VYSARN LIMITED - Annual Report 2008

Financial Report – 30 June 2008

(Formerly Macquarie Mining Limited) (ABN 41 124 212 175)

Macquarie Harbour Mining Limited ABN 41 124 212 175

Contents	Page
Corporate Directory	3
Directors’ Report	4
Corporate Governance Statement	22
Auditors’ Independence Declaration	24
Financial Reports	25
Directors’ Declaration	72
Independent Audit Report to the Members	73

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Corporate Directory

Directors

Basil Conti ( Chairman ) Frank Rogers ( Managing Director) Benjamin Mead Peter Robertson Dr Neil Allen

Secretary

Jade D’Andrilli

Share Register

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

Auditor

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street Subiaco WA 6008

Solicitors

Pullinger Readhead Lucas Level 2, Fortescue House 50 Kings Park Road West Perth WA 6005

Bankers

National Australia Bank Business Banking Centre 86 Collins Street Hobart Tasmania 7000

Stock Exchange Listings

Macquarie Harbour Mining Ltd shares are listed on the Australian Securities Exchange

Ordinary Fully Paid Shares (ASX Code MHM) Listed Options (ASX Code MHMO)

Registered Office in Australia

Level One, 20 Kings Park Road West Perth WA 6005 phone: +61 8 9321 6777 facsimile: +61 8 9324 1293 email: [email protected] website: www.mhml.com.au

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Your directors present their report on the consolidated entity (“Group”) consisting of Macquarie Harbour Mining Limited (“Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2008.

Directors

The following persons were directors of Macquarie Harbour Mining Limited during the whole of the financial year and up to the date of this report:

B A Conti F A Rogers B W Mead N R Allen P L A Robertson

Principal activities

During the period the principal activities of the Group consisted of exploration of gold and other mineral resources.

Dividends

No dividends were paid to members during the financial year and the directors do not recommend the payment of a dividend.

Review of operations

(a) Income statement

	Revenues 2008 $	Results 2008 $
Revenue from continuing operations Loss before income tax expense Income tax expense Loss attributable to members of Macquarie Harbour Mining Limited	118,489	-
		(545,876) -
		(545,876)

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Review of operations (continued)

(b) Financial position

During the year, the Group raised $5,181,961 in contributed equity as a result of:

(i) a placement of 1,750,000 ordinary shares at a deemed value of $0.10, to sophisticated and professional investors;
(ii) a placement of 27,615,000 ordinary shares at a deemed value of $0.20, through the issue of a prospectus;
(iii) a placement of 1,380,750 ordinary shares at a deemed value of $0.20, as pursuant to the broker agreement;
(iv) a placement of 27,497,885 options at a deemed value of $0.01, through the offer of a rights issue; and
(v) payment of share issue costs of $1,067,168.

At the end of the financial year the Group had net cash balances of $3,845,099 and net assets of $5,030,048.

Total liabilities amounted to $321,456 being trade and other payables of $171,516, borrowings of $141,094 and a deferred tax liability of $8,846 from the acquisition of Goldstock Mining Pty Ltd (in the prior period).

(c) Exploration

Since 14 December 2007, the Company has undertaken a majority of exploration efforts in the north eastern Tasmanian project area; within the tenements EL2/2007, EL3/2007 and EL66/2007.

Tenement EL2/2007, which contains the Company’s Gladstone Gold Project, underwent a reverse circulation drilling programme of 1965 metres. The drilling was planned to test the potential for bulk mineable open cut resources beneath and along strike from high grade mineralisation within the Mathinna beds; a well known host for gold deposits in north east Tasmania.

Although visible sulphide mineralisation (mainly pyrite and arsenopyrite) was noted in a majority of the holes, the gold results were generally of a low tenor. The highest value was 17.7 g/t Au from 2728 metres downhole at the Grand Flaneur prospect, while 2 kilometres to the south at Bluebell – Prince Imperial two successive one metre intervals from 46 – 47 metres and 47 - 48 metres in the same hole assayed 11.3 g/t Au and 3.73 g/t Au respectively.

Whilst the initial drilling programme suggested the potential for high-grade, narrow vein gold mineralisation, the Company is primarily targeting ore that could facilitate bulk, open-pit style processing to deliver cash flow in the short-term.

A reinterpretation of the existing geophysical data was undertaken with a view to checking other potential mineralised zones within EL2/2007. A subsequent ground magnetometer survey was conducted over an area to the south of the Portland Mine followed by a soil sampling survey covering an area of some 10 square kilometres. The company is currently awaiting the assay results from a selected group of these samples.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Review of operations (continued)

Exploration involving mapping, ground geophysics and NITON sampling of the Gold/Tin area to the south of Gladstone has resulted in the delineation of a zone of above background Tin anomalies over an area 3 kilometres wide and 6 kilometres long. The Tin mineralisation is associated with griesenised zones within the granite which appears to be the source of the alluvial Tin in the area. The Company has appointed Mr. Revel Monroe, a Consulting Geologist with considerable experience in tin mineralisation in the north east of Tasmania. Mr Monroe’s brief is to source a Tin occurrence that meets the Company’s target of an open-pittable resource within the three Exploration Licences. To date, Mr Monroe has conducted research into his extensive database and has targeted six areas with a previous resource status. Tonnage and grade are to be confirmed in the 2008/09 financial year.

The Company’s west coast Tasmanian exploration efforts have been largely focused upon the Double Cove Iron Ore Project, located within EL21/2007 and Sorell Silica Project, located within EL63/2007. A reconnaissance program was conducted in June 2007 to examine the projects. Aerial and ground analysis were conducted, focusing on geological mapping, sampling and NITON analysis, investigation of ground vegetation cover and overburden, existing track conditions and site access with a view to facilitating project planning and statutory approvals for the upcoming October to April summer field season. The Company has finalised a drilling contractor for a planned 3,500 metre diamond drilling programme, and has started undertaking pre-feasibility studies for potential port locations to facilitate shipment of ore.

Select surface samples were taken from the Birthday Bay Iron Ore Project area, with assay results confirming the existence of high grade hematite-magnetite mineralisation. The surface samples returned grades up to 69% Fe along iron lenses that extend for some five kilometres. Based on field observations and geophysical analysis, the lenses appear to be of approximately 100 metres average width. The surface sample results confirm grades well above the range of typical hematitemagnetite deposits which normally have 20-40% Fe. This new find suggests high potential for iron ore of direct shipping grade. The Company plans to drill 2,500 metre of three main lenses during the upcoming summer field season.

The Sorell Silica Project comprises four areas of high purity quartzite lay towards the northern tip of Cape Sorell, south of Macquarie Harbour. Comalco held the area in the 1970’s, and published reports together with ongoing investigation by the Company suggest a commercial interest in the Silica, particularly the higher-grade sections up to 99.6% Si02. Further drilling is planned during the summer field season with a view to determining a JORC-compliant resource, to facilitate further offtake discussions. Critical to the economic viability of this project will be suitable off-take agreements as silica is not a readily tradeable commodity and dependent upon individual contracts, however early indications of commercial potential are such that the increased priority of the project is warranted. The Company plans to diamond drill 1,000 metre of the higher-grade sections during the upcoming summer field season, following the drilling of the iron ore. The purpose of the drilling will be to provide direct samples to interested parties, to confirm grade and possibly tonnage.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Review of operations (continued)

During June 2008, Managing Director Frank Rogers and senior geological staff conducted an aerial and ground reconnaissance of the Company’s Thomas Creek Porphyry Copper-Gold target, together with the Hibbs Ultramafic Nickel Province.

The Hibbs Ultramafic Nickel Province is an approximately 25 kilometre long belt of ultramafic rocks and includes numerous areas for potential nickel mineralisation. Occurrences of pentlandite have been recorded throughout the belt, which is the nickel sulphide making up the majority of Zinifex’s Avebury Mines ore, further to the north. The Hibbs Belt represents another longer-term target for MHM’s exploration strategy. Recent drill intercepts west of Avebury have also shown anomalous nickel values more distal from the granites which are thought to control mineralisation there. This revelation increases the prospectivity of the Hibbs area. Following the recent helicopter reconnaissance of the project area, regional and more detailed geophysical surveys are planned with follow-up work including ground truthing, mapping, sampling and drilling.

The Thomas Creek prospect offers potential for large tonnage, low-grade porphyry copper-gold style mineralisation and has been compared to the basal portion of the Mount Lyell deposit to the north. For the Company, Thomas Creek is seen as high priority for medium to long term focused exploration. Detailed re-interpretation of existing geophysics is currently underway by Mitre Geophysics and provision for undertaking further more detailed surveys using effective techniques will be made pending this review. Follow-up diamond drilling of identified anomalies was planned to begin during the coming field season following drilling of the iron ore lenses, however it has been decided to postpone the drilling of the Thomas Creek prospect until 2009. The reasons for this largely relate to the Company’s desire to focus exploration activities and expenditure on projects that suggest the potential for being quicker to production, and in turn income for the Company. The postponement of the drilling of Thomas Creek makes way for drilling of the Sorell Silica Project further to the north.

(d) Corporate

On 10 August 2007, 1,750,000 ordinary shares were issued to sophisticated and professional investors to raise a total of $175,000. Funds raised are to be used for the company’s main exploration programs and listing on the Australian Stock Exchange.

On 7 December 2007, 27,615,000 ordinary shares were issued to public investors pursuant to a prospectus to raise a total of $5,523,000. Funds raised are to be used for the company’s main exploration programs.

On 7 December 2007, 1,380,750 ordinary shares were issued pursuant to the broker agreement with Sonray Corporate Pty Ltd.

On 18 April 2008, 20,730,001 listed options were issued to share holders under a rights issue to raise a total of $207,300. Funds raised are to be used for the company’s main exploration programs.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Review of operations (continued)

On 9 May 2008, 6,767,884 listed options were issued to share holders under a rights issue to raise a total of $67,679. Funds raised are to be used for the company’s main exploration programs.

Earnings per share

2008 $ Basic and diluted earnings per shares (0.02)

Matters subsequent to the end of the financial period

Except for the events discussed above, no other matter or circumstance has arisen since 30 June 2008 that has significantly affected, or may significantly affect:

(a) the Group's operations in future financial years;
(b) the results of those operations in future financial years; or
(c) the Group's state of affairs in future financial years.

Likely developments and expected results of operations

Other than likely developments contained in the “review of operations and activities”, further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group.

Environmental regulation

The Group is subject to the environmental laws and regulations imposed under the Mineral Resources Development Act 1995, depending on the activities being undertaken. The Group is currently engaged in exploration activities which are governed by conditions or recommendations imposed through the granting of a licence or permit to explore. Compliance with these laws and regulations is regarded as a minimum standard for the Group to achieve. There were no known breaches of any environmental laws or regulations during the year.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Information on directors

B A Conti FCA, FCIS, FTIA. Chairman – non-executive.

Experience and expertise

Mr Conti is a fellow of the Institute of Chartered Accountants in Australia, the Taxation Institute of Australia and the Chartered Secretaries Australia. He commenced his professional career with Arthur Young & Co and has been a partner/director in the firm of Harden East & Conti Pty Ltd since 1978. Mr Conti has experience in management accounting, taxation, secretarial practice, corporate and financial planning, consulting to small and large businesses and has been associated with the mining industry in a professional capacity for the past 25 years.

Other current directorships None.

Former directorships in last 3 years

None.

Special responsibilities

Chairman of the Board.

Interests in shares and options

385,000 ordinary shares in Macquarie Harbour Mining Limited (indirect). 190,000 options over ordinary shares in Macquarie Harbour Mining Limited (indirect).

F A Rogers. Managing director.

Experience and expertise

Mr Rogers has been involved in the management of mining companies, mineral and chemical process operations, materials handling projects and waste processing industries for 38 years. For most of that time Mr Rogers has operated as CEO of both public and private companies and as a consequence has developed skills in management, financial control and project development and implementation. Mr Rogers has the experience to offer a mature and innovative approach to problem solving both technically and administratively. Mr Rogers has been involved in the exploration, development and/or operation of the following projects:

Youanmi Mine;
Speewah Fluorite Deposit;
Cadjebut Lead-Zinc Mine;
Gidgee Gold Mine; and
Delineation of Mineral Sands in the Eucla Basin.

Mr Rogers also has extensive experience in mechanical and process design and implementation over a broad range of industries. The provision of new and innovative solutions to processing and operational problems led to the design, construction and operation of:

the first continuous carbon-in-pulp gold plant in Australia;
the first methanol gold desorption plant; and
new processes for the aluminium industry.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Information on directors (continued)

Other current directorships

None.

Former directorships in last 3 years

None.

Special responsibilities Managing Director.

Interests in shares

15,025,006 ordinary shares in Macquarie Harbour Mining Limited (indirect).

7,012,503 options over ordinary shares in Macquarie Harbour Mining Limited (indirect).

B W Mead B.Econ. Executive director.

Experience and expertise

Mr Mead has had several years of international banking experience, having worked at Coutts & Co (London) in their commercial banking and money market divisions. Mr Mead has diverse financial and business consulting experience, and is involved in the Australian aluminium industry at an executive level. Mr Mead also currently holds several Directorships of US based organisations with interests in the aluminium industry and marine electronics. He is responsible for commercial management and business development for the Company.

Other current directorships None.

Former directorships in last 3 years None.

Special responsibilities Executive director.

Interests in shares

2,000,000 ordinary shares in Macquarie Harbour Mining Limited (indirect).

40,001 ordinary shares in Macquarie Harbour Mining Limited (direct).

1,500,000 options over ordinary shares in Macquarie Harbour Mining Limited (indirect). 20,001 options over ordinary shares in Macquarie Harbour Mining Limited (direct).

Dr N R Allen B.Sc, PhD. Non-executive director.

Experience and expertise

Dr Allen is a mineral physicist and provides geophysical analysis and mineral dressing expertise to the company. Dr Allen has over 20 years experience in exploration in Tasmania, including the tenement areas in which MHM holds an interest. Further, Dr Allen provides a consulting service to the mining industry specialising in mineral magnetism and the recovery of minerals using new technologies.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Information on directors (continued)

Other current directorships None.

Former directorships in last 3 years

None.

Interests in shares

200,001 ordinary shares in Macquarie Harbour Mining Limited (direct).

100,000 options over ordinary shares in Macquarie Harbour Mining Limited (direct).

P L A Robertson B.E. (Met), MBA. Non-executive director.

Experience and expertise

Mr Robertson is a metallurgist with over 20 years experience in mineral processing, smelting and rolling of aluminium and the development of new technologies. He commenced his career with Warman Equipment and was involved in the processing of Uranium ores. Mr Robertson was the Remelt Plant Metallurgist for Comalco at their Sydney plant and for the past 20 years has been involved in the supply of consumables and consulting services to the aluminium industry through Leymont Pty Ltd. More recently Mr Robertson has been employed as a Director of Alichem Limited, a company involved in the processing of waste from that industry.

Other current directorships None.

Former directorships in last 3 years None.

Interests in shares

100,001 ordinary shares in Macquarie Harbour Mining Limited (direct).

50,000 ordinary shares in Macquarie Harbour Mining Limited (indirect).

50,001 options over ordinary shares in Macquarie Harbour Mining Limited (direct). 25,000 options over ordinary shares in Macquarie Harbour Mining Limited (indirect).

Company secretary

J D’Andrilli B.Com, ACA. Company secretary.

Mr D’Andrilli holds a Bachelor of Commerce Degree (Curtin University). He is an Associate of the Institute of Chartered Accountants in Australia. Mr D’Andrilli has been in the employment of Harden East & Conti Pty Ltd since commencing his professional career in 1994 and advises small and large businesses in the areas of accounting, taxation and corporate services.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Meeting of directors

The numbers of meetings of the company’s board of directors held during the period ended 30 June 2008, and the numbers of meetings attended by each director were:

	Full meetings of	Full meetings of
		Directors
	Held	Attended
F A Rogers		8	8
B A Conti		8	8
B W Mead		8	8
N R Allen		8	6
P L A Robertson		8	7

Remuneration report

The remuneration report is set out under the following main headings:

(a) Principles used to determine the nature and amount of remuneration
(b) Details of remuneration
(c) Service agreements
(d) Share-based compensation
(e) Additional information

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

(a) Principles used to determine the nature and amount of remuneration

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

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

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

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

Alignment to shareholders’ interests:

focuses on exploration success as the creation of shareholder value and returns; and
attracts and retains high calibre executives.

Alignment to program participants’ interests:

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

The framework provides a mix of fixed and variable salaries.

The overall level of executive rewards is not dependent on the performance of the Group or satisfaction of a performance condition. The Group is involved in mineral exploration and did not derive a profit and therefore growth in earnings is not considered relevant. During the same period, average executive remuneration has been maintained in accordance with industry standards.

As at 30 June 2008 the Group had not formalised its short term of long term incentive policy for key management personnel and link to performance. The table below sets out summary information about the Company’s consolidated earnings and share price movements for the year to 30 June 2008.

	30 June 2008	30 June 2007
Revenue from continuing operations Net (loss) before tax Net(loss)after tax	118,483 (545,876) (545,876)	2,965 (145,492) (145,492)
Basic earning per share	(0.02)	(0.02)
Share price at start of the year Share price at the end of the year Dividends	- 0.073 -	- - -

Non-executive directors

Fees and payments to non-executive directors reflect the demands which are made on and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Board. The Chairman’s fees are determined independently to the fees of non-executive directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.

Directors’ fees

The current base remuneration was last reviewed with effect from 1 December 2007. Director’s remuneration is inclusive of committee fees.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

Retirement allowances for directors

There is no provision for retirement allowances for non-executive directors. Superannuation contributions required under the Australian superannuation guarantee legislation continue to be made and are deducted from the directors’ overall fee entitlements.

Executive pay

The executive pay and reward framework has three components:

base pay and benefits;
long-term incentives through participation in the Employee Option Plan; and
other remuneration such as superannuation.

The combination of these comprises the executive’s total remuneration.

(i) Base pay

Structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion.

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

There is no guaranteed base pay increases included in any executives’ contracts.

(ii) Benefits

Executives receive benefits including memberships, car allowances and reasonable entertainment.

(iii) Retirement benefits

Directors and employees are permitted to nominate a superannuation fund of their choice to receive superannuation contributions.

(iv) Employee share option scheme

Information on the employee share option scheme is set out on pages 67 - 68.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

(b) Details of remuneration

Details of the remuneration of the directors, the key management personnel of the Group (as defined in AASB 124 Related Party Disclosures) and specified executives of Macquarie Harbour Mining Limited are set out in the following tables:

The key management personnel of the Group are the directors of Macquarie Harbour Mining Limited (see pages 9 to 11 above).

In addition, the following persons must be disclosed under the Corporations Act 2001 as they are among the 5 highest remunerated Group and/or Company executives:

B A Conti – Company Chairman: Group and Company non-executive
F A Rogers – Managing Director: Group and Company executive
B W Mead – Director: Group and Company executive
N R Allen – Director: Group and Company non-executive
P L A Robertson – Director: Group and Company non-executive

2008	Short-term employee benefits	Post- employment benefit	Share based payments		Value of Options

	Cash salary and fees $
Name		Superannuation $	Options $	Total $	As a % of remuneration

Non-executive directors B A Conti Chairman N R Allen P L A Robertson	- 7,000 7,000	26,160 630 630	- - -	26,160 7,630 7,630	- - - 27% 19%
Sub-total non-executive directors	14,000	27,420	-	41,420
Executive directors B W Mead F A Rogers	131,384 203,333	630 7,500	48,500 48,500	180,514 259,333
Total key management personnel compensation (Group)	348,717	35,550	97,000	481,267

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

(c) Service agreements

Remuneration and other terms of employment for the Managing Director and Executive Director are formalised in service agreements. The agreement for the Managing Director provide for the provision of other benefits, when eligible, in the Employee Share Option scheme. The agreement for the Executive Director provides for the provision of consulting fees and participation, when eligible, in the Employee Share Option scheme.

Other major provisions of the agreements relating to remuneration are set out below.

F A Rogers, Managing Director

Term of agreement: for a period of 3 years from commencement date, notice period of three months;
Base salary, inclusive of superannuation and other benefits, for the year ended 30 June 2008 of $218,000. Provision of four weeks annual leave; and.
Upon termination a payment equal to the amount calculated using the formula in section 200G of the Corporations Act 2001 (Cth) is payable by the company.

B W Mead, Executive Director

Term of agreement: for a period of 3 years from commencement date, notice period of two months;
Consulting fees of $80 per hour for the period of 3 years from 1 September 2007; and
Upon termination a payment for the amount of work in progress up to and including the date of termination is payable.

(d) Share-based compensation

Options are granted under the Employee Share Option scheme. All staff are eligible to participate in the scheme (including executive directors) at the absolute discretion of the Board.

Options are granted under the scheme for no consideration. Entitlements to the options are vested as soon as they become exercisable.

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

			Value per option at grant date
Grant date	Expiry date	Exercise price		Date exercisable

7 December 2007	31 August 2012	$0.20	$0.097	At any time during the optionperiod

When exercisable, each option is convertible into one ordinary share.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

The exercise price of options is the exercise price determined by the Board on or before the issue date provided that in no event shall the exercise price be less than the weighted average sale price of shares sold on ASX during the five business days prior to the issue date or such other period as determined by the Board.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share and the risk free interest rate for the term of the option.

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

Director options

Grant date	7 December 2007
Expiry date	31 August 2012
Quantity	1,000,000
Exercise price	$0.20
Consideration	Nil
Share price at grant date	$0.17
Expected price volatility of the company’s shares	68%
Risk-free interest rate	6.5%

2008 Name	A Remuneration consisting of options	B Value at grant date $	C Value at exercise date $	D Value at lapse date $
F A Rogers B W Mead	18.70% 26.87%	48,500 48,500	- -	- -

A = the percentage of the value of the remuneration consisting of options, based on the value at grant date set out in column B.

B = the value at grant date calculated in accordance with AASB 2 Share-based Payments of options granted during the year as part of remuneration.

C = the value at exercise date of options that were granted as part of remuneration and were exercised during the year.

D = the value at lapse date of options that were granted as part of remuneration and that lapsed during the year.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Remuneration report (continued)

	Number of options	Number of options	Number of options	Number of options
	granted during the year		vested during the year
	2008	2007	2008	2007
	$	$	$	$
Directors of Macquarie Harbour Mining Limited
F A Rogers	500,000	-	500,000		-
B W Mead	500,000	-	500,000		-

There were no ordinary shares issued as a result of the exercise of options.

(e) Additional information

Given Macquarie Harbour Mining Limited is involved in mineral exploration and performance is measured by exploration success, the remuneration of the persons referred to above is not dependent on the satisfaction of a performance condition.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Loans to directors and executives

Information on loans to directors and executives, including amounts, interest rates and repayment terms are set out in note 23 to the financial statements.

Shares under option

Unissued ordinary shares of Macquarie Harbour Mining Limited under option at the date of this report are as follows:

Date options granted Expiry date Issue price of shares	Number under option
7 December 2007 31 August 2012 $0.20 18 April 2008 31 August 2012 $0.20 9 May 2008 31 August 2012 $0.20	2,380,750 20,730,001 6,767,884
	29,878,635

No option holder has any right under the options to participate in any other share issue of the company or any other entity.

Insurance of officers

During the financial year, the Company paid a premium of $9,658 to insure the directors and secretary of the company and its Australian-based controlled entities, and the general managers of the Group.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Proceedings on behalf of the company

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

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

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Non-audit services

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

Details of the amounts paid or payable to the auditor (BDO Kendalls Audit & Assurance (WA) Pty Ltd) for audit and non-audit services provided during the year are set out below.

The Board has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the directors to ensure they do not impact the impartiality and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

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

	Consolidated 2008 2007 $ $
Audit services BDO Kendalls Audit & Assurance (WA) Pty Ltd Audit and review of financial reports Total remuneration for audit services Non-audit services *Audit-related services* BDO Kendalls Corporate Finance (WA) Pty Ltd Due diligence services Total remuneration for audit-related services Total remuneration for non-audit services	25,000 10,000
	25,000 10,000
	- 2,300
	- 2,300
	- 2,300

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Report

Auditor’s independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24.

Auditor

BDO Kendalls Audit & Assurance (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.

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

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B A Conti Director

Perth, Western Australia 30 September 2008

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Corporate Governance Statement

The Company has adopted systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company's needs. To the extent they are applicable, the Company has adopted the Essential Corporate Governance Principles and Best Practice Recommendations as published by ASX Corporate Governance Council.

As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance structures will be given further consideration.

The Objectives of the Board

The Board’s key objectives are to:

increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders; and
ensure the Company is properly managed.

The Board has primary responsibility to shareholders for the welfare of the Company by guiding and monitoring the business and the affairs of the Company and determining the vision and objectives of the Company.

The Company recognises the importance of the Board in providing a sound base for good corporate governance in the operations of the Company.

The Board must at all times act honestly, fairly and diligently in all respects in accordance with the law applicable to the Company.

The Board will at all times act in accordance with all relevant Company policies.

Each of the directors, when representing the Company, must act in the best interests of shareholders of the Company and in the best interests of the Company as a whole.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Corporate Governance Statement

The Responsibilities of the Board

The Board’s responsibilities include:

supervising the Company’s framework of control and accountability systems to enable risk to be assessed and managed;
ensuring the Company is properly managed;
approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
approving the annual budget;
monitoring the financial performance of the Company;
approving and monitoring financial and other reporting;
providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;
appointing the external auditor and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the Board must be ratified by shareholders at the next AGM of the Company;
liaising with the Company’s external auditors; and
monitoring and ensuring compliance with all of the Company’s legal obligations, in particular those obligations relating to the environment, native title, cultural heritage and occupational health and safety.

Adopted Charters, Policies and Codes

The Company has adopted:

Audit Committee Charter;
Policy and Procedure for Selection and Appointment of New Directors;
Remuneration Committee Charter;
Code of Conduct;
Policy for Dealing in Company Securities;
Disclosure Policy and Communications Strategy; and
Risk Management Policy.

There is no separate Audit Committee or Remuneration Committee. Due to the small size and structure of the Board, separate committees are not considered to add any efficiency. When considering financial matters and matters of remuneration, the Board functions in accordance with its Audit Committee Charter and Remuneration Committee Charter respectively.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Auditor’s Independence Declaration

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| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Financial Reports – 30 June 2008

Contents	Page
Financial Report
Income Statement	26
Balance Sheet	27
Statement of Changes in Equity	28
Cash Flow Statement	29
Notes to Financial Statements	30
Directors’ Declaration	72
Independent Audit Report to the Members	73

Macquarie Harbour Mining Limited is a company limited by shares incorporated and domiciled in Australia. Its registered office and principal place of business are:

Registered Office	Principal Place of Business
Level One, 20 Kings Park Road	20 Recreation Street
West Perth WA 6005	Kingston Beach TAS 7050

A description of the nature of the Group's operations and its principal activities is included in the review of operations and activities in the directors’ report, both of which are not part of this financial report.

The financial report was authorised for issue by the directors on 30 September 2008. The company has the power to amend and reissue the financial report.

Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the company. All press releases, financial reports and other information are available at our Shareholders’ Centre on our website: www.mhml.com.au.

For queries in relation to our reporting please call +61 3 6229 9955 or email [email protected]

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Income Statements

For the year ended 30 June 2008

Notes	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Revenue from continuing operations 5 Other income 6 Administrative expenses Annual leave expense Consultancy fees Depreciation expense 7 Employee benefit expense 7 Insurance expense Office accommodation expense Option expense Professional fees Shareholder expenses Other expenses 7 Results from operating activities Loss before income tax expense Income tax expense 8 Loss after income tax expense Loss attributable to members of Macquarie Harbour Mining Ltd Earnings per share for loss attributable to the ordinary equity holders of the company: Basic and diluted earnings per share 33	118,483 2,965 116,820 6 - 6 (24,753) (244) (24,431) (29,577) - (29,577) (136,384) (121,635) (136,384) (18,861) (521) (18,861) (56,085) - (56,085) (20,985) - (20,985) (28,325) - (28,325) (176,660) - (176,660) (47,612) (10,970) (47,142) (38,625) - (38,625) (86,498) (15,087) (86,498)	2,965 - (224) - (121,635) (521) - - - - (10,970) - (15,087)
	(545,876) (145,492) (546,747)	(145,472)
	(545,876) (145,492) (546,747) - - -	(145,472) -
	(545,876) (145,492) (546,747)	(145,472)
	(545,876) (145,492) (546,747)	(145,472)
	Cents Cents (1.75) (1.69)

The above Income Statements should be read in conjunction with the accompanying notes.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Balance Sheets

As at 30 June 2008

Notes	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Assets Current assets Cash and cash equivalents 9 Trade and other receivables 10 Total current assets Non-current assets Receivables 11 Other financial assets 12 Exploration and evaluation 13 Property, plant and equipment 14 Deferred assets 15 Intangible assets 16 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 17 Borrowings 18 Total current liabilities Non-current liabilities Deferred tax liabilities 19 Borrowings 20 Total non-current liabilities Total liabilities Net assets Equity Contributed Equity 21 Share based payments reserve 22 Accumulated losses 22 Total equity	3,845,099 238,417 3,842,739 94,570 16,043 94,148	237,934 15,279
	3,939,669 254,460 3,936,887	253,213
	- - 743,308 728 - 13,728 763,388 98,238 - 423,719 11,238 423,719 218,674 22,300 218,674 5,326 5,326 1,283	34,927 13,000 34,542 11,238 22,300 1,283
	1,411,835 137,102 1,400,712	117,290
	5,351,504 391,562 5,337,599	370,503
	171,516 85,753 167,308 27,978 - 27,978	73,520 -
	199,494 85,753 195,286	73,520
	8,846 8,846 - 113,116 - 113,116	- -
	121,962 8,846 113,116	-
	321,456 94,599 308,402	73,520
	5,030,048 296,963 5,029,197	296,983
	5,490,483 442,455 5,490,483 230,933 - 230,933 (691,368) (145,492) (692,219)	442,455 - (145,472)
	5,030,048 296,963 5,029,197	296,983

The above Balance Sheets should be read in conjunction with the accompanying notes.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Statements of Changes in Equity

For the year ended 30 June 2008

Notes	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Total equity at the beginning of the financial year Loss for the year 22 Total recognised income and expense for the year Transactions with equity holders in their capacity as equity holders: Contributions of equity net of transaction costs 21(a) Share based payments reserve 22 Total equity at the end of the financial year	296,963 - 296,983 - (545,876) (145,492) (546,747) (145,472)
	(248,913) (145,492) (249,764) (145,472)
	5,048,028 442,455 5,048,028 442,455 230,933 - 230,933 -
	5,030,048 296,963 5,029,197 296,983

The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Cash Flow Statements

For the year ended 30 June 2008

Notes	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Cash flows from operating activities Payments to suppliers and employees Interest received Net cash outflow from operating activities 31 Cash flows from investing activities Payments for plant and equipment Proceeds from sale of property, plant and equipment Payments for exploration properties Loan to subsidiary Exploration and evaluation expenditure Net cash outflow from investing activities Cash flows from financing activities Proceeds from issues of securities Proceeds from borrowings Repayment of borrowings Net cash inflows from financing activities Net increase in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 9	(514,986) (130,922) (510,876) (130,138) 118,483 2,965 116,820 2,965
	(396,503) (127,957) (394,056) (127,173)
	(644,456) (11,759) (644,456) (11,759) 100 - 100 - (43,220) (33,660) - - - - (707,416) (34,927) (609,969) (20,217) 49,903 (20,217)
	(1,297,545) (65,636) (1,301,869) (66,903)
	5,169,581 432,010 5,169,581 432,010 140,005 - 140,005 - (8,856) - (8,856) -
	5,300,730 432,010 5,300,730 432,010
	3,606,682 238,417 3,604,805 237,934 238,417 - 237,934 -
	3,845,099 238,417 3,842,739 237,934

The above Cash Flow Statements should be read in conjunction with the accompanying notes.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied during the year presented, unless otherwise stated. The financial report includes separate financial statements for Macquarie Harbour Mining Limited as an individual entity and the consolidated entity consisting of Macquarie Harbour Mining Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial report of Macquarie Harbour Mining Limited comply with International Financial Reporting Standards (IFRS).

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.

Critical accounting estimates

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

Comparatives

The comparatives for the prior year were for a part year, where the Company commenced trading on 1 March 2007. This is relevant for all comparative information.

Going concern

The financial report has been prepared on a going concern basis which contemplates the continuity of business activities and the realisation of assets and the payment of liabilities in the normal course of business.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Macquarie Harbour Mining Limited (''company'' or ''parent entity'') as at 30 June 2008 and the results of all subsidiaries for the year then ended. Macquarie Harbour Mining Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

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

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

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

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

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

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

Investments in subsidiaries are accounted for at cost in the individual financial statements of Macquarie Harbour Mining Limited.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(c) Segment reporting

A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

(d) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Interest income

Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

(e) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

A deferred tax asset and liability are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit of loss.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

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

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

(f) Business combinations

The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition.

Where equity instruments are issued in an acquisition, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill (refer to note 1(l)). If the cost of acquisition is less than the Group's share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

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.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(g) Impairment of assets

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

(h) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(i) Investments and other financial assets

Classification

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet (note 10).

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-tomaturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

(iv) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

Subsequent measurement

Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the income statement within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognised in the income statement as part of revenue from continuing operations when the Group’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

Details on how the fair value of financial instruments is determined are disclosed in note 2.

Fair value

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Impairment

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not reversed through the income statement.

(j) Fair value estimation

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

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over-thecounter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(k) Property, plant and equipment

Plant and equipment is stated at historical cost less depreciation. Historical costs include expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

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

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

Furniture, fittings and equipment 5 -20 years
Computer equipment 4 years
Exploration equipment 5 years
Vehicles 8 -12 years

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

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

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

(l) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Group’s investment in each country of operation by each primary reporting segment.

(m) Trade and other payables

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

(n) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statements over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(o) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(p) Employee benefits

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

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

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(ii) Long service leave

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

(iii) Share-based payments

Share-based compensation benefits are provided to employees via the Macquarie Harbour Mining Employee Option Plan. Information relating to these schemes is set out in note 34.

The fair value of options granted under the Macquarie Harbour Mining Employee Option Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying scheme and the risk free interest rate for the term of the option.

The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

(q) Contributed equity

Ordinary shares are classified as equity.

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

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

(r) Earnings per share

(iv) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share

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

(s) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest.

Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation.

Exploration and evaluation expenditure for each area of interest, other than that acquired from the purchase of another mining consolidated entity, is carried forward as an asset provided that one of the following conditions is met:

such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; and
exploration and evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.

Expenditure which fails to meet at least one of the conditions outlined above is written off, furthermore, the directors regularly review the carrying value of exploration and evaluation expenditure and make write downs if the values are not expected to be recoverable.

Identifiable exploration assets acquired from another mining consolidated entity are recognised as assets at their cost of acquisition, as determined by the requirements of AASB 6 Exploration for and evaluation of mineral resources. Exploration assets acquired are reassessed on a regular basis and these costs are carried forward provided that at least one of the conditions referred to in AASB 6 is met.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

Exploration and evaluation expenditure incurred subsequent to acquisition in respect of an exploration asset acquired, is accounted for in accordance with the policy outlined above for exploration expenditure incurred by or on behalf of the entity.

Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered.

When an area of interest is abandoned, any expenditure carried forward in respect of that area is written off.

Expenditure is not carried forward in respect of any area of interest/mineral resource unless the Group’s rights of tenure to that area of interest are current.

(t) Goods and services tax (GST)

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

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

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

(u) New accounting standards and interpretations

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

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB8

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

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements For the year ended 30 June 2008

1 Summary of significant accounting policies (continued)

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

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

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

AASB-I 14 will be effective for annual reporting periods commencing on or after 1 January 2008. It provides guidance on the maximum amount that may be recognised as an asset in relation to a defined benefit plan and the impact of minimum funding requirements on such an asset. None of the Group’s defined benefit plans are subject to minimum funding requirements and none of them is in a surplus position. The Group will apply AASB-I 14 from 1 July 2008, but it is not expected to have any impact on the Group’s financial statements.

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

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

(v) Revised AASB 3 Business Combinations

A revised AASB 3 was issued in March 2008 and is applicable for annual reporting periods beginning on or after 1 July 2009. It changes the application of acquisition accounting for business combinations and the accounting for minority interests. The Group has not yet determined the potential effect of the revised standard on the Group’s financial report. The Group intends to apply the revised standard from 1 July 2009

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

2 Financial risk management

Overview

The Company and Group have exposure to the following risks from their use of financial instruments:

credit risk;
liquidity risk; and
market risk (including interest rate risk and price risk)
capital management

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

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

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. For the Company it arises from receivables due from subsidiaries.

(i) Investments

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating.

(ii) Trade and other receivables

As the Group operates in the mining explorer sector, it does not have trade receivables and therefore is not exposed to credit risk in relation to trade receivables.

The Company and Group have established an allowance for impairment that represents their estimate of incurred losses in respect of other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures. The management does not expect any counterparty to fail to meet its obligations.

Presently, the Group undertakes exploration and evaluation activities exclusively in Australia. At the balance sheet date there were no significant concentrations of credit risk.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

2 Financial risk management (continued)

(iii) Exposure to credit risk

The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was:

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Financial assets Cash and cash equivalents Receivables Other financial assets	3,845,099 238,417 3,842,739 237,934 - - 743,308 34,927 - - 13,000 13,000
	3,845,099 238,417 4,599 047 285,861

(iv) Guarantees

Group policy is to provide financial guarantees only to wholly-owned subsidiaries.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.

The Company does not anticipate a need to raise additional capital in the next 12 months to meet forecasted operational activities. The decision on how the Company will raise future capital will depend on market conditions existing at that time.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

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

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

2 Financial risk management (continued)

							More than 5 years $
Consolidated 2008	Carrying Amount $	Contractual Cash Flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $

Hire purchase liabilities Credit cards Trade and other payables	131,937 9,157 91,856	171,113 9,157 91,856	15,601 9,157 91,856	15,601 - -	31,202 - -	108,709 - -	- - -
	232,950	272,126	116,614	15,601	31,202	108,709	-

							More than 5 years $
Consolidated 2007	Carrying Amount $	Contractual Cash Flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $

Trade and other payables	85,753	85,753	85,753	-	-	-	-

							More than 5 years $
Parent Entity 2008	Carrying Amount $	Contractual Cash Flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $

Hire purchase liabilities Credit cards Trade and other payables	131,937 9,157 87,648	171,113 9,157 87,648	15,601 9,157 87,648	15,601 - -	31,202 - -	108,709 - -	- - -
	228,742	267,918	112,406	15,601	31,202	108,709	-

							More than 5 years $
Parent Entity 2007	Carrying Amount $	Contractual Cash Flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $

Trade and other payables	73,520	73,520	73,520	-	-	-	-

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

2 Financial risk management (continued)

Market Risk

(i) Foreign exchange risk

The Group operations are limited to domestic activities within Australia.

Company sensitivity

The Group’s profit would not be materially different due to changes in exchange rates.

(ii) Price risk

The Group is not exposed to equity securities price risk as it holds no investments in securities classified on the balance sheet as either available-for-sale or at fair value through the profit or loss. The Group is not exposed directly to commodity price risk.

(iii) Interest rate risk

The Group’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets is set out below:

	2008	2008	2007	2007
	Weighted average interest rate		Weighted average interest rate
Consolidated		Balance AUD $		Balance AUD $

Variable interest rate: Cash and cash equivalents Fixed interest rate Cash and cash equivalents	5.75% 7.77%	745,099 3,100,000	% -	238,417 -
		3,845,099		238,417

The Group has significant interest-bearing assets; however a percentage change in interest rates would not have a material impact on the results.

Company sensitivity

At 30 June 2008, if interest rates had changed by -/+ 80 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been $30,761 lower/higher, mainly as a result of higher/lower interest income from cash and cash equivalents. Equity would have been $30,761 lower/higher mainly as a result of higher/lower interest income from cash and cash equivalents.

At 30 June 2007, if interest rates had changed by -/+ 60 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been $1,430 lower/higher, mainly as a result of higher/lower interest income from cash and cash equivalents. Equity would have been $1,430 lower/higher mainly as a result of higher/lower interest income from cash and cash equivalents.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

2 Financial risk management (continued)

Fair values

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

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date.

Fair values versus carrying amounts

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

	2008 2007 Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $	2008 2007 Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $
Consolidated Cash and cash equivalents Hire purchase liabilities Other loans Trade and other payables Parent Entity Cash and cash equivalents Loans to subsidiaries Investments in subsidiaries Hire purchase liabilities Other loans Trade and other payables	3,845,099 3,845,099 238,417 131,937 131,937 - 9,157 9,157 - 91,856 91,856 85,753	238,417 - - 85,753
	4,078,049 4,078,049 324,170	324,170
	3,842,739 3,842,739 237,934 743,308 743,308 34,927 13,000 13,000 13,000 131,937 131,937 - 9,157 9,157 - 87,648 87,648 73,520	237,934 34,924 13,000 - - 73,520
	4,827,789 4,827,789 359,381	359,381

Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity.

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

3 Critical accounting estimates and judgements

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

1) Critical accounting estimates and assumptions

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

(a) Exploration and evaluation expenditure

The Group has carrying balances for exploration and evaluation. Each year the Group assesses whether these balances have suffered any impairment, in accordance with the accounting policy stated in Note 1 (s). The recoverable amounts are based on the assumption that the assets will either become economic mining properties or saleable to a potential third party.

(b) Share based payments

The Group uses the Black-Scholes option pricing model in accounting for its share-based payments. The Black-Scholes model takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying scheme and the risk free interest rate for the term of the option. The fair value of options granted under the Macquarie Harbour Mining Employee Option Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

4 Segment information

(i) Business segment

The Group operates predominantly in one industry. Its principal activities are those of prospecting and mineral exploration.

(ii) Geographical segment

The Group operates only in Australia.

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
5 Revenue Revenue from continuing operations Other revenue Interest received	118,483 2,965 116,820 2,965

48

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
6 Other income Net gain on disposal of property, plant and equipment 6 - 6 7 Expenses Loss before income tax includes the following expenses: Depreciation Plant and equipment 24,204 521 24,204 Motor vehicles 9,063 - 9,063 Amount capitalised – exploration and evaluation (14,406) - (14,406) 18,861 521 18,861 Employee benefit expense Salaries, fees and other benefits 218,786 - 218,786 Amount capitalised – exploration and evaluation (162,701) - (162,701) 56,085 - 56,085 Other expenses Advertising 1,508 165 1,508 Borrowing costs 60 - 60 Conferences and seminars 4,471 1,533 4,471 Fringe benefits tax 2,814 - 2,814 General expenses 3,866 210 3,866 Hire of equipment 986 - 986 Interest paid 5,372 - 5,372 Legal cost 9,158 - 9,158 Motor vehicle expenses 5,473 - 5,473 Printing, postage and stationary 10,522 2,215 10,522 Repairs and maintenance 4,167 - 4,167 Subscriptions and donations 2,790 - 2,790 Telephone 18,429 2,935 18,429 Travel expenses 16,882 8,029 16,882 86,498 15,087 86,498	6 - 6	-
		521 - -
	18,861 521 18,861	521
	218,786 - 218,786 (162,701) - (162,701)	- -
	56,085 - 56,085	-
	1,508 165 1,508 60 - 60 4,471 1,533 4,471 2,814 - 2,814 3,866 210 3,866 986 - 986 5,372 - 5,372 9,158 - 9,158 5,473 - 5,473 10,522 2,215 10,522 4,167 - 4,167 2,790 - 2,790 18,429 2,935 18,429 16,882 8,029 16,882	165 - 1,533 - 210 - - - - 2,215 - - 2,935 8,029
	86,498 15,087 86,498	15,087

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
8 Income tax expense (a) Income tax expense Current tax Deferred tax (b) Reconciliation of income tax expense to prima facie tax payable Loss before income tax Prima facie income tax at 30% Tax loss not recognised Income tax expense/(benefit) (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at 30% (d) Unrecognised deferred tax assets arising on timing differences and losses Timing Losses – revenue	- - - - - -	- -
	- - -	-
	(545,876) (145,492) (546,747)	(145,472)
	(163,763) (43,648) (164,024)	(43,642)
	(163,763) (43,648) (164,024)	(43,642)
	- - -	-
	(691,368) (145,492) (692,219)	(145,472)
	(207,411) (43,648) (207,666)	(43,642)
	- - - 691,368 145,492 692,219	- 145,472

Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profit will be available against which tax losses can be utilised.

9 Current assets – Cash and cash equivalents

Cash at bank and on hand 3,845,099 238,417 3,842,739 237,934

(a) Interest rate risk exposure The Group’s and the parent entity’s exposure to interest rate risk is discussed in note 2.

(b) Undrawn cash facilities

The Group has undrawn cash and cash equivalents at 30 June 2008 amounting to $191,263 (2007: Nil)

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated	Consolidated	Parent	Entity
	2008	2007	2008	2007
	$	$	$	$
10 Current assets – Trade and other receivables
Other receivables	94,570	16,043	94,148	15,279

(a) Other receivables

These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the terms or repayment exceed six months. Collateral is not normally obtained.

(b) Interest rate risk

Information about the Group’s and the parent entity’s exposure to interest rate risk in relation to trade and other receivables is provided in note 2.

(c) Impaired receivables and receivables past due

None of the current receivables are impaired or past due but not impaired.

(d) Fair value and credit risk

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the carrying amount each class of receivables mentioned above. Refer to note 2 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.

11 Non current assets – Receivables

Loans to related parties - - 743,308 34,927

(a) Risk exposure

Information about the Group’s and the parent entity’s exposure to credit risk and interest rate risk is provided in note 2.

12 Non current assets – Other financial assets

Investment in controlled entity (Note 29(a)) Prepaid finance expenses	- - 13,000 13,000 728 - 728 -
	728 - 13,728 13,000

(a) This financial asset is held at cost.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
13 Non current assets – Exploration and evaluation Exploration and evaluation Exploration and evaluation – costs less amounts written off 763,388 98,238 - Reconciliation At the beginning of the period 98,238 - 34,542 Expenditure during the period 665,150 98,238 - Amounts transferred to subsidiary - - (34,542) Amounts written off - - - 763,388 98,238 -		34,542
	98,238 - 34,542 665,150 98,238 - - - (34,542) - - -	- 34,542 - -
	763,388 98,238 -	34,542

The ultimate recoupment of exploration and evaluation costs carried forward is dependent upon the successful development and/or commercial exploitation, or alternatively sale, of the respective areas of interest.

14 Non current assets – Property, plant and equipment

Plant and equipment Plant and equipment – at cost Less: Accumulated depreciation Reconciliation At the beginning of the year Additions Disposals Depreciation (Note 7) Closing net book value Motor vehicles Motor vehicles – at cost Less: Accumulated depreciation Reconciliation At the beginning of the year Additions Depreciation (Note 7) Closing net book value	317,816 11,759 317,816 (24,719) (521) (24,719)	11,759 (521)
	293,097 11,238 293,097	11,238
	11,238 - 11,238 306,157 11,759 306,157 (94) - (94) (24,204) (521) (24,204)	- 11,759 - (521)
	293,097 11,238 293,097	11,238
	139,685 - 139,685 (9,063) - (9,063)	- -
	130,622 - 130,622	-
	- - - 139,685 - 139,685 (9,063) - (9,063)	- - -
	130,622 - 130,622	-

52		Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
14 Non current assets – Property, plant and equipment (continued) Plant and equipment 293,097 11,238 293,097 11,238 Motor vehicles 130,622 - 130,622 - 423,719 11,238 423,719 11,238 15 Non current assets – Deferred assets Capital raising expenses - 22,300 - 22,300 Capital asset not ready for use 218,674 - 218,674 - 218,674 22,300 218,674 22,300 16 Non current assets – Intangible assets Formation expenses 5,326 5,326 1,283 1,283 17 Current liabilities – Trade and other payables Trade payables 62,279 85,753 58,071 73,520 Accrued expenses 56,291 - 56,291 - Other payables 29,577 - 29,577 - 148,147 85,753 143,939 73,520 Trade and other payables are non-interest bearing liabilities stated at cost and settled within 30 days. 18 Current liabilities – Borrowings Secured Hire purchase liabilities 18,821 - 18,821 - Other loans 9,157 - 9,157 - 27,978 - 27,978 -	equipment (continued) 293,097 11,238 293,097 11,238 130,622 - 130,622 -
	423,719 11,238 423,719 11,238
	- 22,300 - 22,300 218,674 - 218,674 -
	218,674 22,300 218,674 22,300
	5,326 5,326 1,283 1,283
	27,978 - 27,978 -

(a) Security and fair value disclosures

Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 20.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

Consolidated	Consolidated	Parent	Entity
2008	2007	2008	2007
$	$	$	$

18 Current liabilities – Borrowings (continue)

(b) Risk exposures

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 2.

19 Non current liabilities – Deferred tax liabilities

The balance comprises temporary
differences attributable to:
Acquisition of subsidiary	8,846	8,846	-	-

20 Non current liabilities – Borrowings

Secured
Hire purchase liabilities	113,116	-	113,116	-
(a) Secured liabilities and assets pledged as security
Hire purchase liabilities	131,937	-	131,937	-

Hire purchase liabilities are effectively secured as the rights to the assets recognised in the financial statements revert to the lessor in the event of default.

The carrying amounts or assets pledged as security for current and non-current borrowings are:

Hire purchase liabilities
Property, plant and equipment	130,622	-	130,622	-

(b) Fair value The carrying amounts and fair values of borrowings at balance date are:

	2008 2007 Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $	2008 2007 Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $
Consolidated Hire purchase liabilities Parent Entity Hire purchase liabilities	131,937 131,937 -	-
	131,937 131,937 -	-

54 | Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

20 Non current liabilities – Borrowings (continue)

(c) Risk exposures

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 2.

21 Contributed equity

(a) Share capital 2008 Number 2007 Number	2008 $ 2007 $
Ordinary shares – fully paid 54,995,760 24,250,010 Options – unlisted 2,380,750 - Options – listed 27,497,885 -	5,256,397 442,455 - - 234,086 -
	5,490,483 442,455

(b) Movement in ordinary share capital

(b) Movement in ordinary share capital
Date Details	Number of shares Issue price $	$
1 March 2007 Placement of shares 30 April 2007 Placement of shares 25 May 2007Shares issued pursuant to share sale agreement 31 May 2007 Placement of shares Less: Transaction costs arising on issue of shares 7 August 2007 Placement of shares 10 August 2007 Placement of shares 7 December 2007Issue of shares pursuant to a prospectus 7 December 2007Issue of shares pursuant to broker agreement Less: Transaction costs arising on issue of shares	10 1.00 7,000,000 0.001 13,000,000 0.001 4,250,000 0.10 24,250,010 1,500,000 0.10 250,000 0.10 27,615,000 0.20 1,380,750 0.20 54,995,760	10 7,000 13,000 425,000 (2,555)
		442,455 150,000 25,000 5,523,000 276,150 (1,160,208)
		5,256,397

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

21 Equity securities issued (continued)

(d) Options

At the end of the period, options over ordinary shares on issue are as shown below:

2,380,750 unlisted options exercisable at 20 cents and expiring 31 August 2012.
27,497,885 listed options exercisable at 20 cents and expiring 31 August 2012.

Date Details	Number of options Issue price $	$
7 December 2007Issue of options pursuant to an agreement 2,380,750 - - 18 April 2008Issue of options pursuant to rights issue 20,730,001 0.01 207,300 9 May 2008Issue of options pursuant to rights issue 6,767,884 0.01 67,679 Less: Transaction costs arising on issue of shares (40,893) 29,878,635 234,086 (f) Capital management process Details of the Group’s capital management process are set out in note 2. 22 Reserves and retained earnings (a) Reserves Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $ Share-based payments reserve 230,933 - 230,933 - Movements in share-based payments reserve were as follows: Balance 1 July - - - - Employee share plan expense 230,933 - 230,933 - Balance 30 June 230,933 - 230,933 - (b) Retained profits Movements in retained profits were as follows: Balance 1 July (145,492) - (145,472) - Net profit/(loss) for the year (522,507) (145,492) (523,378) (145,472) Balance 30 June (667,999) (145,492) (668,850) (145,472)		- 207,300 67,679 (40,893)
		234,086

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

22 Reserves and retained earnings (continue)

(c) Nature and purpose of reserves

(a) Share-based payments reserve

The share-based payments reserve is used to recognise:

the fair value of options issued to employees but not exercised.

23 Key management personnel disclosures

(a) Directors

The following persons were directors of Macquarie Harbour Mining Limited during the financial period.

(i) Chairman – non executive

B A Conti

(ii) Executive directors

B W Mead

F A Rogers, Managing Director

(iii) Non-executive directors

N R Allen P L A Robertson

(c) Key management personnel compensation

	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
Short-term employee benefits Post-employment benefits Share-based payments	348,717 120,000 348,717 120,000 35,550 - 35,550 - 97,000 - 97,000 -
	481,267 120,000 481,267 120,000

(d) Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the remuneration report on pages 16 to 18.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

23 Key management personnel disclosures (continued)

(ii) Option holdings

The numbers of options over ordinary shares in the company held during the financial period by each director of Macquarie Harbour Mining Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2008 Name	Balance at the start of theyear	Granted during the period as remuneration	Exercised during the period	Options issued during the period	Balance at the end of theyear	Vested and exercisable at the end of theperiod
Directors of Macquarie Harbour Mining Limited
B A Conti B W Mead F A Rogers N R Allen P L A Robertson	- - - - -	- 500,000 500,000 - -	- - - - -	182,500 1,020,001 6,512,503 100,000 75,001	182,500 1,520,001 7,012,503 100,000 75,001	182,500 1,520,001 7,012,503 100,000 75,001

All vested options are exercisable at the end of the year.

(iii) Share holdings

The numbers of shares in the company held during the financial period by each director of Macquarie Harbour Mining Limited and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

2008 Name	Balance at the start of theyear	Other changes during the year	Balance at the end of theyear
Directors of Macquarie Harbour Mining Limited Ordinary shares
B A Conti B W Mead F A Rogers N R Allen P L A Robertson	200,000 2,000,001 13,000,006 200,001 100,001	165,000 40,000 25,000 - 50,000	365,000 2,040,001 13,025,006 200,001 150,001

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

23 Key management personnel disclosures (continued)

2007 Name	Balance at the start of theyear	Other changes during the year	Balance at the end of theyear
Directors of Macquarie Harbour Mining Limited Ordinary shares
G A S Rogers B A Conti B W Mead F A Rogers N R Allen P L A Robertson	- - - - - -	- 200,000 2,000,001 13,000,006 200,001 100,001	- 200,000 2,000,001 13,000,006 200,001 100,001

(e) Loans to key management personnel

There are no loans to directors or other key management personnel of Macquarie Harbour Mining Limited.

(f) Other transactions with key management personnel

During the period, the Group was charged $49,484 (2007: $3,525) by Harden East & Conti Pty Ltd for business and taxation services. Harden East & Conti Pty Ltd is a company associated with Mr B A Conti.

During the period, the Group was charged $144,197 (2007: $42,039) by Ageicion Pty Ltd which is the corporate trustee for the Mead Family Trust for consulting services. Ageicion Pty Ltd is a company associated with Mr B W Mead.

During the period, the Group was charged $425,678 (2007: $89,223) by Rogers Engineering Services Pty Ltd for consulting services, construction of plant and equipment and rental services. Rogers Engineering Services Pty Ltd is a company associated with Mr F A Rogers.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

Consolidated	Consolidated
2008	2007
$	$

23 Key management personnel disclosures (continued)

Aggregate amounts of each of the above types of other transactions with key management personnel of Macquarie Harbour Mining Limited:

Amounts recognised as expense
Harden, East & Conti Pty Ltd
Accountancy	34,554	970
Travel	880	-
Rogers Engineering Services Pty Ltd
Consulting fees	12,000	80,000
General expenses	930	-
Printing, postage and stationary	529	1,081
Rental expense	26,467	-
Repairs and maintenance	2,012	-
Telephone	8,486	1,738
Travel	-	3,744
Ageion Pty Ltd
Conferences and seminars	4,190	-
Consulting fees	124,380	40,000
General expenses	815	-
Option expense	48,500	-
Printing, postage and stationary	738	754
Repairs and maintenance	25	-
Travel	1,347	749
Mr F A Rogers
Motor vehicle expenses	364	-
Option expense	48,500	-
Salaries and wages	8,333	-
Superannuation contributions	750	-
Travel	1,677	3,182
Mr B A Conti
Superannuation contributions	26,160	-
Mr B W Mead
Directors’ fees	7,000	-
Superannuation contributions	630	-
Mr N R Allen
Directors’ fees	7,000	-
Superannuation contributions	630	-

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated 2008 2007 $ $
23 Key management personnel disclosures (continued) Amounts recognised as expense Mr P L A Robertson Directors’ fees Superannuation contributions Travel Amounts recognised as property, plant and equipment Rogers Engineering Services Pty Ltd Construction of mobile tin sampling plant Mr F A Rogers Purchase of boat (includes salaries and wages, superannuation) Purchase of GPS unit Amounts recognised as motor vehicles Rogers Engineering Services Pty Ltd Purchase of Toyota tray utility Amounts recognised as office furniture and equipment Rogers Engineering Services Pty Ltd Purchase and installation of air conditioning units Ageicion Pty Ltd Purchase of laptop computers Purchase of office furniture Amounts recognised as exploration and evaluation Rogers Engineering Services Pty Ltd Amounts paid in relation to exploration and evaluation Mr F A Rogers Amounts paid in relation to exploration and evaluation Salaries and wages Superannuation	7,000 - 630 - 453 -
	374,980 132,218
	189,032 - 2,350 - 300 -
	191,682 -
	1,103 -
	3,091 - 4,715 - - 536
	7,806 536
	150,250 2,660 2,067 - 73,333 - 6,600 -
	232,250 2,660

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated 2008 2007 $ $
23 Key management personnel disclosures (continued) Amounts recognised as share issue costs Harden East & Conti Pty Ltd Amounts paid in relation to share issues 14,050 2,555 Rogers Engineering Services Pty Ltd Amounts paid in relation to share issues 31,778 - Ageicion Pty Ltd Amounts paid in relation to share issues 7,987 - Mr F A Rogers Amounts paid in relation to share issues 10,000 - 63,815 2,555 Aggregate amounts payable to key management personnel of the Group at balance date relating to the above types of other transactions: Current liabilities Rogers Engineering Services Pty Ltd 21,505 20,225 Mr F A Rogers 120 - Harden East & Conti Pty Ltd 968 3,525 22,594 23,750	14,050 2,555 31,778 - 7,987 - 10,000 -
	63,815 2,555
	22,594 23,750

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $	Consolidated Parent Entity 2008 2007 2008 2007 $ $ $ $
24 Remuneration of auditors During the period the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) Audit services BDO Kendalls Audit & Assurance (WA) Pty Ltd Audit and review of financial reports 25,000 10,000 13,058 10,000 Total remuneration for audit services 25,000 10,000 13,058 10,000 (b) Non-audit services Audit-related services BDO Kendalls Corporate Finance (WA) Pty Ltd Due diligence services - 2,300 - 2,300 Total remuneration for audit-related services - 2,300 - 2,300 Total remuneration for non-audit services 25,000 12,300 13,058 12,300
	25,000 10,000 13,058	10,000
	- 2,300 -	2,300
	- 2,300 -	2,300
	25,000 12,300 13,058	12,300

25 Contingencies

The Group has no contingent assets or liabilities to disclose at the date of this report.

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated	Consolidated	Parent Entity	Parent Entity
	2008	2007	2008	2007
	$	$	$	$
26 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not		recognised as liabilities is as follows:
Exploration and evaluation
Payable:
Within one year	485,500	-	485,500	-
Later than one year but not later than	485,500	-	485,500	-
five years
Later than five years	-	-	-	-
	971,000	-	971,000	-

(b) Finance commitments

(i) Hire purchase liabilities

The Group finances various plant and equipment with a carrying amount of $130,622 (2007 - Nil) under hire purchase agreements expiring within the next five years.

Commitments in relation to hire purchase agreements are payable as follows: Within one year Later than one year but not later than five years Later than five years Minimum finance payments Future finance charges Total hire purchase liabilities Representing hire purchase liabilities: Current (note 18) Non-current (note 20)	31,202 - 31,202 - 139,912 - 139,912 - - - - -
	171,114 - 171,114 - (39,177) - (39,177) -
	131,937 131,937
	18,821 - 18,821 - 113,116 - 113,116 -
	131,937 - 131,937 -

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

Consolidated	Consolidated	Parent	Entity
2008	2007	2008	2007
$	$	$	$

27 Related party transactions

(a) Parent entities

The parent entity within the Group is Macquarie Harbour Mining Limited.

(b) Subsidiaries

Interests in subsidiaries are set out in note 29.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 23.

(d) Transactions with related parties

(d) Transactions with related parties
Purchases of goods and services
Purchases of property, plant and equipment from other related parties	198,774	-	198,774	-
Purchases of consulting services from other related parties	136,384	120,000	136,384	120,000
Purchases of business and taxation services from other related parties	49,074	11,006	48,604	7,363
Superannuation Contributions
Contributions to superannuation funds on behalf of employees	35,550	-	35,550	-
Share-based payments
Compensation received from employee option plan (note 34)	97,000	-	97,000	-
Other transactions
Remuneration paid to directors of the Australian parent entity	104,333	-	104,333	-
Payment of company expenses	48,631	-	48,631	-
Amounts paid in relation to exploration and evaluation	152,317	1,000	152,317	1,000
Amounts paid in relation to share issues	49,869	-	49,869	-

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

	Consolidated	Consolidated	Parent	Entity
	2008	2007	2008	2007
	$	$	$	$
27 Related party transactions (continued)
(e) Outstanding balances arising from purchases of goods and		services
Current payables (purchases of
services)
Other related parties	22,594	28,676	22,594	25,033

No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

(f) Loans to/from related parties

Loans to subsidiaries Beginning of the period Loans advanced End of the period	- - 34,927 - - - 707,416 34,927
	- - 742,343 34,927

No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

(g) Terms and conditions

All other transactions were made on normal commercial terms and conditions and at market rates.

Outstanding balances are unsecured and are repayable in cash.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

28 Business combination

On 25 May 2007 the parent entity acquired 100% of the issued share capital of Goldstock Mining Pty Ltd.

Details of the fair value of the assets and liabilities acquired and goodwill are as follows:

(a) Summary of acquisition

(a) Summary of acquisition
	$
Purchase consideration Cash Paid 13,000,000 shares issued pursuant to share sale agreement Total purchase consideration Fair value of net identifiable assets acquired Deferred tax liability on acquisition Goodwill in subsidiary	- 13,000
	13,000
	(7,640) (8,846)
	29,486

(b) Assets and liabilities acquired

	Acquiree’s carrying amount Fair value $ $
Cash Other receivables Tenement bonds Intangible assets: formation expenses Trade payables Loan – Macquarie Harbour Mining Limited Deferred tax liability Net identifiable assets acquired	503 503 764 764 34,210 34,210 4,043 4,043 (12,233) (12,233) (34,927) (34,927) - (8,846)
	(7,640) (16,486)

29 Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results for the following subsidiary in accordance with the accounting policy described in note 1(b):

	Country of	Class of
Name of entity	incorporation	shares	Equity	holding
			2008	2007
			%	%
Goldstock Mining Pty Limited	Australia	Ordinary	100	100

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

30 Events occurring after the balance sheet date

Except for the events discussed above, no other matter or circumstance has arisen since 30 June 2008 that has significantly affected, or may significantly affect:

(a) the Group's operations in future financial years;
(b) the results of those operations in future financial years; or
(c) the Group's state of affairs in future financial years.

31 Reconciliation of profit after income tax to net cash inflow from operating activities

Consolidated
Parent Entity
2008
2007
2008
2007
$
$
$
$

Operating profit (loss) after income
tax
(522,507)
(145,492)
(523,378)
(145,472)
Profit on disposal of property, plant
and equipment
(6)
-
(6)
-
Annual leave expense
29,577
-
29,577
-
Borrowing costs
60
-
60
-
Depreciation
18,861
521
18,861
521
Option expense
153,291
-
153,291
-
Change in operating assets and
liabilities
(Increase) in trade and other
receivables
(78,527)
(16,043)
(78,869)
(15,279)
Increase in trade and other payables
2,748
33,057
6,408
33,057
Net cash (outflow) from operating
activities
(396,503)
(127,957)
(394,056)
(127,173)
32 Non-cash investing and financing activities
Acquisition of Goldstock Mining Pty
Ltd by means of share issue
-
-
13,000
13,000

(522,507)
(145,492)
(523,378)
(145,472)
(6)
-
(6)
-
29,577
-
29,577
-
60
-
60
-
18,861
521
18,861
521
153,291
-
153,291
-
(78,527)
(16,043)
(78,869)
(15,279)
2,748
33,057
6,408
33,057

(396,503)
(127,957)
(394,056)
(127,173)

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

33 Earnings per share

	Consolidated 2008 2007 $ $
(a) Basic earnings per share Loss attributable to the ordinary equity holders of the company (b) Reconciliations of earnings used in calculating earnings per share Loss attributable to the ordinary equity holders of the company (c) Weighted average number of shares used as the denominator Weighted average number of ordinary shares	(0.0175) (0.0169)
	(545,876) (145,492)
	31,252,402 8,579,928

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

34 Share-based payments

(a) Employee option plan

The establishment of the Macquarie Harbour Mining Limited employee share option plan was established on the 7 December 2007. Under the plan, the board may issue options to participants (or to a nominee as the participant directs) having regard, in each case, to:

a. the contribution to the Company which has been made by the participant;
b. the period of employment of the participant with the company, including (but not limited to) the years of service by that participant;
c. the potential contribution of the participant to the company; and
d. any other matters which the board considers in its absolute discretion, to be relevant.

When exercisable, each option is convertible into one ordinary share.

The exercise price of options is the exercise price determined by the board on or before the issue date provided that in no event shall the exercise price be less than the weighted average sale price of shares sold on ASX during the five business days prior to the issue date or such other period as determined by the board.

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

			Balance at the start of the year Number					Vested and exercisable at end of the year Number
				Granted during the year Number	Exercised during the year Number	Forfeited during the year Number	Balance at end of the year Number
Grant date	Expiry date	Exercise price

Consolidated andparent entity – 2008
07 Dec 2007	31 Aug 2012	$0.20	-	1,000,000	-	-	1,000,000	1,000,000
Weighted average exercise price			$0.20	$0.20	$0.20	$0.20	$0.20	$0.20

No options expired during the period covered by the table above.

Fair value of options granted

The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 10 cents per option (2007 – not applicable). The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share and the risk free interest rate for the term of the option.

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Notes to the Financial Statements

For the year ended 30 June 2008

34 Share-based payments (continued)

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

(a) options are granted for no consideration and vest based on Macquarie Harbour Mining Limited’s TSR ranking within a peer group of 20 selected companies over a three year period.
(b) exercise price: $0.20.
(c) grant date: 7 December 2007.
(d) expiry date: 31 August 2012.
(e) share price at grant date: $0.17.
(f) expected price volatility of the company’s shares: 68%.
(g) risk-free interest rate: 6.5%.

The expected price volatility is based on the historic volatility adjusted for any expected changes to future volatility due to publicly available information.

(b) Expenses arising from share-based payment transactions

Total expenses arising from share-based payments transactions recognised during the period as part of employee benefit expense were as follows:

	Consolidated	Consolidated		Parent	Entity
	2008	2007		2008	2007
	$	$		$	$
Options issued under employee option plan	97,000		-	97,000		-

35 Guarantees

Macquarie Harbour Mining Ltd is party to a bank guarantee under which it has guaranteed the tenement bonds for Goldstock Mining Pty Ltd. The guarantees on issue at 30 June 2008 are $29,580 (2007: Nil) with undrawn amounts of $70,420 (2007: Nil).

Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Directors’ Declaration

For the year ended 30 June 2008

The directors of the company declare that:

(a) The financial statements, comprising the income statement, balance sheet, cash flow statement, statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001; and
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the company’s and consolidated entity's financial position as at 30 June 2008 and of their performance for the financial period ended on that date.
(b) In the directors opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable3; and
(c) The remuneration disclosures set out on pages 12 to 18 of the directors’ report (as part of the audited Remuneration Report) comply with section 300A of the Corporations Act 2001; and
(d) The directors have been given the declarations by the chief executive officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Board of Directors and is signed on behalf of the directors by:

==> picture [91 x 62] intentionally omitted <==

B A Conti Director

Perth, Western Australia 30 September 2008

| Financial Report – 30 June 2008

Macquarie Harbour Mining Limited ABN 41 124 212 175

Independent Auditor’s Report

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Financial Report – 30 June 2008 |

Macquarie Harbour Mining Limited ABN 41 124 212 175

Independent Auditor’s Report (continued)

==> picture [452 x 616] intentionally omitted <==

| Financial Report – 30 June 2008

AI assistant

VYSARN LIMITED — Annual Report 2008

66029_rns_2008-09-29_4228d830-901b-4a1e-b4f7-b09e48e21d53.pdf

Corporate Directory

Directors

Secretary

Share Register

Auditor

Solicitors

Bankers

Stock Exchange Listings

Registered Office in Australia

Directors’ Report

Directors

Principal activities

Dividends

Review of operations

(a) Income statement

Directors’ Report

Review of operations (continued)

(b) Financial position

(c) Exploration

Directors’ Report

Review of operations (continued)

Directors’ Report

Review of operations (continued)

(d) Corporate

Directors’ Report

Review of operations (continued)

Earnings per share

Matters subsequent to the end of the financial period

Likely developments and expected results of operations

Environmental regulation

Directors’ Report

Information on directors

B A Conti FCA, FCIS, FTIA. Chairman – non-executive.

Experience and expertise

Former directorships in last 3 years

Special responsibilities

Interests in shares and options

F A Rogers. Managing director.

Experience and expertise

Directors’ Report

Information on directors (continued)

B W Mead B.Econ. Executive director.

Experience and expertise

Interests in shares

Dr N R Allen B.Sc, PhD. Non-executive director.

Experience and expertise

Directors’ Report

Information on directors (continued)

P L A Robertson B.E. (Met), MBA. Non-executive director.

Experience and expertise

Interests in shares

Company secretary

J D’Andrilli B.Com, ACA. Company secretary.

Directors’ Report

Meeting of directors

Remuneration report

(a) Principles used to determine the nature and amount of remuneration

Directors’ Report

Remuneration report (continued)

Non-executive directors

Directors’ fees

Directors’ Report

Remuneration report (continued)

Retirement allowances for directors

Executive pay

(i) Base pay

(ii) Benefits

(iii) Retirement benefits

(iv) Employee share option scheme

Directors’ Report

Remuneration report (continued)

(b) Details of remuneration

Directors’ Report

Remuneration report (continued)

(c) Service agreements

F A Rogers, Managing Director

B W Mead, Executive Director

VYSARN LIMITED Annual Report 2008