information and certain asset and liability information regarding business segments for the year ended 30 June 2010.

==> picture [482 x 87] intentionally omitted <==

----- Start of picture text -----

Continuing Discontinued
Operations Operations
Coal
Exploration – Mine Services New Corporate/ Consolidation
Mozambique Technology Projects Unallocated Adjustments Consolidated
----- End of picture text -----

	Corporate/ Unallocated Consolidation Adjustments Consolidated Coal Exploration – Mozambique Mine Services Technology New Projects
Segment Revenue Segment Expenses Depreciation Evaluation Expense Impairment of inventories Segment result Segment Assets Fixed Assets Assets held for sale Segment Liabilities	- 197,000 - 32,888 - 229,888
	- (121,727) - - - (121,727) - - (151,688) - - (151,688) - (87,559) - - - (87,559)

	- (485,565) (151,688) (58,903) - (696,156)
	- 176,798 - - - 176,798 - 667,466 - - - 667,466
	- - - (111,514) - (111,514)

Note 17: Related Party Disclosure

The consolidated financial statements include the financial statements of Mozambi Coal Limited and the subsidiaries listed in the following table.

		% Equity Interest	% Equity Interest
Name	Country of Incorporation	2011	2010
Mine Mixers Pty Ltd Australia Dugal Pty Ltd Australia Dugal Resources Lda Mozambique		100 100 100 - 70 -

Mozambi Coal Limited is the ultimate Australian parent entity and ultimate parent of the Group.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 18: Events After the Balance Sheet Date

Payment of US$25,000 to Xiluva upon signing MOU for surface tax and bonds;
Payment of US$250,000 to Xiluva on submission of an application requesting the transfer of 2738L to the National Directorate of Mines in Mozambique; and
A final payment of US$1,250,000 to Xiluva upon successful transfer of 2738L and the completion of legal and technical due diligence by Mozambi.

The Company also negotiated a private placement with major shareholder Polo Resources Plc on the following terms:

The issue of 7,500,000 ordinary shares at A$0.25 to raise A$1,875,000.
The issue of 2,500,000 unlisted options with an exercise price of $0.30 expiring in 2 years from the date of issue

There has not been any matter or circumstance, other than disclosed above or elsewhere in this report, the financial statements or notes thereto, that has arisen since the end of the financial period, that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Note 19: Auditors’ Remuneration

The auditor of Mozambi Coal Limited is HLB Mann Judd.

==> picture [485 x 51] intentionally omitted <==

----- Start of picture text -----

Consolidated
2011 2010
$ $
----- End of picture text -----

Amounts received or due and receivable by HLB Mann Judd for: An audit or review of the fnancial report of the entity and any other entity in the Group Other services in relation to the entity and any other entity in the Group - tax compliance - investigating accountants report	29,500 29,700 21,680 8,447 9,048 -
	60,228 38,147

MOZAMBI COAL LTD | annual report 2011 59

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 20: Parent Entity Information

The following details information related to the parent entity, MOZ, at 30 June 2011. The information presented here has been prepared using consistent accounting policies as presented in Note 1.

==> picture [482 x 37] intentionally omitted <==

----- Start of picture text -----

Parent
2011 2010
----- End of picture text -----

Financial position Assets Current Assets Non-Current Assets Total Assets Liabilities Current Liabilities Total Liabilities Equity Issued capital Reserves Accumulated losses Total Equity Financial performance Proft and (Loss) for the year Total comprehensive income/(loss) for the year	3,227,767 1,424,186 7,047,212 923,928
	10,274,979 2,348,114

	(136,930) (105,054)
	(136,930) (105,054)
	28,607,928 20,718,432 2,584,516 385,269 (21,054,395) (18,860,641)
	10,138,049 2,243,060
	(2,193,754) (696,153)
	(2,193,754) (696,153)

The Company has a receivable owing to it by its wholly owned subsidiary Mine Mixers Pty Ltd of $79,086. The amount has been advanced interest free, unsecured and with no fixed terms for repayment. As the Company may realise this asset through procuring the sale of the majority of the assets held by its subsidiary, the loan has been written down to the book value of the net assets of the subsidiary.

The Company has a receivable owing to it by its wholly owned subsidiary Dugal Pty Ltd of $1,000,182. The amount has been advanced interest free, unsecured and with no fixed terms for repayment.

The Company has a receivable owing to it by its 70% owned subsidiary Dugal Resources Lda of $205,865. The amount has been advanced interest free, unsecured and with no fixed terms for repayment.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 21: Directors and Executives Disclosures

(a) Details of Key Management Personnel

(i) Directors

Michael Griffiths Chairman (non-executive) Shiv Madan Managing Director Alex Neuling Executive Director / Company Secretary Robert Hemphill Director (non-executive)

(ii) Other executives Chalamaiah Kondragunta Exploration Manager Ryan Broom CFO / Company Secretary

Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.

(b) Option holdings of Key Management Personnel (Consolidated)

==> picture [484 x 46] intentionally omitted <==

----- Start of picture text -----

Vested as at end of period
Balance at Granted as Net Balance at
beginning remune- Options change end of Not
30 June 2011 of period ration exercised Other period Total Exercisable Exercisable
----- End of picture text -----

Directors Michael Grifths Shiv Madan Alex Neuling Robert Hemphill Other Executives Chalamaiah Kondragunta Ryan Broom Total 30 June 2010 Directors Ashley Pattison Alex Neuling Robert Hemphill Michael Grifths Total**	- - - - - - - - - - - 10,320,000 10,320,000 10,320,000 - 10,320,000 - - - - - - - - - - - - - - - - - 500,000 - - 500,000 500,000 500,000 - - 250,000 - - 250,000 250,000 250,000 -
	- 750,000 - 10,320,000 11,070,000 11,070,000 750,000 10,320,000
	240,000 - 240,000 - - - - - 100,000 - 100,000 - - - - - 100,000 - 100,000 - - - - - - - - - - - - -
	440,000 - 440,000 - - - - -

appointed 1 March 2011 ** appointed 1 January 2011

*** appointed 2 May 2011

**** resigned 14 April 2010

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

Note 21: Directors and Executives Disclosures (Cont’d)

(c) Shareholdings of Key Management Personnel (Consolidated)

Shares held in Mozambi Coal Limited

==> picture [482 x 65] intentionally omitted <==

----- Start of picture text -----

Balance at Balance at
beginning of end of period
period (or when Issued as On Exercise Net Change Other (or when ceased
appointed) remuneration of Options (disposal) to be a director)
30 June 2011 Ord Ord Ord Ord Ord
----- End of picture text -----

Directors Michael Grifths Shiv Madan Alex Neuling Robert Hemphill Other Executives Chalamaiah Kondragunta Ryan Broom 30 June 2010 Directors Alex Neuling Michael Grifths Ashley Pattison** Robert Hemphill	- - - - - - - - 10,320,000 10,320,000 400,000 - - 150,000 550,000 100,000 - - - 100,000 - - - - - - - - - -
	500,000 - - 10,470,000 10,970,000 300,000 - 100,000 - 400,000 - - - - - 1,138,750 - 240,000 (1,138,750) 240,000 430,000 - 100,000 (430,000) 100,000
	1,868,750 - 440,000 (1,568,750) 740,000

appointed 1 March 2011

** appointed 1 January 2011

*** appointed 2 May 2011

****resigned 14 April 2010

All equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Note 22: Acquisition of subsidiary

On 1 March 2011, Mozambi Coal Limited acquired 100% of the voting shares of Dugal Pty Ltd which in turn acquired a 70% interest in a Mozambican subsidiary, Dugal Resources Lda during the period.

The total cost of the combination was $8,965,089 and comprised an issue of equity instruments, cash and contingent consideration. The Group issued 20,000,000 ordinary shares with a fair value of $0.20 each, based on the quoted price of the shares of Mozambi Coal Limited at the date of exchange in addition to 20,000,000 options over ordinary shares. The options were valued using the Black Scholes valuation model and each option was valued at $0.1002.

This transaction was an acquisition of assets and does not meet the requirements of AASB 3 Business Combinations.

Mozambi Coal Limited acquisition of Dugal Pty Ltd

Mozambi Coal Limited acquisition of Dugal Pty Ltd
Cash and cash equivalents Other receivables Trade payables Net liabilities acquired	$ 1,278 120 (22,413)
	(21,015)

Dugal Pty Ltd acquisition of Dugal Resources Lda

Other receivables	513
Net Assets acquired	513
*Excess of consideration over net assets acquired:*
The excess of consideration over the net assets acquired has been attributed to exploration assets.
No adjustment has been made for tax consequences.
Net liabilities acquired	(20,502)
Consideration for acquisition of Dugal Pty Ltd	6,005,959
Consideration for acquisition of Dugal Resources Lda	2,959,130
Excess of consideration over net liabilities acquired	8,985,591
*The cash outfow on acquisition is as follows:*
Cash paid	(1,000,695)
Loan forgiven	132,015
Net cash acquired with the subsidiary	1,278
Net cash outfow	(867,402)

MOZAMBI COAL LTD | annual report 2011 63

==> picture [596 x 56] intentionally omitted <==

CORPORATE GOVERNANCE STATEMENT

Introduction

Mozambi Coal Limited ("Company") has adopted an extensive system of controls as the basis for administration of the Company’s corporate governance policies. Information relating to these policies and procedures is summarised below. The Board of the Company is committed to pursuing the genuine spirit of best practice corporate governance objectives in the manner most appropriate to the needs and circumstances of the Company.

The following additional information about the Company's corporate governance practices is set out on the Company's website at www.mozambicoal.com.au.

Board & Committee Charters

Board Charter
Audit Committee Charter
Nomination Committee Charter
Remuneration Committee Charter

Documentation of Policies & Procedures

Code of Conduct
Policy and Procedure for Selection and Appointment of Directors
Performance Evaluation Processes
Director Independence Assessment
Summary of Securities Trading Policy
Summary of Continuous Disclosure Policy
Policy for Selection, Appointment & Rotation of External Auditor
Summary of Shareholder Communication Policy
Summary of Risk Management Policy
Summary of Whistleblower Policy

Explanations for departures from best practice recommendations

During the Reporting Period the Company has complied with each of the Ten Essential Corporate Governance Principles and the corresponding Best Practice Recommendations as published by the ASX Corporate Governance Council ("ASX Principles and Recommendations"), other than in relation to the matters specified in the table which follows.

==> picture [482 x 18] intentionally omitted <==

----- Start of picture text -----

Principle Ref Recommendation Ref Notification of Departure Explanation for Departure
----- End of picture text -----

Principle Ref	Recommendation Ref	Notifcation of Departure	Explanation for Departure

4	4.2	The audit committee includes executive directors.	The current composition of the Board does not allow for the audit committee to be structured in accordance with all of the requirements of Recommendation 4.2 without compromising its overall efciency in the view of the Board. The Board will continue to review its composition to ensure that this remains appropriate to the Company’s circumstances.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Skills, experience, expertise and term of office of each director

A profile of each director containing the applicable information is set out in the Directors' Report.

Identification of independent directors

The Company currently has two independent directors, Mr Robert Hemphill and Mr Michael Griffiths

Statement concerning availability of independent professional advice

If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director then, provided the director first obtains approval for incurring such expense from the chairperson, the Company will pay the reasonable expenses associated with obtaining such advice.

Management of Material Risks and Assurances to the Board

The Board determines the Company’s “risk profile” and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Board has delegated to the Audit and Risk Committee responsibility for implementing the risk management system.

The Audit and Risk Committee will submit particular matters to the Board for its approval or review. Among other things it will:

Oversee the Company’s risk management systems, practices and procedures to ensure effective risk identification and management and compliance with internal guidelines and external requirements;
Assist management to determine the key risks to the businesses and prioritise work to manage those risks; and
Review reports by management on the efficiency and effectiveness of risk management and associated internal compliance and control procedures.

The Company’s process of risk management and internal compliance and control includes:

Identifying and measuring risks that might impact upon the achievement of the Company’s goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks.
Formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk management policies and internal controls.
Monitoring the performance of, and improving the effectiveness of, risk management systems and internal compliance and controls, including regular assessment of the effectiveness of risk management and internal compliance and control.

To this end, comprehensive practises are in place that are directed towards achieving the following objectives:

Compliance with applicable laws and regulations.
Preparation of reliable published financial information.
Implementation of risk transfer strategies where appropriate e.g. insurance.

The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Management is required to assess risk management and associated internal compliance and control procedures and report back quarterly to the Audit and Risk Committee. The Board has received an assurance from management that the Company’s management of its material business risks is effective.

The Board will review assessments of the effectiveness of risk management and internal compliance and control on an annual basis. In addition, the Chief Executive Officer and Chief Financial Officer (or their equivalents) required to provide the Board with a declaration pursuant to s295A of the Corporations Act. In so doing, they have also provided the Board with assurance that such declaration is founded on a sound system of risk management and internal control and that this system is operating effectively in all material respects relating to financial reporting risk.

MOZAMBI COAL LTD | annual report 2011 65

==> picture [596 x 56] intentionally omitted <==

CORPORATE GOVERNANCE STATEMENT (CONT’D)

Names of nomination committee members and their attendance at committee meetings

The full Board carries out the functions of a Nomination Committee in accordance with the Nomination Committee Charter.

Names and qualifications of audit committee members

The names, relevant financial expertise and industry experience of each of the audit committee members is set out in the Directors' Report.

Number of audit committee meetings and names of attendees

Details of the audit committee meetings held and attended are disclosed in the Directors Report.

Confirmation whether performance evaluation of the board and its members have taken place and how conducted

The Company has a policy of performing an evaluation of the Board and its members on an annual basis. For the year to 30 June 2011 this was performed without the use of external consultants.

Company’s remuneration policies

Details of the Company’s remuneration policies are disclosed in the Remuneration Report within the Directors’ Report.

Names of remuneration committee members and their attendance at committee meetings.

Names, qualifications and experience of the Remuneration Committee, together with details of the meetings held and attended are disclosed in the Directors’ Report.

Existence and terms of any schemes for retirement benefits for non-executive directors

The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.

MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

ASX ADDITIONAL INFORMATION

The shareholder information set out below was applicable as at 30 September 2011.

Twenty largest shareholders

==> picture [482 x 18] intentionally omitted <==

----- Start of picture text -----

Rank Name Units % of Units
----- End of picture text -----

1 Citicorp Nominees Pty Limited 2 Varuna Pty Ltd 3 HSBC Custody Nominees 4 Cityside Investments Pty Ltd 5 EZR Systems Pty Ltd 6 D.A.R. Holdings Pty Ltd 7 CS Fourth Nominees Pty Ltd 8 Chata Holdings Pty Ltd 9 UBS Wealth Management 10 Hawera Pty Ltd 11 Nefco Nominees Pty Ltd 12 Mr John Philip Powell 13 JP Morgan Nominees Australia Limited 14 ABN Amro 15 Subiaco Capital Pty Ltd 16 Ramsa Pty Ltd 17 R W Associates 18 Ms Jennifer Ruth Hercules 19 Mr Robertino Galipo 20 Mr Carmelo Galipo Total Top 20 Other Total Ordinary Shares On Issue	27,022,600 23.661 10,320,000 9.036 3,383,402 2.962 3,200,000 2.802 3,200,000 2.802 3,200,000 2.802 3,043,287 2.665 1,500,000 1.313 1,361,733 1.192 1,334,009 1.168 1,300,000 1.138 1,190,000 1.042 1,084,530 0.950 1,008,935 0.883 1,000,000 0.876 823,000 0.721 800,000 0.700 755,000 0.661 705,000 0.617 705,000 0.617
	66,936,496 58.609%
	47,271,236 41.391%
	114,207,732 100.00%

Substantial shareholders

	Units	% Held
Citycorp Nominees 27,022,600 23.661 Varuna Pty Ltd 10,320,000 9.036

MOZAMBI COAL LTD | annual report 2011 67

==> picture [596 x 56] intentionally omitted <==

ASX ADDITIONAL INFORMATION (CONT’D)

Distribution of equity securities

==> picture [485 x 33] intentionally omitted <==

----- Start of picture text -----

Performance Performance
Ordinary shares Unlisted options
rights shares
----- End of picture text -----

1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 > 100,001 Total	243 - - - 269 - - - 124 - - - 522 1 - 1 119 27 4 4
	1,277 28 4 5

482 shareholders held fewer than a marketable parcel of shares based on the share price as at 30 September 2011.

Unquoted securities

The Company has 32,950,000 unlisted options on issue as at 30 September 2011. The Options do not carry a right to vote at a general meeting of shareholders.

==> picture [485 x 168] intentionally omitted <==

----- Start of picture text -----

Expiry Date Exercise Price No. of Options No. of Holders
31/12/2011 $0.20 9,700,000 16
21/02/2014 $0.25 20,000,000 5
30/06/2014 $0.35 250,000 2
30/06/2014 $0.45 250,000 2
30/06/2014 $0.55 250,000 2
22/06/2013 $0.30 2,500,000 1
32,950,000
Holders of greater than 20% of unlisted options:
No unlisted options held % Held
Varuna Pty Ltd 10,320,000 31.3%
----- End of picture text -----

The Company has 2,225,000 performance rights on issue as at 30 September 2011. The Performance Rights do not carry a right to vote at a general meeting of shareholders.

==> picture [484 x 18] intentionally omitted <==

----- Start of picture text -----

Expiry Date Hurdle Price No. of Performance Rights No. of Holders
----- End of picture text -----

21/02/2012 $0.28 21/02/2012 $0.38 21/02/2012 $0.45 21/02/2013 $0.31 21/02/2013 $0.42 21/02/2013 $0.50 21/02/2014 $0.31 21/02/2014 $0.42 21/02/2014 $0.50	338,250 4 348,500 4 338,250 4 198,000 2 204,000 2 198,000 2 198,000 2 204,000 2 198,000 2 2,225,000

68 MOZAMBI COAL LTD | annual report 2011

==> picture [596 x 56] intentionally omitted <==

Holders of greater than 20% of performance rights:

	No performance rights held	% Held
Shiv Madan 1,000,000 44.9% Michael Grifths 600,000 26.9%

The Company has 5,000,000 performance shares on issue as at 30 September 2011. There are 5 holders of the performance shares. The Performance Shares do not carry a right to vote at a general meeting of shareholders.

Holders of greater than 20% of performance shares:

	No performance shares held	% Held
Varuna Pty Ltd 2,580,000 51.6%

Restricted Securities

As at 30 September 2011, there were 21,000,000 ordinary shares, 20,000,000 unlisted options and 5,000,000 performance shares under escrow until 1 March 2013.

Voting rights

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at meetings of shareholders or classes of shareholders:

(a) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;
(b) On a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and
(c) On a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares, shall have such number of votes being equivalent to the proportion which the amount paid (not credited) is of the total amounts paid and payable in respect of those shares (excluding amounts credited).

On-market buy back

There is currently no on-market buy-back program for any of the Company’s listed securities.

Company secretary, registered and principal administrative office and share registry

The Company Secretaries are Mr Alex Neuling and Mr Ryan Broom.

The Company’s principal and administrative office is at Level 2, 640 Murray Street, West Perth, WA 6005, Australia.

The Company’s Share Registry is maintained by Advanced Share Registry Services Pty Ltd, 150 Stirling Hwy Nedlands WA 6009.

MOZAMBI COAL LTD | annual report 2011 69

==> picture [596 x 56] intentionally omitted <==

ASX ADDITIONAL INFORMATION (CONT’D)

Tenement Listing

==> picture [484 x 18] intentionally omitted <==

----- Start of picture text -----

Number Name Country Interest
----- End of picture text -----

Number	Name	Country	Interest

3245L	Tete West	Mozambique	70%
3246L	Muturara	Mozambique	70%
2738L	Songo	Mozambique	Right to earn 80%

MOZAMBI COAL LTD | annual report 2011

==> picture [88 x 86] intentionally omitted <==

----- Start of picture text -----

Mozambi
Coal
----- End of picture text -----

Level 2, 640 Murray Street, West Perth WA 6005 Tel: (08) 9321 0774 | Fax: (08) 6314 1557

AI assistant

VOLT RESOURCES LIMITED — Annual Report 2011

66019_rns_2011-10-26_1807d522-64a0-45d3-8617-7f8c707936ad.pdf

Corporate Directory

DIRECTORS

SHARE REGISTRY

COMPANY SECRETARY

AUDITORS

REGISTERED OFFICE

SOLICITORS

BANKERS

SECURITIES EXCHANGE LISTING

Contents

CHAIRMAN’S REPORT

Dear Shareholder,

OPERATIONS REPORT

Overview

Summary of licences

OPERATIONS REPORT (CONT’D)

2738L

Summary

Geology

Target Mineralisation

Exploration

OPERATIONS REPORT (CONT’D)

3246L

Summary

Geology

Target Mineralisation

Exploration

OPERATIONS REPORT (CONT’D)

3245L

Summary

Geology

Target Mineralisation

Exploration

OPERATIONS REPORT (CONT’D)

Results

Note 1:

Competent Person Statement

DIRECTORS’ REPORT

Directors

Mr Michael Griffiths

Mr Shiv Madan – appointed 1 March 2011

Mr Alex Neuling

Mr Robert Hemphill

Principal activities

Summary review of operations

Results

Significant changes in state of affairs

Information on Directors

Mr Michael Griffiths– Non executive Chairman

Mr Shiv Madan – Managing Director

Special responsibilities – none

DIRECTORS’ REPORT (CONT’D)

Mr Alex Neuling – Executive Director & Company Secretary

Qualifications – CA, ACIS, BSc

Mr Robert Hemphill – Non-executive Director

Qualifications – B. Bus, CA

Mr Ryan Broom – Company Secretary

Qualifications – B. Com, CA

Meetings of Directors

Share options

Performance rights

DIRECTORS’ REPORT (CONT’D)

REMUNERATION REPORT – AUDITED

Details of key management personnel (including the five highest paid executives of the Company and the Group)

(i) Directors

(ii) Executives

Remuneration committee

Remuneration philosophy

Remuneration structure

Non-executive directors

Retirement benefits and allowances

Executives

Base pay

Short term incentives

Long Term Incentives - Share-based compensation

Link to Group Performance

Service agreements

VOLT RESOURCES LIMITED Annual Report 2011