VYSARN LIMITED - Annual Report 2011

annuaL report 30tH June 2011

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CORPORATE DIRECTORY REPORT fROm ThE ChAIRmAn REVIEW Of OPERATIOnS DIRECTORS’ REPORT CORPORATE GOVERnAnCE STATEmEnT AuDITOR’S InDEPEnDEnCE DEClARATIOn fInAnCIAl REPORT DIRECTORS’ DEClARATIOn InDEPEnDEnT AuDITOR’S REPORT ADDITIOnAl InfORmATIOn

Corporate DIreCtorY

Directors

Bankers

Basil Conti (Chairman) Frank Rogers (Managing Director) Benjamin Mead Dr Neil Allen Simon Wells

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

secretaries

stock exchange listings

Benjamin Mead Richard Rybak Annabelle Brooks

MHM Metals shares are listed on the Australian Securities Exchange

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

share register

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

registereD office in australia

Level One, 20 Kings Park Road West Perth WA 6005

auDitor

BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008

phone: +61 8 9321 6777 facsimile: +61 8 9324 1293 email: [email protected] website: www.mhml.com.au

solicitors

Clayton Utz Level 27, QV.1 Building 250 St Georges Terrace Perth WA 6000

report from tHe CHaIrman

Dear Shareholder

The 2011 financial year has been another significant period of development of your Company. The primary focus of the Company has been the continuing development of the aluminium waste recycling business in Australia and commencing the global expansion into the United States. In October 2010 a private placement of shares raised $12 million at $1 per share to facilitate the US expansion and provide working capital.

During the year the staged upgrade of the Company’s salt slag recycling plant, dross recycling plant and aluminium oxide processing plant was undertaken. This has resulted in the commissioning of the closedloop salt slag processing plant achieving a landfill-free solution for the aluminium industry waste stream. At the time of this report construction of a leading-edge salt crystallisation system is under way to be commissioned during the current financial year. Please refer to the operations report for further details of the Australian and US Aluminium Waste Recycling development.

Our silica division has continued to develop negotiations with various parties expressing interest in off-take of high purity lump silica and silica flour and the development of a silica smelter in Tasmania.

The Company’s other mineral exploration assets continue to be enhanced through the exploration programmes as detailed in the operations report.

I would like to take this opportunity to thank my fellow Directors and all the Company employees for their commitment to the success of the Company.

Your board of directors is looking forward to continuing to enhance shareholder value and we thank you for your continued support.

Yours sincerely

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Basil Conti Chairman

reVIeW of operatIonS

Consolidated Statement of Comprehensive Income	Results 2011 $	Results 2010 $
Revenue from continuing operations	5,089,967	2,855,239
Loss before income tax expense	(1,411,086)	(2,022,245)
Income tax beneft/(expense)	1,104,258	-
loss attributable to members
of mhm metals limited	(306,828)	(2,022,245)

» Appointment of Simon Wells as Executive Director

introDuction

MHM Metals Limited (MHM) has continued to strengthen over the 2011 financial year. MHM’s aluminium waste recycling business has become the primary focus of the company as the Australian operations mature and setting up the global expansion is a major imperative.

» Resignation of Peter Robertson as Non-Executive Director

Australian Aluminium Waste Recycling Operations

» Construction and commissioning of salt slag recycling plant, dross recycling plant and aluminium oxide processing plant

MHM retains diversified mineral interests in high purity silica, gold and base metals due to the value of these projects and the potential to deliver fruitful outcomes for shareholders. MHM’s strategy is to continue to advance the mineral projects while assessing options for these such as project development partners, divestment or spin-off opportunities.

» Continued profitability of the Australian operations during ongoing construction of the three new systems

» Contract signed for aluminium oxide-based AL80 product offtake, an event of global significance for the aluminium industry

» Construction of a leadingedge salt crystallisation system is underway

Over the year key MHM developments included:

Corporate

uS Aluminium Waste Recycling Developments

» Name change from Macquarie Harbour Mining Limited to MHM Metals Limited to better reflect the diversified interests of the company

» Relocation of Executive Director Ben Mead to the United States to drive global expansion of MHM’s aluminium waste recycling business

» $12 million capital raising at $1 per share to help fund the expansion of the aluminium salt slag recycling business in the United States

» Agreement with US-based Smelter Service Corporation to explore salt slag recycling opportunities in the US, following an introduction from Alcoa Inc

» Continued engagement with Alcoa’s US operations regarding salt slag recycling, in addition to other companies expressing keen interest

» New opportunity to recycle black dross, another waste byproduct of the aluminium industry that can be recycled using MHM’s proprietary technology

» Appointment of John Pugh as Director of Operations, North America

» Site selection well advanced with ongoing due diligence and contract negotiations

» Testing and analysis of a 350,000 tonne salt slag landfill owned by Smelter Service Corporation. Additional landfills and stockpiles of salt slag and black dross also identified, with analysis ongoing

» Engagement with state and county governments about project support

» Preliminary environmental permitting and approval investigations

» Investigation of project financing options with focus on non-dilutionary mechanisms

» Engagement with a number of parties expressing support for additional salt slag and black dross recycling facilities elsewhere in the US

high Purity Silica Project Development

» Continued positive engagement with proponents of a Tasmanian silicon smelter proposal

» Ongoing negotiation for offtake of high purity lump silica and silica

flour for use within Australia and for export

» Drilling of the Cape Sorell high purity lump silica project

Other mineral Exploration Project Development

» Drilling and VTEM analysis of the Hill 99 VHMS copper – gold – lead – zinc project

» VTEM analysis of the Thomas Creek porphyry copper – gold project

» Relinquishment of the Miyabi Gold Project (Tanzania), together with previously held exploration areas in western Tasmania

corporate

Change of name

At MHM’s 2010 Annual General Meeting shareholders approved a company name change from Macquarie Harbour Mining Limited to MHM Metals Limited. The new name more appropriately reflects the diversified interests of the company particularly the importance of the aluminium waste recycling business. The company’s ASX code remains MHM.

Capital Raising

During October 2010 a private placement of shares to new and existing sophisticated investors occurred raising $12 million at $1.00 per share. The capital raising was for the expansion of MHM’s aluminium business in the US and for working capital.

The placement was made under the ASX Listing Rule 7.1, which allows the issue of up to 15% new

securities without shareholder approval in any 12-month period. The placement was subsequently ratified by shareholders at the company’s AGM.

Appointment of Executive Director

In April 2011 Simon Wells was appointed as an Executive Director. Mr Wells has played a pivotal role in the development of MHM’s silicon smelter proposal working closely with the multinational project proponents and the Tasmanian and federal governments. Mr Wells has assumed executive oversight of the operational aspects of MHM and its subsidiaries together with ongoing focus on the high purity silica project. Mr Wells’ areas of expertise include government liaison, environmental management, statutory regulation, licensing and public relations.

Mr Wells has a background in project management and implementation and consulting to the mining, engineering and chemical industries. He was the Managing Partner of 3FC Group, a consulting and political lobbying firm that represents domestic and international companies with major infrastructure development proposals within Australia. At the time of his engagement 3FC was assisting proponents of developments with a capital value in excess of $1 billion.

Resignation of non-Executive Director

In November 2010 Non-Executive Director Peter Robertson resigned from the company for personal reasons unrelated to the company.

aluminium Waste recycling operations

MHM Metals Limited holds the perpetual, exclusive global rights to a technology to recycle aluminium salt slag. The technology can also be used to recycle aluminium black dross, another waste product from the aluminium industry. The technology results in total waste treatment and production of aluminium and other saleable products. The process removes the need for any portion of the salt slag or black dross to be sent to landfill.

What is aluminium salt slag?

Aluminium salt slag, also known as aluminium salt cake, is a byproduct from the secondary aluminium industry. The secondary aluminium industry is the industry sector that re-melts recycled aluminium.

When recycled aluminium is placed in a rotary barrel furnace to be re-melted, salt and potassium chloride are also introduced to act as a flux and increase the efficiencies of the process. Once the molten aluminium has been recovered, the remaining waste product must be removed and treated. This byproduct is aluminium salt slag.

Traditionally the aluminium salt slag was placed in landfill, though the practice is no longer permitted in Australia. The EPA has designated aluminium salt slag a hazardous material and can no longer be disposed in landfill.

Salt slag landfill is permitted in the US in some states. While salt slag landfill is generally permissible, the

regulations covering this practice are becoming increasingly stringent. There is growing resistance to salt slag landfilling practices as a number of problematic landfills have heightened backlash to this practice in recent years. MHM’s cost-effective alternative to landfill is expected to increase pressure to cease salt slag landfilling and adopt recycling as industry best practice.

What is aluminium black dross?

Black dross is a product that is produced when aluminium is melted in reverberatory furnaces with a similar salt and potash flux that is used in the salt slag producing rotary furnace operations. Black dross generally has a similar composition to salt slag, albeit often with a higher aluminium content.

Black dross recycling also presents an opportunity to recover aluminium, salt/potash and aluminium oxides using MHM’s proprietary technology.

What is aluminium white dross?

White dross is a byproduct when aluminium is melted without the addition of salt and potash flux. White dross generally has an aluminium content higher than either salt slag or black dross and is wholly comprised of aluminium and aluminium oxides.

mhm’s closed-loop salt slag and black dross recycling process

MHM has exclusive, perpetual global rights to a technology that can recycle aluminium salt slag and black dross. The technology processes salt slag and black dross into three

commodities: aluminium, a salt and potassium chloride blend and aluminium oxide. All commodities have value and can be reused, with nothing left to landfill.

The technology has compelling environmental benefits including:

» Reduced energy consumption; the energy used in the recycling of aluminium recovered from salt slag and black dross is 95% less than required to produce aluminium from the primary production process using bauxite ore

» Recycling of salt, potash and aluminium oxides; all valuable commodities that were previously consigned to landfill

» Avoidance of hazardous materials in landfill

» Recovery of substantial volumes of water using closedloop salt flux crystallisation techniques

The technology can also be used to reclaim materials from existing salt slag/black dross landfills, removing material from the ground, recycling and reusing the recovered commodities.

Competitive advantages of mhm’s closed-loop recycling technology

MHM’s closed-loop salt slag and black dross recycling technology has distinct competitive advantages:

» High quality recovered aluminium concentrate: the aluminium recovered by MHM’s process is clean of all aluminium oxides and flux, and ready for re-melting.

» Aluminium oxide use: aluminium oxide comprises the largest portion of commodities recovered from recycled salt slag and black dross. Following recovery of this material by MHM, the aluminium oxide is further treated to produce a product called AL80, which is used as an alumina substitute by industry.

» Salt crystallisation techniques: the salt and potassium chloride flux is recovered from MHM’s process as high-density brine. This brine must be evaporated. The expense of producing a crystalline flux from the brine has traditionally been a hurdle to economic salt slag and black dross recycling. MHM’s process incorporates an innovative Australian evaporation technology to significantly reduce these costs and produce a flux that is immediately available for reuse in smelting.

» Cost competitive to landfill: while salt slag and black dross landfill is prohibited in Australia, a number of other global jurisdictions including in the US continue to permit landfill. MHM is confident that the salt slag and black dross recycling process provides a cost competitive alternative to landfill when the value of the recovered aluminium and flux is accounted for. This will likely result in industrydriven change of best practices for salt cake and black dross management as opposed to change by regulation.

» Program to recycle landfilled material: MHM’s program to reclaim landfilled salt slag and black dross should provide financial benefits for the company and benefits for the environment.

australian operations

Overview

MHM’s Australian salt slag recycling business is operated by wholly-owned subsidiary Alreco Pty Ltd. Alreco recycles 100% of the salt slag produced in Australia and also provides services associated with non-salt slag and white dross recycling.

Alreco recycles salt slag for Alcoa Australia Rolled Product Pty Ltd (Alcoa), a wholly owned subsidiary of Alcoa Inc (NYSE:AA). Alreco recycles salt slag and non-salt slag, and treats white dross for Sims Aluminium Pty Ltd, a wholly owned subsidiary of Sims Metal Management Limited (ASX:SGM). Alreco also has a program to recycle an existing salt slag landfill owned by Alcoa, estimated to contain 160,000 tonnes of salt slag.

Alreco’s salt slag recycling facility is located in Moolap, Victoria. The facility is within 2km of Alcoa’s aluminium smelter at Point Henry, within 60km of Sims Aluminium Pty Ltd at Laverton and less than 1km from Alcoa’s salt slag landfill that will be recycled by Alreco.

Process feedstock

Alreco operates a toll-fee structure with Alcoa and Sims for recycling of salt slag, non-salt slag and white dross. Under this arrangement Alreco charges a fixed price per tonne for services, with some recovered commodities remaining the property of Alcoa and Sims and Alreco retaining ownership of others.

The contract with Alcoa for landfill reclamation provides for Alcoa to

relinquish ownership rights to any commodities recovered from the 160,000 tonne salt slag landfill. Under the terms of the contract the salt slag will be recovered from the site, recycled and sold. Upon completion the landfill will be returned to a natural state. The landfilled salt slag contains aluminium, salt and aluminium oxides. No potash is present in the landfilled salt slag as the practice of blending potash with salt flux was not adopted until after the closure of this landfill.

As of 30 June 2011 salt

slag reclamation has not yet commenced at Alcoa’s landfill. Following commissioning of the closed-loop recycling system in June 2011, Alreco’s focus is re-processing a stockpile of stored partly-processed salt slag on site, in addition to ongoing delivery of new salt slag, non-salt slag and dross. The stockpiled partly-processed material was accumulated by Alreco to continue processing operations in Geelong concurrent with new plant construction.

When this stockpile is reduced Alreco will begin processing Alcoa’s 160,000 tonne salt slag landfill. Alreco’s profits are expected to substantially increase from this stage. Landfill processing will be used by Alreco to balance the throughput of the plant – processing the landfilled salt slag resource will vary according to the volumes received from Alcoa and Sims. This will enable Alreco to maximise plant throughput and efficiency. It is expected that the landfill will be processed at about 35,000 tonnes per year over five years, in addition to the estimated 24,000 tonnes

per year delivered by Sims and Alcoa. Alreco is exploring other opportunities to increase nonlandfill feedstock.

Aluminium oxide offtake

In June 2011 a contract was signed with Impex Minerals Pty Ltd for offtake of Alreco’s aluminium oxide-based AL80 product. AL80 is based on aluminium oxide from Alreco’s salt slag processing and value added using an additional proprietary process.

Finding viable applications for aluminium oxide had been a major hurdle for salt slag processing, with the industry trying unsuccessfully for many years to source a high value, high volume application for aluminium oxide. Alreco’s off take agreement for AL80 is significant for the global aluminium industry. MHM believes there is an opportunity for further value adding AL80, and this project is currently underway.

MHM is seeking additional aluminium oxide for treatment and to sell to Impex Minerals.

us operations

In January 2011 MHM

commenced an expansion of the salt slag recycling business into the US. Executive Director Ben Mead re-located to Tennessee to establish MHM Metals Corporation, a US wholly-owned operating subsidiary. Closedloop salt slag recycling will be an immensely positive development for the US aluminium industry welcomed by the aluminium industry, government and other stakeholders.

Project feasibility analysis with Alcoa, Smelter Service Corporation and others

In October 2010 MHM agreed with Smelter Service Corporation (SSC) to work together to assess opportunities for salt slag processing in the United States. SSC produces approximately 90,000 tonnes of salt slag per annum and has a 350,000 tonne salt slag landfill that may be suitable for reprocessing.

MHM’s analysis of the opportunities for salt slag recycling extended to a number of companies including continuing cooperation with Alcoa Inc.

The outcome of the internal study highlighted the enticing opportunity for salt slag recycling in the United States. The study also indicated the strong potential for black dross recycling. MHM has resolved that it is in the best interests of shareholders that MHM wholly own and operate any salt slag and black dross recycling facility. At time of writing this report MHM is engaged with SSC, Alcoa and others to secure feedstock supply contracts to underwrite construction of the first closed-loop US recycling operation for these types of waste.

Appointment of Director of Operations, north America

In June 2011 MHM Metals Corporation appointed Mr John Pugh as Director of Operations, North America. Mr Pugh was formerly Vice President of Business Development and Vice President of Operations for SSC.

Mr Pugh is widely regarded as one of the leading operations executives in the US aluminium industry and will be a great asset for MHM. Mr Pugh holds a degree in business management and has 31 years management experience in the metals industries. This includes five years with a manganese alloy foundry and 26 years in secondary aluminium recycling, including 21 years with SSC.

uS plant location and site due diligence

MHM is assessing a number of sites in the US for construction of the first salt slag and black dross recycling plant. This will depend on a number of factors; most importantly the proximity to salt slag and black dross suppliers. The company will determine the potential of these additional feedstocks prior to making an unconditional site acquisition. Irrespective, site due diligence including purchase price and negotiation of acquisition terms continues on a number of sites.

landfill reclamation due diligence

MHM has identified a number of landfills and stockpiles of salt slag and black dross that may be amenable to reclamation and reprocessing.

In March 2011 MHM undertook a testing program on a 350,000 tonne salt slag landfill owned by SSC. First stage testing indicated that the entire landfill might not be amenable to remediation. However, there appears to be potential to recover valuable aluminium and potentially some salt and potassium chloride

flux and aluminium oxide. The SSC landfill has some soil and clay contamination in some areas and separation of these from aluminium oxides can be inhibiting.

MHM and SSC have approached the Tennessee Department of Environment and Conservation with a number of proposals for remediation, which are being considered.

MHM has an ongoing program of identification and analysis of landfills and stockpiles that may be suitable for recycling. The sites are within the State of Tennessee and other locations around the country. Assessments are ongoing.

State and county government support

MHM’s proposal to bring closedloop salt slag and black dross recycling to the United States has been met with overwhelming support from every level of government. MHM’s business brings investment and job creation and will improve the sustainability of the US aluminium industry. Discussions have centred on project support, incentives and concessions and a quantitative support package will be finalised when MHM determines plant location.

Preliminary environmental permitting and approval appraisal

MHM’s permitting and engineering consultants have commenced preliminary assessment of permitting requirements for plant construction, together with an assessment of any differences

between Australian and US regulation that may require refinements to the technology to comply with US laws. No significant issues are expected.

Investigation of non-dilutionary financing mechanisms

MHM has commenced

investigations into non-dilutionary financing for its expansion into the US. Management is confident it can grow the business without shareholder dilution and using debt and other project finance facilities.

Engagement with parties with feedstock for additional recycling facilities

MHM has also engaged with aluminium companies that are enthusiastic about supplying salt cake in other regions of the US. MHM is simultaneously assessing additional salt slag recycling facilities to service these regions.

high purity silica project Development

The demand for high purity silicabased products is increasing exponentially due to hightech and renewable energy applications of the commodity. MHM is working on projects that would supply both high purity lump silica and silica flour.

High purity lump silica is used in production of silicon metal, a strategic high-tech commodity that results from smelting approximately three tonnes of silica with one tonne of carbon (coal, charcoal). Silicon metal has applications in the production of photovoltaic cells, computer chips and a range of high-tech

products that increase efficiency and reduce energy consumption.

Silica flour is a fine, granular product that has a variety of applications including manufacturing LCD screens and solar panel components.

MHM continues to be actively engaged with proponents of a Tasmanian silicon smelter proposal, together with ongoing negotiation for offtake of high purity lump silica and silica flour for use within Australia and for export.

Due to the discussions being commercial-in-confidence, only limited information can be provided at this stage. Management remains optimistic about outcomes from MHM’s silica interests.

MHM’s first-phase diamond drilling at the Cape Sorell High Purity Silica Project was completed during June 2011. A total of six short holes intersected white quartzite over a thickness of approximately 12 metres based on visual appearance. The silica rich quartzite dips approximately 50° west, and drilling was designed to test the true thickness of the quartzite at the North Escarpment prospect and the potential for a more extensive silica cap over mixed sediments including sandstone and siltstone. Sampling and assaying of the drill core was not finalised at the date of this report.

MHM is continuing to develop the company’s silica prospects while discussions occur with candidate project development partners. Decisions will be based on maximising returns to shareholders.

other mineral exploration project Development

MHM retains diversified mineral interests in gold and base metals due to the value of these projects and the potential to deliver outcomes for shareholders. MHM’s exploration landholding in western Tasmania is commonly regarded as an extension of the Mount Read Volcanics, a highly mineralised zone containing a number of historic and operating mines further to the north. Management believes that the wholly-owned exploration region has the potential to become a major mining district of Tasmania.

During the reporting period, MHM relinquished a number of mineral exploration projects including the Miyabi Gold Project in Tanzania and a number of Tasmanian gold and base metal targets.

vtem geophysical stuDies

In mid 2010 MHM completed a helicopter-borne geophysical survey (VTEM) over its western Tasmanian project area, which identified a number of targets. The survey was designed to locate conductive targets within prospective ground for gold, copper, nickel and iron ore. Following the VTEM analysis MHM’s exploration team conducted ground-truthing and soil sampling over some of the highest priority geophysical anomalies. The work carried out by MHM’s team, together with review of historical exploration has yielded two high-priority projects within the exploration area; the Hill 99 polymetallic prospect and the Thomas Creek Porphyry CopperGold prospect.

Review of the old drill holes at the Thomas Creek Porphyry CopperGold prospect indicates that there was strong hydrothermal activity in this system derived from an as yet undefined source deeper down. Moreover, the age of intrusions from Thomas Creek returned similar ages to Mt Lyell (copper-gold) mineralisation further to the north.

The rock sequence from Hill 99 polymetallic prospect shows striking similarities to those rock units which host the major gold, copper/gold and zinc/lead/silver mines in western Tasmania – especially North Lyell, Henty and Hellyer.

hill 99 Copper – Gold – Zinc – lead Prospect

The VTEM survey identified a number of strong anomalies approximately 2.5 km along strike from Hill 99. The anomalies lie between Hill 99 and the old Noddy Creek prospect explored by BHP in the early 1970s. The existence of these anomalies within such a prospective zone was considered highly encouraging.

Hill 99 is a polymetallic target that was tested by a fan of three diamond drill holes from a single site in the late 1990s by a previous explorer. The target was selected based on anomalous stream sediment and soil samples and also by a geophysics (IP) anomaly. The IP target was not intersected due to difficult ground conditions. Recent re-examination of the core has confirmed that the anomalous copper and zinc – lead values are associated with strongly altered mafic volcanic rocks with similarities to other economic deposits within the Mt Read Volcanic belt (Mt Lyell, Hellyer and Henty).

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Figure A. Prospect geology and drill location map of Hill99. Red zones show copper lodes from surface geochemistry and drill holes.

In June 2011 MHM completed a two-hole 369 metre diamonddrilling program at the project targeting copper mineralisation with zinc and gold credits in either a structural or VHMS setting. Three copper (+ minor gold) zones were apparent (see Figures A and B). These are defined by previous soil samples (shown as dots on Figure A) and intersections drawn on the cross sections. All are hosted by highly altered volcanics that have strong affinities with alteration assemblages at the North Lyell (previous production listed as 4.7Mt @ 5.28% Cu, 0.4 g/t Au and 34.3 g/t Ag, Corbett, 2001)[1] and Henty (reserves: 2.83Mt @ 12.5g/t Au, Seymour et al. 2007)[2] mines further to the north of Hill 99.

The drilling identified strong chlorite, white mica, carbonate and localised quartz-albite assemblages, similar to the North Lyell copper-gold deposit. The intense alteration mineralogy from the current drilling comprises strong (replacement) silica-white mica assemblages with pyrite and various copper sulphide minerals, very similar to the mineralogy found at the North Lyell deposit.

1 Corbett, K.A., 2001, New Mapping and Interpretations of the Mount Lyell Mining District, Tasmania: A Large Hybrid Cu-Au System with and Exhalative Pb-Zn-Top . Econ Geol. V 96, pp1089-1122.

2 Seymour, D.B., Green, G.R., and Calver, C.R., 2007, Tasmanian Geological Survey 2007, The Geology and Mineral Deposits of Tasmania: a summary , Bull.72 p 9.

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Figure B. Geological cross section across Hill99 showing the 3 copper lodes. Stratigraphy is overturned, hence rhyolitic/dacitic volcanic (orange) are youngest in sequence.

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Figure C. Cross section showing alteration intersected in hole H99-04. Note quartz-sericite-chlorite-pyrite±carbonate alteration in hanging wall just above lowest copper intersection.

A second mineralisation model for Hill 99 is the Henty gold deposit. The high grade gold at Henty occurs in a silicified, structurally altered zone with adjacent copper mineralisation. Current drilling and a geological review of previous drilling at Hill 99 have found zones of silicification in the stratigraphic footwall, similar to those at Henty. A mixed zone of pervasive quartz and sericite alteration from hole H99-4 shows anomalous gold, nickel and zinc values (from 155m to 173m). The Henty gold deposit was discovered by assaying similarly silicified core for gold some 10 years after the holes had been drilled. Similar lowgrade assays such as found in hole H99-4 also occur in the periphery at Henty (Figure C).

Significant historical information for Henty/Rosebery style VMS mineralisation and Mount Lyell style copper-gold-zinc provides an excellent drill core library for MHM Metals to apply its new exploration techniques to focus the second-stage drilling, targeting the mineralisation potential at depth. The results are sufficiently encouraging that a second stage drilling program of three diamond drill holes totaling 1,200m has been recommended, to test along strike and deeper than the existing drilling. The timeframe for the second stage program has not yet been determined.

thomas creek copper golD project

The Thomas Creek Copper Gold Project is a recently discovered, highly prospective and underexplored porphyry copper-gold

target with the potential for a ‘world-class’ resource. This prospect has affinities to parts of the Mt Lyell mineralisation (311Mt @ 0.97% copper, 0.31g/t gold, Seymour et al. 2007))*as well as some other world class porphyry deposits.

Thomas Creek was first recognised as a potential porphyry style copper-gold deposit in 1993 by Plutonic Operations after soil sampling and geochemical surveys returned typical porphyry type signatures. However, opinion on the nature and style of the deposit have remained ambiguous even after eight diamond drill holes were carried out in 1996. MHM’s 2010 VTEM survey, reinterpretation of existing data and new techniques for analysing deposits of this nature have confirmed that Thomas Creek remains a highly prospective target.

Inspection of the Plutonic Operations drill core from Thomas Creek has revealed several observations not noted by previous workers which support an alkali porphyry copper-gold system is present.

The first observation is that most of the copper minerals (mostly chalcopyrite) are very fine-grained and not visible to the naked eye. Possibly for this reason, much of the core was not originally sampled or assayed, despite the intersections that were sampled being strongly anomalous in copper and sometimes gold. Thin section analysis shows that most of the copper-sulphides are very fine and are associated

with magnetite and pyrite as separate discreet, grains.

A second important observation not noted by previous workers is that the host rocks have extensive hematite dusting of feldspars, which is typical of some porphyry alteration envelopes especially at Newcrest’s Cadia-Ridgeway Mine in New South Wales.

A third observation made of the host rock at Thomas Creek is the alteration of high temperature actinolite to chlorite, which in a typical porphyry model is classified as propylitic alteration. This type of alteration usually rims a porphyry system for several hundred metres together with pyrite, epidote and ferroan calcite. The alteration of actinolite to chlorite demonstrates retrogressive metamorphism by hydrothermal fluids typical of the outer shell of a porphyry system.

The fourth and vital observation was made from core from hole TC-5 from Thomas Creek. This is that there are significant hydrothermal breccias present in the core, with highly altered clasts within a matrix of more mafic composition. Highly altered zones containing strongly anomalous copper and gold mineralisation confirm that this event was a mineralising event. This indicates that there was strong hydrothermal activity in this system derived from an as yet undefined source, deeper down.

MHM plans a first stage drilling program at Thomas Creek during 2012.

JORC Compliance Statement

Information in this report that relates to Exploration results, Mineral Resources or Ore Reserves is based on information compiled by Richard Lindsay (Exploration Manager for MHM) who is a member of the Australian Institute of Geoscientists. Richard Lindsay has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the “Australian Code for Reporting of Mineral Resources and Ore Reserves”. Richard Lindsay consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

DIreCtorS’ report

Your Directors present their report on the consolidated entity (“Group”) consisting of MHM Metals Limited (“Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2011.

Directors

The following persons were Directors of MHM Metals 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

S H Wells was appointed as director on 31 March 2011 and continues in office at the date of this report.

P L A Robertson was a director from the beginning of the financial year until his resignation on 30 November 2010.

principal activities

During the period the principal activities of the Group consisted of exploration of mineral resources and aluminium salt slag processing.

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

The detailed review of operations of the Group for the year is contained in “Review of Operations” of this Annual Report.

earnings per share

2011 2010 $ $

Basic earnings (0.0032) (0.0273) per share

matters suBsequent to the enD of the financial perioD

No matter or circumstance has arisen since 30 June 2011 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.

The Group is subject to the reporting requirements of the National Pollutant Inventory under the National Environmental Protection Measures legislation. This requires the Group to monitor, measure and report its annual emissions. The Group has implemented systems and processes for the collection and calculation of the data required and submitted its 2010/11 report on 30 August 2011.

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

456,250 ordinary shares in MHM Metals Limited (indirect).

682,500 options over ordinary shares in MHM Metals 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-inpulp gold plant in Australia; » the first methanol gold desorption plant; and

» new processes for the aluminium industry.

Other current Directorships

None.

former Directorships in last 3 years

None.

Special responsibilities

Managing Director.

Interests in shares

10,901,256 ordinary shares in MHM Metals Limited (indirect).

8,512,503 options over ordinary shares in MHM Metals Limited (indirect).

B W mead B.Econ. Executive Director & Company Secretary

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 aluminium industry and geothermal energy industries at an executive level. Mr Mead is responsible for commercial management and business development for the Group.

Other current Directorships

None.

former Directorships in last 3 years

None.

Special responsibilities

Executive Director.

Interests in shares

1,900,000 ordinary shares in MHM Metals Limited (indirect).

40,001 ordinary shares in MHM Metals Limited (direct).

3,000,000 options over ordinary shares in MHM Metals Limited (indirect).

20,001 options over ordinary shares in MHM Metals 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 group.

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.

Other current Directorships

None.

former Directorships in last 3 years None.

Special responsibilities

Non-executive Director.

Interests in shares

250,000 options over ordinary shares in MHM Metals Limited (direct).

company secretary

The Company secretaries are Mr B W Mead, Mr R Z Rybak and Ms A Brooks. Mr Mead was appointed to the position of company secretary in 2009. Mr Rybak was appointed in November 2010, and Ms Brooks was appointed in May 2011.

Interests in shares

meeting of Directors

425,001 ordinary shares in MHM Metals Limited (direct).

250,000 options over ordinary shares in MHM Metals Limited (direct).

The number of meetings of the group’s board of Directors held during the period ended 30 June 2011, and the number of meetings attended by each Director were:

S h Wells.Executive Director.

Experience and expertise

Mr Wells has a background in project management and implementation and consulting to the mining, engineering and chemical industries.

He was the Managing Partner of 3FC Group, a consulting and political lobbying firm that represents domestic and international companies with major infrastructure development proposals within Australia.

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	8
P L A	3	3
Robertson
(resigned
30/11/10)
S H Wells (appointed	2	2
31/03/11)

Other current Directorships

None.

former Directorships in last 3 years

None.

Special responsibilities

Executive Director.

remuneratIon report (auDIteD)

Revenue from continuing operations Net (loss) before tax Net (loss) after tax Basic earning per share	30 June 2011 5,089,967 (1,411,086) (306,828) (0.0032)	30 June 2010 2,855,239 (2,022,245) (2,022,245) (0.0273)	30 June 2009 255,154 (422,030) (422,030) (0.0080)	30 June 2008 118,489 (545,876) (545,876) (0.0175)	30 June 2007 2,965 (145,492) (145,492) (0.0169)
Share price at start of the year	0.18	0.07	0.07	-	-
Share price at the end of the year	1.00	0.18	0.07	0.07	-
Dividends	-	-	-	-	-

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

a. Principles used to determine the nature and amount of remuneration

Details of remuneration

Service agreements

d. Share-based compensation

Additional information

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

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.

Alignment to shareholders’ interests:

» focuses on exploration success as the creation of shareholder value and returns;

» focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivery constant return on assets as well as focusing the executive on key non-financial drivers of value; and

» attracts and retains high calibre executives.

Alignment to 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 2011 the Group had not formalised its short term or long term incentive policy for key management personnel and link to performance. The table above sets out summary information about the Group’s

consolidated earnings and share price movements for the year to 30 June 2011.

non-executive Directors

Fees and payments to nonexecutive 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 July 2010. Director’s remuneration is inclusive of committee fees.

Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $200,000 per annum and was approved by shareholders at the annual general meeting on 29 November 2010.

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.

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.

Benefits

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

Retirement benefits

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

Employee share option scheme

Information on the employee share option scheme is set out in Note 32.

Details of remuneration

The key management personnel of the Group are the Directors of MHM Metals Limited (see pages 13 to 15).

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

» B A Conti – Company Chairman: Group non-executive
»
»
»
»
F A Rogers – Managing Director: Group executive
B W Mead – Director and Company Secretary: Group executive
N R Allen – Director: Group non-executive
S H Wells – Director: Group executive

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 MHM Metals Limited are set out in the following tables.

2011 name	Short-term employee benefts Cash salary & fees $ Cash bonus $	Short-term employee benefts Cash salary & fees $ Cash bonus $	Post- employment beneft Super- annuation $	Share based payments Options $	Total $	Value of Options As % of remun- eration	Perfor- mance Related As % of remun- eration
Non-executive Directors
B A Conti (Chairman)	33,838	-	26,160	23,102	83,100	28%	0%
N R Allen	27,523	-	2,477	23,102	53,102	43%	0%
P L A Robertson	11,468	-	1,032	23,102	35,602	65%	0%
(resigned 30/11/10)
Sub-total	72,829	-	29,669	69,306	171,804
Executive Directors
B W Mead	200,000	200,000	18,000	69,307	487,307	14%	0%
F A Rogers	300,000	200,000	27,000	69,307	596,307	12%	0%
S H Wells	38,750	-	3,488	37,957	80,195	47%	0%
(appointed 31/3/11)*
Total key management	611,579	400,000	78,157	245,877	1,335,613
personnel compensation
(Group)

The value of options granted to S H Wells as shown above include only the expense attributable to the period for which he was appointed a Director of the Group.

2010 name	Short-term employee benefts Cash salary & fees $	Post- employment beneft Super- annuation $	Share based payments Options $	Total $	Value of Options As % of remun- eration	Perfor- mance Related As % of remun- eration
Non-executive Directors
B A Conti (Chairman)	-	26,160	28,648	54,808	52%	0%
N R Allen	12,000	1,080	27,359	40,439	68%	0%
P L A Robertson	12,000	1,080	27,359	40,439	68%	0%
P Lucas(resigned 11/09/09)	7,000	-	2,148	9,148	31%	0%
Sub-total	31,000	28,320	85,514	144,834
Executive Directors
B W Mead	198,697	10,028	86,132	294,857	29%	0%
F A Rogers	292,293	22,500	86,132	400,925	21%	0%
Total key management per-	521,990	60,848	257,778	840,616

Total key management personnel compensation (Group)

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: reviewed annually, until terminated in accordance with the agreement, notice period of three months;

» Base salary, inclusive of superannuation and other benefits, for the year ended 30 June 2011 of $327,000. 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: reviewed annually, until terminated in accordance with the agreement, notice period of three months;

» Base salary, inclusive of superannuation and other benefits, for the year ended 30 June 2011 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.

S h Wells, Executive Director

» Term of agreement: reviewed annually, until terminated in accordance with the agreement, notice period of three months;

» Base salary, inclusive of superannuation and other benefits, for the year ended 30 June 2011 of $196,200. 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.

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.

Per service contracts, employees are granted options upon completion of 12 months employment.

Options are issued to Directors on an annual basis in relation to services provided to MHM Metals Limited.

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

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

Grant date Expiry date Exercise Value per Date vested Date exercisable
price option at
grant date
----- End of picture text -----

7 December 2007	31 August 2012	$0.20	$0.097	7 December 2007	At any time during the option period
12 December 2008	28 November 2013	$0.20	$0.030	12 December 2008	At any time during the option period
18 December 2008	14 December 2013	$0.20	$0.030	18 December 2008	At any time during the option period
9 October 2009	9 October 2014	$0.25	$0.250	9 October 2009	At any time during the option period
17 December 2009	30 November 2014	$0.28	$0.240	17 December 2009	At any time during the option period
5 January 2010	4 January 2015	$0.28	$0.280	5 January 2010	At any time during the option period
6 October 2010	6 October 2015	$0.85	$1.015	6 October 2010	At any time during the option period

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.

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 2011 included:

Employee options Grant date Expiry date Quantity Exercise price Consideration Share price at grant date Expected price volatility of the company’s shares Risk-free interest rate Employee options	6 October 2010 6 October 2015 300,000 $0.85 Nil $1.02 110% 4.90%
Grant date	20 June 2011
Expiry date	20 June 2016
Quantity	300,000
Exercise price	$1.80
Consideration	Nil
Share price at grant date	$1.05
Expected price volatility of the	110%
company’s shares
Risk-free interest rate	4.77%

Details of remuneration: cash Bonuses anD options

Cash bonuses were paid to F A Rogers and B W Mead during the financial year, to the amount of $200,000 each, shown within the remuneration included in the table on page 18. These were based on company performance as reported to 30 November.

For each cash bonus and grant of options included in the tables on page 23, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that forfeited because the person did not meet the service and performance criteria is set out below.

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

2011 Cash bonus Options
Paid forfeit ed Year Vested forfeit ed financial minimum maximum
granted years in total value total value
which of grant of grant
options yet to vest yet to vest
may vest
% % % % $ $
----- End of picture text -----

F A Rogers	100%	-	2011	-	-	-	-	-
	-	-	2010	100%	-	-	-	-
	-	-	2009	100%	-	-	-	-
B W Mead	100%	-	2011	-	-	-	-	-
	-	-	2010	100%	-	-	-	-
	-	-	2009	100%	-	-	-	-
B A Conti	-	-	2010	100%	-	-	-	-
	-	-	2009	100%	-	-	-	-
N R Allen	-	-	2010	100%	-	-	-	-
	-	-	2009	100%	-	-	-	-
P L A Robertson	-	-	2010	100%	-	-	-	-
(resigned 30/11/10)	-	-	2009	100%	-	-	-	-
S H Wells (appointed 31/03/11)	-	-	2011	73%	-	30 June 2012	40,877	40,877

No part of the bonuses is payable in future years. No options will vest if the conditions are not satisfied. The maximum value of the options yet to vest has been determined as the amount of the grant date fair value of the options that is yet to be expensed.

2011	A Remuneration consisting of option	B Value at grant date $	C Value at exercise date $	D Value at lapse date $
F A Rogers	-	-	-	-
B W Mead	-	-	-	-
B A Conti	-	-	-	-
N R Allen	-	-	-	-
P L A Robertson (resigned 30/11/10)	-	-	-	-
S H Wells (appointed 31/03/11) *	47%	152,247	-	-

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.

Options were granted to S H Wells prior to his appointment as Director.

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

number of options number of options
granted during the year vested during the year
2011 2010 2011 2010
----- End of picture text -----

F A Rogers	-	750,000	-	750,000
B W Mead	-	750,000	-	750,000
B A Conti	-	250,000	-	250,000
N R Allen	-	250,000	-	250,000
P L A Robertson (resigned 30/11/10)	-	250,000	-	250,000
S H Wells (appointed 31/03/11) *	150,000	-	-	-

150,000 options were issued to S H Wells on 6 October 2010 prior to his appointment as Director.

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

aDDitional information

MHM Metals Limited is involved in mineral exploration and aluminium salt slag processing, remuneration of the persons referred to above is not dependent on the satisfaction of a performance condition.

This is the end of the audited remuneration 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 21 to the financial statements.

shares unDer option

Unissued ordinary shares of MHM Metals Limited under option at the date of this report are as follows:

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

Date options Issue price number
Expiry date
granted of shares under option
----- End of picture text -----

Date options granted Expiry date Issue price of shares	number under option
07 December 2007 31 August 2012 $0.20 18 April 2008 31 August 2012 $0.20 09 May 2008 31 August 2012 $0.20 12 December 2008 28 November 2013 $0.20 18 December 2008 14 December 2014 $0.20 09 October 2009 09 October 2014 $0.25 17 December 2009 30 November 2014 $0.28 05 January 2010 04 January 2015 $0.28 06 October 2010 06 October 2015 $0.85 20 June 2011 20 June 2016 $1.80	2,131,225 19,388,000 6,767,760 1,100,000 1,000,000 370,000 1,900,000 100,000 300,000 300,000
	33,356,985

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

A total of 1,299,625 ordinary shares were issued on the exercise of listed options.

insurance of officers

During the financial year, the Group paid a premium of $12,382 to insure the Directors and secretaries 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 group. 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 group

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

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

non-auDit services

The group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group is important.

Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for audit and nonaudit 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:

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

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

	Consolidated 2011 $ 2010 $
Audit services BDO Audit (WA) Pty Ltd audit and review of fnancial reports Total remuneration for audit services Non-audit services Audit-related services BDO Corporate & International Tax (WA) Pty Ltd taxation advice Total remuneration for non-audit services	47,428 32,380
	47,428 32,380
	8,200 1,929
	8,200 1,929

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 27.

auDitor

BDO Audit (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 2011

Corporate GoVernanCe Statement

The Group 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 Group’s needs. To the extent that they are applicable, the Group has adopted the Essential Corporate Governance Principles and Best Practice Recommendations as published by ASX Corporate Governance Council.

As the Group’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 Group’s shareholders; and

» ensure the Group is properly managed.

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

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

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

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

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

the responsiBilities of the BoarD

The Board’s responsibilities include:

» supervising the Group’s framework of control and accountability systems to enable risk to be assessed and managed;

» ensuring the Group 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 Group;

» approving and monitoring financial and other reporting;

» providing overall corporate governance of the Group, including conducting regular reviews of the balance of responsibilities within the Group to ensure division of functions remain appropriate to the needs of the Group;

» 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 Group; liaising with the Group’s external auditors; and

» monitoring and ensuring compliance with all of the Group’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 Group 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.

auDItor’S InDepenDenCe DeCLaratIon

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Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

30 September 2011

The Directors MHM Metals Limited Level 1, 40 Kings Park Road WEST PERTH WA 6005

Dear Sirs,

DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MHM METALS LIMITED

As lead auditor of MHM Metals Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

the auditor independence requirements of the Corporations Act 2001 in relation to the audit
any applicable code of professional conduct in relation to the audit.

This declaration is in respect of MHM Metals Limited and the entities it controlled during the period.

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Peter Toll Director

==> picture [49 x 16] intentionally omitted <==

BDO Audit (WA) Pty Ltd Perth, Western Australia

fInanCIaL report

29 30 31 32 33 78 79

COnSOlIDATED STATEmEnT Of COmPREhEnSIVE InCOmE COnSOlIDATED STATEmEnT Of fInAnCIAl POSITIOn COnSOlIDATED STATEmEnT Of ChAnGES In EquITY COnSOlIDATED STATEmEnT Of CASh flOWS nOTES TO ThE COnSOlIDATED fInAnCIAl STATEmEnTS DIRECTORS’ DEClARATIOn InDEPEnDEnT AuDITOR’S REPORT

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

Registered Office Level One, 20 Kings Park Road West Perth WA 6005

Principal Place of Business 52 Channel Highway Kingston 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 2011. The group 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 group. 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]

ConSoLIDateD Statement of CompreHenSIVe InCome

for tHe Year enDeD 30 June 2011

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Consolidated
notes 2011 2010
$ $
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notes	Consolidated 2011 $ 2010 $
Sales revenue from continuing operations 5 Cost of sales Gross proft Other revenue from continuing operations 5 Administrative expenses Consultancy fees Depreciation expenses 6 Employee beneft expenses 6 Employee entitlements expenses Exploration expenses Insurance expenses Offce accommodation expenses Option expenses Pre-operational expenses Professional fees Shareholder expenses Other expenses 6 Results from operating activities loss before income tax expense Income tax beneft/(expense) 7 loss after income tax expense loss and comprehensive income attributable to members of mhm metals ltd Earnings per share for loss attributable to the ordinary equity holders of the company: Basic earnings per share 31	4,715,859 2,735,528 (1,557,655) (839,246)
	3,158,204 1,896,282
	374,108 119,711 (81,258) (43,191) (2,400) (90,343) (501,355) (150,202) (1,697,419) (762,316) (231,511) (78,771) (166,939) (727,069) (218,682) (56,818) (136,827) (77,915) (476,914) (335,571) - (977,051) (146,878) (106,663) (198,258) (106,568) (1,084,957) (525,760)
	(1,411,086) (2,022,245)
	(1,411,086) (2,022,245) 1,104,258 -
	(306,828) (2,022,245)
	(306,828) (2,022,245)
	Cents Cents (0.32) (2.73)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

ConSoLIDateD Statement of fInanCIaL poSItIon

aS at 30 June 2011

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Consolidated
notes 2011 2010
$ $
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notes	Consolidated 2011 $ 2010 $
ASSETS Current assets Cash and cash equivalents 8 Trade and other receivables 9 Total current assets non-current assets Other fnancial assets 10 Exploration and evaluation 11 Property, plant and equipment 12 Deferred tax assets 13 Total non-current assets Total assets liaBilities Current liabilities Trade and other payables 14 Borrowings 15 Total current liabilities non-current liabilities Deferred tax liabilities 16 Borrowings 17 Other payables 18 Total non-current liabilities Total liabilities net assets equity Contributed equity 19 Share based payments reserve 20 Accumulated losses 20 Total equity	8,998,269 2,286,132 1,463,607 1,105,223
	10,461,876 3,391,355
	57,697 32,968 2,319,588 1,460,057 8,806,302 5,885,066 2,330,339 -
	13,513,926 7,378,091
	23,975,802 10,769,446
	1,446,154 1,531,372 81,706 38,255
	1,527,860 1,569,627
	683,820 8,846 43,942 69,336 7,347 3,211
	735,109 81,393
	2,262,969 1,651,020
	21,712,833 9,118,426
	24,088,404 11,664,083 1,066,900 589,986 (3,442,471) (3,135,643)
	21,712,833 9,118,426

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

ConSoLIDateD Statement of CHanGeS In equItY

for tHe Year enDeD 30 June 2011

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Contributed Accumulated Share Based Total
Equity losses Payments
Reserve
$ $ $ $
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	Contributed Equity $ Accumulated losses $ Share Based Payments Reserve $ Total $
2010 Balance 1 July 2009 Loss for the year Total comprehensive income for the year Share based payments Shares issued Balance 30 June 2010 2011 Balance 1 July 2010 Loss for the year Total comprehensive income for the year Share based payments Shares issued Balance 30 June 2011	5,490,483 (1,113,398) 254,415 4,631,500
	- (2,022,245) - (2,022,245)
	- (2,022,245) - (2,022,245) - - 335,571 335,571 6,173,600 - - 6,173,600
	11,664,083 (3,135,643) 589,986 9,118,426
	11,664,083 (3,135,643) 589,986 9,118,426
	- (306,828) - (306,828)
	- (306,828) - (306,828) - - 476,914 476,914 12,424,321 - - 12,424,321
	24,088,404 (3,442,471) 1,066,900 21,712,833

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

ConSoLIDateD Statement of CaSH fLoWS

for tHe Year enDeD 30 June 2011

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Consolidated
notes 2011 2010
$ $
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notes	Consolidated 2011 $ 2010 $
Cash fows from operating activities Receipts from customers Payments to suppliers and employees Exploration and evaluation expenditure Interest received net cash outfow from operating activities 29 Cash fows from investing activities Payments for property, plant and equipment Payment for acquisition of land and buildings – Alreco Pty Ltd 26 Payments for acquisition of plant and equipment – Alreco Pty Ltd 26 Proceeds from sale of property, plant and equipment Exploration and evaluation expenditure net cash outfow from investing activities Cash fows from fnancing activities Proceeds from issues of securities Proceeds from borrowings Repayment of borrowings net cash infows from fnancing activities net increase in cash and cash equivalents held Cash and cash equivalents at the beginning of the fnancial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the fnancial year 8	4,534,624 2,026,338 (4,855,213) (3,419,481) (395,824) (85,739) 374,108 119,711
	(342,305) (1,359,171)
	(3,751,751) (1,344,552) - (1,500,000) - (1,554,950) - 1,000 (1,044,137) (633,630)
	(4,795,888) (5,032,132)
	11,873,214 6,173,600 83,501 - (83,663) (20,798)
	11,873,052 6,152,802
	6,734,859 (238,501) 2,286,132 2,524,633 (22,722) -
	8,998,269 2,286,132

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

noteS to tHe ConSoLIDateD fInanCIaL StatementS

for tHe Year enDeD 30 June 2011

1 summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied during the year presented, unless otherwise stated.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IfRS

The consolidated financial statements of MHM Metals 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 IFRS 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.

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.

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of MHM Metals Limited (‘’company’’ or ‘’parent entity’’) as at 30 June 2011 and the results of all subsidiaries for the year then ended. MHM Metals 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 deconsolidated 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 statement of comprehensive income. 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.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income and statement of financial position respectively.

Investments in subsidiaries are accounted for at cost in the individual financial statements of MHM Metals Limited.

(ii) Changes in ownership interests

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

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

If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are classified to profit or loss where appropriate.

(c)

Segment reporting

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

(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.

(ii) Tolling income

The group operates a toll-fee structure with Alcoa and Sims for recycling of salt slag, non-salt slag and dross. Revenue from tolls is recognised in the accounting period in which the slag and dross are received by the group.

(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.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

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

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax asset and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit and loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, respectively.

(f) Business combinations

The acquisition 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. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of and pre-existing equity interests in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-byacquisition basis, the group recognises any non-controlling interest in the acquire either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

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

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

Change in Accounting Policy

A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to apply the acquisition method to business combinations, there have been some significant changes.

All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt are subsequently remeasured through profit or loss. Under the group’s previous policy, contingent payments were only recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of acquisition.

Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and therefore included in goodwill.

Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. This decision is made on an acquisitionby-acquisition basis. Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree’s net identifiable assets.

If the group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the group’s net profit after tax.

(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 statement of cash flow 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 statement of financial position.

(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) 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 reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position (note 9).

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 statement of comprehensive income. 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 statement of comprehensive income as gains and losses from investment securities.

Subsequent measurement

Loans and receivables are carried at amortised cost using the effective interest method.

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

(j) fair value estimation

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.

(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 statement of comprehensive income 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
Aluminium salt slag processing plant & equipment 8 – 10 years
Vehicles 8 -12 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting 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 statement of comprehensive income. 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) 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.

(m)

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 statement of comprehensive income 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 statement of financial position 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.

(n) 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.

Employee benefits

(o)

(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.

(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.

Share-based payments

(iii)

Share-based compensation benefits are provided to employees via the MHM Metals Employee Option Plan. Information relating to these schemes is set out in note 32.

The fair value of options granted under the MHM Metals 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.

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

(p) 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.

Earnings per share

(q)

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the group, 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.

(r) 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.

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.

(s) 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 statement of financial position.

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.

(t) new accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.

(i) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for the accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. The group will apply the amended standard from 1 July 2011. When the amendments are applied, the group will need to disclose any transactions between its subsidiaries and its associates. However, it has yet to put systems into place to capture the necessary information. It is therefore not possible to disclose the financial impact, if any, of the amendment on the related party disclosures.

(ii) AASB 9 financial Instruments (effective 1 January 2013)

In December 2010 the AASB issued an amendment to AASB 9 which amends the requirements for classification and measurement of financial assets. It is effective for the accounting periods beginning on or after 1 January 2013. The following requirements have generally been carried forward unchanged from AASB 139 Financial Instruments: Recognition and Measurement into AASB 9. These include the requirements relating to:

»
»
Classification and measurement of financial liabilities; and
Derecognition requirements for financial assets and liabilities.

However, AASB 9 requires that gains or losses on financial liabilities measured at fair value are recognised in profit or loss, except that the effects of changes in the liability’s credit risk are recognised in other comprehensive income. The entity does not have any financial liabilities measured at fair value through profit or loss. There will therefore be no impact on the financial statements when these amendments to AASB 9 are first adopted.

(iii) AASB 10 Consolidated financial Statements (effective 1 January 2013)

In May 2011 AASB 10 was issued to introduce a single ‘control model’ for all entities, including special purpose entities (SPEs), whereby all of the following conditions must be present:

»
»
»
Power over investee (whether or not power used in practice)
Exposure, or rights, to variable returns from investee
Ability to use power over investee to affect the entity’s returns from investee.

When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity does not have any special purpose entities.

(iv) AASB 11 Joint Arrangements (effective 1 January 2013)

In May 2011 AASB 11 was issued to classify joint arrangements as either ‘joint operations’ (where parties with joint control have rights to assets and obligations for liabilities) or ‘joint ventures’ (where parties with joint control have rights to the net assets of the arrangement). Joint arrangements structured as a separate vehicle will generally be treated as joint ventures and accounted for using the equity method (proportionate consolidation no longer allowed). When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity has not entered into any joint arrangements.

(v) AASB 13 fair Value measurement (effective 1 January 2013)

In May 2011 AASB 13 was issued to establish a single framework for measuring fair value of financial and nonfinancial items recognised at fair value in the statement of financial position or disclosed in the notes in the financial statements. Additional disclosures will be required for items measured at fair value in the statement of financial position, as well as items merely disclosed at fair value in the Notes to the Consolidated Financial Statements. Extensive additional disclosure requirements for items measured at fair value that are ‘level 3’ valuations in the fair value hierarchy that are not financial instruments, e.g. land and buildings, investment properties etc. When this standard is adopted for the first time for the year ended 30 June 2014, there will be no impact on the financial statements because the revised fair value measurement requirements apply prospectively from 1 July 2013. Additional disclosures will be required.

AASB 119 Employee Benefits (effective 1 January 2013)

(vi)

In June 2011 AASB 119 was issued, which makes changes to the recognition of employee benefits as follows:

»
Elimination of the ‘corridor’ approach for deferring gains/losses for defined benefit plans
» Actuarial gains/losses on remeasuring the defined benefit plan obligation/asset to be recognised in OCI rather
than in profit or loss, and cannot be reclassified in subsequent periods
»
Subtle amendments to timing for recognition of liabilities for termination benefits

» Employee benefits ‘expected to be settled’ (as opposed to ‘due to be settled’ under current standard) within 12 months after the end of the reporting period are short-term benefits, and therefore not discounted when calculating leave liabilities. Annual leave not expected to be used within 12 months of end of reporting period will in future be discounted when calculating leave liability.

The group currently calculates its liability for annual leave employee benefits on the basis that it is due to be settled within 12 months of the end of the reporting period because employees are entitled to use this leave at any time. The amendments to IAS 19 require that such liabilities be calculated on the basis of when the leave is expected to be taken, i.e. expected settlement.

When this standard is first adopted for 30 June 2014 year end, annual leave liabilities will be recalculated on 1 July 2012. Leave liabilities for any employees with significant balances of leave outstanding who are not expected to take their leave within 12 months will be discounted, which may result in a reduction of the annual leave liabilities recognised on 1 July 2012, and a corresponding increase in retained earnings at that date.

(vii) AASB 2010-6 Disclosures on Transfers of financial Assets (effective 1 July 2011)

In November 2010 AASB 2010-6 Disclosures of Financial Assets was amended to require additional disclosures for entities that transfer financial assets, including information about the nature of financial assets involved and the risks associated with them. As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements.

(viii) AASB 1054 Australian Additional Disclosures (effective 1 July 2011)

In May 2011 AASB 1054 was issued, which moves additional Australian specific disclosure requirements for for-profit entities from various Australian Accounting Standards into this Standard as a result of the TransTasman Convergence Project. It also removes the requirement to disclose each class of capital commitment and expenditure commitment contracted for at the end of the reporting period (other than commitments for the supply of inventories). When this Standard is adopted for the first time for the year ended 30 June 2012, the financial statements will no longer include disclosures about capital and other expenditure commitments as these are no longer required by AASB 1054.

(ix) IAS 1 Presentation of financial Statements (effective 1 July 2013)

In June 2011 AASB 101 was amended to align the presentation of items of other comprehensive income (OCI) with US GAAP. Various name changes as follows:

» 1 statement of comprehensive income – to be referred to as ‘statement of profit or loss and other comprehensive income’

» 2 statements – to be referred to as ‘statement of profit or loss’ and ‘statement of comprehensive income’.

OCI items must be grouped together into two sections: those that could subsequently be reclassified into profit or loss and those that cannot. When this standard is first adopted for the year ended 30 June 2014, there will be no impact on amounts recognised for transactions and balances for 30 June 2014 (and comparatives). However, the statement of comprehensive income will include name changes and include subtotals for items of OCI that can subsequently be reclassified to profit or loss in future (e.g. foreign currency translation reserves) and those that cannot subsequently be reclassified (e.g. fixed asset revaluation surpluses).

(x) IfRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013)

In May 2011 IFRS 12 was issued to combine existing disclosures from IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. It also introduces new disclosure requirements for interests in associates and joint arrangements, as well as new requirements for unconsolidated structured entities. As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required for interests in associates and joint arrangements, as well as for unconsolidated structured entities.

(xi) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective 1 January 2012)

On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. MHM Metals Limited is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity.

(xii) AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of underlying Assets (effective from 1 January 2012)

In December 2010 the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets and liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The amendment is not expected to have any significant impact on the financial statements when applied from 1 July 2012.

2 financial risk management

Overview

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

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

This note presents information about the 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.

(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 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 reporting date there were no significant concentrations of credit risk.

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
	2011 $ 2010 $
financial assets Cash and cash equivalents Trade receivables Credit quality	8,998,269 2,286,132 1,400,702 1,011,792
	10,398,971 3,297,924

The two trade receivables as at 30 June 2011 were Project Development Corporation Pty Ltd (PDC) and SIMS Aluminium Pty Ltd. Their credit terms are 30 days which they have not previously breached or defaulted on payment on any occasion.

The credit quality of cash assets can be assessed by reference to external credit ratings as supplied by Standard & Poor’s (S&P):

	Consolidated
	2011 $ 2010 $
Cash at bank and short-term bank deposits AA A BBB+	8,922,086 2,285,391 25 25 75,694 -
	8,997,805 2,285,416

(iii) 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 Group does not anticipate a need to raise additional capital in the next 12 months to meet forecasted operational activities. The decision on how the Group 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:

Consolidated 2011	Carrying Amount $	Contractual Cash flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $	more than 5 years $
Hire purchase liabilities	69,335	77,504	15,601	15,601	31,202	15,100	-
Credit cards	21,168	21,168	21,168	-	-	-	-
Trade and other payables	1,488,646	1,489,596	1,200,372	281,877	7,347	-	-
	1,579,149	1,588,268	1,237,141	297,478	38,549	15,100	-
Consolidated 2010	Carrying Amount $	Contractual Cash flows $	6 months or less $	6 to 12 months $	1 to 2 years $	2 to 5 years $	more than 5 years $
Hire purchase liabilities	92,316	108,707	15,601	15,601	31,202	46,303	-
Credit cards	15,276	15,276	15,276	-	-	-	-
Trade and other payables	1,534,583	1,534,583	1,534,583	-	-	-	-
	1,642,175	1,658,566	1,565,460	15,601	31,202	46,303	-

market Risk

(i) foreign exchange risk

The Group operations are limited to domestic activities within Australia.

Group 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 statement of financial position as either available-for-sale or at fair value through the profit or loss. The Group is not exposed directly to commodity price risk.

Interest rate risk

(iii)

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

Consolidated	2011 Weighted average interest rate Balance AuD $	2011 Weighted average interest rate Balance AuD $	2010 Weighted average interest rate Balance AuD $	2010 Weighted average interest rate Balance AuD $
Variable interest rate
Cash and cash equivalents	3.77%	848,244	4.25%	2,136,107
fixed interest rate
Cash and cash equivalents	4.84%	8,150,025	5.00%	150,025
		8,998,269		2,286,132

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

Group sensitivity

At 30 June 2011, 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 $45,133 lower/higher, mainly as a result of higher/lower interest income from cash and cash equivalents. Equity would have been $45,133 lower/higher mainly as a result of higher/lower interest income from cash and cash equivalents.

At 30 June 2011, 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 $33,850 lower/higher, mainly as a result of higher/lower interest income from cash and cash equivalents. Equity would have been $33,850 lower/higher mainly as a result of higher/lower interest income from cash and cash equivalents.

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 reporting date.

fair values versus carrying amounts

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

	2011 2010
	Carrying Amount fair Value Carrying Amount fair Value
	$ $ $ $
Consolidated Cash and cash equivalents Trade and other receivables Hire purchase liabilities Other loans Trade and other payables	8,998,269 8,998,269 2,286,132 2,286,132 1,463,607 1,463,607 1,105,223 1,105,223 69,336 69,336 92,316 92,316 56,312 56,312 15,276 15,276 1,453,501 1,453,501 1,534,583 1,534,583
	12,041,025 12,041,025 5,033,530 5,033,530

The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to the 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. The fair value of current borrowings approximates the carrying amount, as the impact of discounting is not significant.

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.

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 (r). 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 BlackScholes 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 MHM Metals 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

Description of Segment

(i)

Management has determined the operating segments based on reports reviewed by the strategic steering committee that are used to make strategic decisions.

The committee identified two reporting segments, prospecting and mining exploration and aluminium salt slag processing. The Group operates only in Australia.

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Prospecting
2011 and mining Aluminium Salt
Exploration Slag Processing Total
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2011	Prospecting and mining Exploration Aluminium Salt Slag Processing Total
Total segment revenue Cost of sales Other overhead expenses Total segment expenses Adjusted EBITDA Depreciation and amortisation Total segment assets Total segment liabilities	365,140 4,724,827 5,089,967
	- 1,557,655 1,557,655 3,063,161 1,880,237 4,943,398
	3,063,161 3,437,892 6,501,053
	(2,716,831) 1,445,318 (1,271,513)
	337,435 163,920 501,355
	14,028,811 9,946,991 23,975,802
	1,096,078 1,166,891 2,262,969

5 revenue

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Sales revenue from continuing operations Tolling income Management fees Product income Other income Other revenue Interest received	4,503,769 2,556,869 185,473 123,017 4,255 41,689 22,362 13,953
	4,715,859 2,735,528
	374,108 119,711
	5,089,967 2,855,239

6 expenses

	Consolidated
	2011 $ 2010 $
loss before income tax includes the following expenses: Depreciation Plant and equipment Motor vehicles Impairment of exploration and evaluation assets Amount capitalised – exploration and evaluation Employee beneft expense Salaries, fees and other benefts Amount capitalised – exploration and evaluation	218,196 175,309 46,997 25,374 274,290 - (38,128) (50,481) 501,355 150,202 2,241,749 993,718 (544,330) (231,402) 1,697,419 762,316

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Other expenses Advertising Borrowing costs Cleaning Computer requisites Conferences and seminars Electricity Entertainment Foreign exchange losses Formation expenses Freight and cartage Fringe benefts tax General expenses Hire of equipment Interest paid Legal costs Loss on sale of non-current assets Motor vehicle expenses Payroll tax Printing, postage and stationery Product testing Repairs and maintenance Subscriptions and donations Telephone Travel expenses Write-off of leasehold improvements	- 16,929 158 158 11,256 10,507 13,568 11,217 4,610 836 132,044 56,541 2,659 2,240 22,722 - - 5,326 19,845 4,636 31,122 7,756 172,050 111,888 3,157 4,907 12,326 10,405 69,524 84,766 10,817 5,862 34,516 12,900 99,422 18,529 33,036 15,289 130,758 - 28,203 18,987 32,382 12,374 81,201 33,958 139,581 73,667 - 6,082
	1,084,957 525,760

Consolidated
2011
$ 2010
$

Other expenses
Advertising
Borrowing costs
Cleaning
Computer requisites
Conferences and seminars
Electricity
Entertainment
Foreign exchange losses
Formation expenses
Freight and cartage
Fringe benefts tax
General expenses
Hire of equipment
Interest paid
Legal costs
Loss on sale of non-current assets
Motor vehicle expenses
Payroll tax
Printing, postage and stationery
Product testing
Repairs and maintenance
Subscriptions and donations
Telephone
Travel expenses
Write-off of leasehold improvements

-
16,929
158
158
11,256
10,507
13,568
11,217
4,610
836
132,044
56,541
2,659
2,240
22,722
-
-
5,326
19,845
4,636
31,122
7,756
172,050
111,888
3,157
4,907
12,326
10,405
69,524
84,766
10,817
5,862
34,516
12,900
99,422
18,529
33,036
15,289
130,758
-
28,203
18,987
32,382
12,374
81,201
33,958
139,581
73,667
-
6,082

1,084,957
525,760

7 income tax Benefit/(expense)

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Consolidated
2011 2010
$ $
(a) Income tax benefit/(expense)
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Income tax beneft/(expense) (a)	Consolidated 2011 $ 2010 $
Current tax Deferred tax numerical Reconciliation of income tax expense to (b) prima facie tax payable Loss before income tax Prima facie income tax at 30% Tax loss (recognised) /not recognised Income tax expense/(beneft) numerical reconciliation of income tax expense to (c) prima facie tax payable Loss before income tax Prima facie income tax at 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Opening losses brought forward Entertainment Exploration expenditure Employee entitlements Options expense Pre-operating and share issue expense Sundry items Tax loss not recognised Income tax expense/(beneft)	- - 1,104,258 -
	1,104,258 -
	(1,411,086) (2,022,245)
	(423,326) (606,673)
	(680,932) 606,673
	(1,104,258) -
	(1,411,086) (2,022,245)
	(423,326) (606,673)
	(983,561) (712,301) 2,311 2,265 (202,203) (4,906) 34,064 32,505 143,074 100,671 324,851 213,023 532 (8,145)
	- (983,561)
	(1,104,258) -

(d) Amounts recognised directly in equity

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity:

Current tax – credited directly to equity Net deferred tax – debited (credited) directly to equity	- - (551,107) -
	(551,107) -

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Tax losses (e) Unused tax losses for which no deferred tax asset has been recognised Potential tax beneft at 30% unrecognised temporary differences (f) Unrecognised deferred tax assets Timing Losses – revenue Unrecognised deferred tax liabilities Timing net unrecognised deferred tax assets	- (3,278,537)
	- (983,561)
	- 334,408 - 983,561
	- 1,317,969
	- 381,638
	- 381,638
	- 936,331

8 current assets – cash anD cash equivalents

	Consolidated 2011 $ 2010 $	Consolidated 2011 $ 2010 $
Cash at bank and on hand	8,998,269	2,286,132

(a) Interest rate risk exposure

The Group’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 2011 amounting to $67,300 (2010: $80,927).

9 current assets – traDe anD other receivaBles

	Consolidated
	2011 $ 2010 $
Trade receivables GST receivables Other receivables	1,400,702 1,011,792 - 91,653 62,905 1,778
	1,463,607 1,105,223

(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 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 of 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.

10 non-current assets – other financial assets

	Consolidated
	2011 $ 2010 $
Prepaid fnance expenses Prepaid offce accommodation expenses Prepaid insurance expenses	255 412 21,684 - 35,758 32,556
	57,697 32,968

a. Prepaid finance expenses are expired over the life of the finance agreement it relates to.
b. Prepaid office accommodation expenses are expired over the term of the lease agreement it relates to.
c. Prepaid insurance expenses are expired over the life of the policies it relates to.

11 non-current assets – exploration anD evaluation

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Exploration and evaluation Exploration and evaluation – costs less amounts written off Reconciliation At the beginning of the period Expenditure during the period Expenditure written off	2,319,588 1,460,057
	1,460,057 1,354,497 1,026,470 832,629 (166,939) (727,069)
	2,319,588 1,460,057

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.

12 non-current assets – property, plant anD equipment

	Consolidated
note	2011 $ 2010 $
land and buildings Land and buildings – at fair value Reconciliation At the beginning of the year Additions Closing net book value Plant improvements Land and buildings – at cost Reconciliation At the beginning of the year Additions Allocated to land and buildings Allocated to plant and equipment Closing net book value	1,710,919 1,500,000
	1,500,000 - 210,919 1,500,000
	1,710,919 1,500,000
	- 1,896,403
	1,896,403 - - 1,896,403 (210,919) - (1,685,484) -
	- 1,896,403

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Consolidated
note 2011 2010
$ $
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note	Consolidated 2011 $ 2010 $
Plant and equipment Plant and equipment – at cost Less: Accumulated depreciation Reconciliation At the beginning of the year Additions Disposals Depreciation 6 Impairment Closing net book value motor vehicles Motor vehicles – at cost Less: Accumulated depreciation Reconciliation At the beginning of the year Additions Disposals Depreciation 6 Closing net book value land & Buildings Plant Improvements Plant & Equipment Motor Vehicles	7,564,920 2,548,013 (733,611) (263,043)
	6,831,309 2,284,970
	2,284,970 687,010 5,049,642 1,773,269 (10,817) - (218,196) (175,309) (274,290) -
	6,831,309 2,284,970
	360,162 252,784 (96,088) (49,091)
	264,074 203,693
	203,693 112,647 107,378 123,283 - (6,863) (46,997) (25,374)
	264,074 203,693
	1,710,919 1,500,000 - 1,896,403 6,831,309 2,284,970 264,074 203,693
	8,806,302 5,885,066

13 non-current assets – DeferreD tax assets

The balance comprises temporary differences attributable to:

	Consolidated
	2011 $ 2010 $
Tax losses Employee benefts Timing differences	1,607,117 - 97,225 - 625,997 -
	2,330,339 -

14 current liaBilities – traDe anD other payaBles

	Consolidated
	2011 $ 2010 $
Trade payables GST payables Other payables	1,158,209 1,336,309 6,068 - 281,877 195,063
	1,446,154 1,531,372

Trade and other payables are non-interest bearing liabilities stated at cost and settled within 30 days. Amounts not expected to be settled within 12 months: $Nil.

15 current liaBilities – BorroWings

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Secured Hire purchase liabilities unsecured Insurance premium funding Other loans	25,394 22,979 35,144 - 21,168 15,276
	81,706 38,255

Security and fair value disclosures

a.

Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 17.

b.

Risk exposures

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

16 non-current liaBilities – DeferreD tax liaBilities

The balance comprises temporary differences attributable to:

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Consolidated
2011 2010
$ $
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	Consolidated 2011 $ 2010 $
Capitalisation of exploration expenditure Acquisition of subsidiary – Goldstock Mining Pty Ltd non-current liaBilities – BorroWings 17 Secured Hire purchase liabilities Secured liabilities and assets pledged as security (a) Hire purchase liabilities	674,974 - 8,846 8,846
	683,820 8,846
	43,942 69,336
	69,336 92,316

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

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

hire purchase liabilities

Property, plant and equipment 80,341 91,420

(b) fair value

The carrying amounts and fair values of borrowings at reporting date are:

	2011 2010
	Carrying Amount fair Value Carrying Amount fair Value
	$ $ $ $
Consolidated Hire purchase liabilities	69,336 69,336 92,316 92,316

(c) Risk exposures

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

18 non-current liaBilities – other payaBles

	Consolidated
	2011 $ 2010 $
Other payables	7,347 3,211
	7,347 3,211

19 contriButeD equity

(a) Share capital

2011 number 2010 number	2011 $ 2010 $
Ordinary shares – fully paid 101,617,410 87,538,260 Options – unlisted 7,201,225 7,380,750 Options – listed 26,155,760 27,455,385	23,854,318 11,429,997 - - 234,086 234,086
	24,088,404 11,664,083

(b) movement in ordinary share capital

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2011
Date Details number of Issue price
shares $ $
----- End of picture text -----

At	beginning of reporting period		87,538,260		11,429,997
06	October 2010	Exercise of Options	10,000	0.20	2,000
25	October 2010	Exercise of Options	110,000	0.20	22,000
26	October 2010	Issued	12,000,000	1.00	12,000,000
02	November 2010	Exercise of Option	1	0.20	-
02	November 2010	Exercise of Options	350,000	0.28	98,000
22	November 2010	Exercise of Options	7,500	0.20	1,500
01	December 2010	Exercise of Options	1,116,225	0.20	223,245
20	December 2010	Exercise of Options	49,924	0.20	9,985
28	January 2011	Exercise of Options	40,000	0.25	10,000
04	March 2011	Exercise of Options	160,000	0.20	32,000

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

2011
Date Details number of Issue price
shares $ $
----- End of picture text -----

Date Details	number of shares Issue price $	$
18 April 2011 Exercise of Options 03 May 2011 Exercise of Options 19 May 2011 Exercise of Options 01 June 2011 Exercise of Options 15 June 2011 Exercise of Options 15 June 2011 Exercise of Options 22 June 2011 Exercise of Options 30 June 2011 Exercise of Options Less: Transaction costs arising on share issue Add: Deferred tax asset recognised 30 June 2011 Balance	14,500 0.20 19,000 0.20 40,000 0.20 35,000 0.20 10,000 0.20 40,000 0.25 50,000 0.20 27,000 0.20	2,900 3,800 8,000 7,000 2,000 10,000 10,000 5,400
		23,877,827 (574,616)
		23,303,211 551,107
	101,617,410	23,854,318

2010

Date Details	number of shares Issue price $	$
At beginning of reporting period 03 November 2009 Issued 01 December 2009 Exercise of Options 04 December 2009 Exercise of Options 17 December 2009 Issued 15 March 2010 Exercise of Options Less: Transaction costs arising on share issue 30 June 2010 Balance	54,995,760 15,000,000 0.20 32,500 0.20 5,000 0.20 17,500,000 0.20 5,000 0.20	5,256,397 3,000,000 6,500 1,000 3,500,000 1,000
		11,764,897 (334,900)
	87,538,260	11,429,997

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the group 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.

(d) Options

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

» 2,131,225 unlisted options exercisable at 20 cents and expiring 31 August 2012.
» 26,155,760 listed options exercisable at 20 cents and expiring 31 August 2012.
» 1,100,000 unlisted options exercisable at 20 cents and expiring 28 November 2013.
» 1,000,000 unlisted options exercisable at 20 cents and expiring 14 December 2013.
» 370,000 unlisted options exercisable at 25 cents and expiring 9 October 2014.
» 1,900,000 unlisted options exercisable at 28 cents and expiring 30 November 2014.
» 100,000 unlisted options exercisable at 28 cents and expiring 4 January 2015.
» 300,000 unlisted options exercisable at 85 cents and expiring 6 October 2015.
» 300,000 unlisted options exercisable at 180 cents and expiring 20 June 2016

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2011 Details number of Issue price
options $ $
----- End of picture text -----

2011 Details	number of options Issue price $ $
At the beginning of the period 06 October 2010 Issued options pursuant to an agreement 06 October 2010 Exercise of Listed Options 25 October 2010 Exercise of Listed Options 25 October 2010 Exercise of Unlisted Options 02 November 2010 Exercise of Listed Options 02 November 2010 Exercise of Unlisted Options 22 November 2010 Exercise of Listed Options 01 December 2010 Exercise of Listed Options 01 December 2010 Exercise of Unlisted Options 20 December 2010 Exercise of Listed Options 28 January 2011 Exercise of Unlisted Options 04 March 2011 Exercise of Listed Options 18 April 2011 Exercise of Listed Options 03 May 2011 Exercise of Listed Options 19 May 2011 Exercise of Listed Options 01 June 2011 Exercise of Listed Options 15 June 2011 Exercise of Listed Options 15 June 2011 Exercise of Unlisted Options 20 June 2011 Issued options pursuant to an agreement 22 June 2011 Exercise of Listed Options 30 June 2011 Exercise of Listed Options At reporting date	34,836,135 - 234,086 300,000 - - (10,000) - - (10,000) - - (100,000) - - (1) - - (350,000) - - (7,500) - - (866,700) - - (249,525) - - (49,924) - - (40,000) - - (160,000) - - (14,500) - - (19,000) - - (40,000) - - (35,000) - - (10,000) - - (40,000) - - 300,000 - - (50,000) - - (27,000) - -
	33,356,985 234,086

2011
Details

number of
options
Issue price
$ $

At the beginning of the period
06 October 2010
Issued options pursuant to an agreement
06 October 2010
Exercise of Listed Options
25 October 2010
Exercise of Listed Options
25 October 2010
Exercise of Unlisted Options
02 November 2010
Exercise of Listed Options
02 November 2010
Exercise of Unlisted Options
22 November 2010
Exercise of Listed Options
01 December 2010
Exercise of Listed Options
01 December 2010
Exercise of Unlisted Options
20 December 2010
Exercise of Listed Options
28 January 2011
Exercise of Unlisted Options
04 March 2011
Exercise of Listed Options
18 April 2011
Exercise of Listed Options
03 May 2011
Exercise of Listed Options
19 May 2011
Exercise of Listed Options
01 June 2011
Exercise of Listed Options
15 June 2011
Exercise of Listed Options
15 June 2011
Exercise of Unlisted Options
20 June 2011
Issued options pursuant to an agreement
22 June 2011
Exercise of Listed Options
30 June 2011
Exercise of Listed Options
At reporting date

34,836,135
-
234,086
300,000
-
-
(10,000)
-
-
(10,000)
-
-
(100,000)
-
-
(1)
-
-
(350,000)
-
-
(7,500)
-
-
(866,700)
-
-
(249,525)
-
-
(49,924)
-
-
(40,000)
-
-
(160,000)
-
-
(14,500)
-
-
(19,000)
-
-
(40,000)
-
-
(35,000)
-
-
(10,000)
-
-
(40,000)
-
-
300,000
-
-
(50,000)
-
-
(27,000)
-
-

33,356,985
234,086

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2010 Details number of Issue price
options $ $
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2010 Details	number of options Issue price $ $
At the beginning of the period 9 October 2009 Issued options pursuant to an agreement 14 October 2009 Reversal of Issued options pursuant to an agreement (Per Amended 3B – 14/10/09) 14 October 2009 Reversal of Issued options pursuant to an agreement (Per Amended 3B – 14/10/09) 1 December 2009 Exercise of Listed Options 4 December 2009 Exercise of Listed Options 17 December 2009 Issued options pursuant to an agreement 5 January 2010 Issued options pursuant to an agreement 15 March 2010 Exercise of Listed Options At reporting date	32,278,635 - 234,086 450,000 - - (100,000) - - (100,000) - - (32,500) - - (5,000) - - 2,250,000 - - 100,000 - - (5,000) - -
	34,836,135 234,086

2010
Details

number of
options
Issue price
$ $

At the beginning of
the period
9 October 2009
Issued options pursuant to an agreement
14 October 2009
Reversal of Issued options pursuant to an
agreement (Per Amended 3B – 14/10/09)
14 October 2009
Reversal of Issued options pursuant to an
agreement (Per Amended 3B – 14/10/09)
1 December 2009
Exercise of Listed Options
4 December 2009
Exercise of Listed Options
17 December 2009
Issued options pursuant to an agreement
5 January 2010
Issued options pursuant to an agreement
15 March 2010
Exercise of Listed Options
At reporting date

32,278,635
-
234,086
450,000
-
-
(100,000)
-
-
(100,000)
-
-
(32,500)
-
-
(5,000)
-
-
2,250,000
-
-
100,000
-
-
(5,000)
-
-

34,836,135
234,086

(e) Capital management process

Details of the Group’s capital management process are set out in note 2.

20 reserves anD retaineD earnings

(a) Reserves

	Consolidated
	2011 $ 2010 $
Share based payments reserve Movements in share based payments reserve were as follows: Balance 1 July Employee share plan expense Balance 30 June Accumulated losses (b) Movements in retained profts were as follows: Balance 1 July Net loss for the year Balance 30 June	1,066,900 589,986
	589,986 254,415 476,914 335,571
	1,066,900 589,986
	(3,135,643) (1,113,398) (306,828) (2,022,245)
	(3,442,471) (3,135,643)

(c) nature and purpose of reserves

(i) Share based payments reserve

The share based payments reserve is used to recognise:

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

21 key management personnel Disclosures

(a) Key management personnel compensation

	Consolidated
	2011 $ 2010 $
Short-term employee benefts Post-employment benefts Share based payments	1,011,579 521,990 78,157 60,848 207,920 257,778
	1,297,656 840,616

(b) 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 audited remuneration report in the Directors Report.

(ii) Option holdings

The number of options over ordinary shares in the group held during the financial period by each Director of MHM Metals Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2011 name	Balance at the start of the year	Granted during the period as remun- eration	Exercised during the period	Options issued during the period	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the period
Directors of mhm metals limited
B A Conti	682,500	-	-	-	-	682,500	-
B W Mead	3,020,001	-	-	-	-	3,020,001	-
F A Rogers	8,512,503	-	-	-	-	8,512,503	-
N R Allen	450,000	-	(200,000)	-	-	250,000	-

2011 name	Balance at the start of the year	Granted during the period as remun- eration	Exercised during the period	Options issued during the period	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the period
P L A Robertson	425,001	-	(250,001)	-	(175,000)	-	-
(resigned 30/11/10)
S H Wells	-	-	-	-	250,000	250,000	-
(appointed 31/3/11)

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

2010 name	Balance at the start of the year	Granted during the period as remun- eration	Exercised during the period	Options issued during the period	Balance at the end of the year	Vested and exercisable at the end of the period
Directors of mhm metals limited
B A Conti	432,500	-	-	250,000	682,500	-
B W Mead	2,270,001	-	-	750,000	3,020,001	-
F A Rogers	7,762,503	-	-	750,000	8,512,503	-
N R Allen	200,000	-	-	250,000	450,000	-
P L A Robertson	175,001	-	-	250,000	425,001	-

(iii) Share holdings

The number of shares in the group held during the financial period by each Director of MHM Metals 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.

2011 name	Balance at the start of the year	Received during the year on the exercise of the options	Other changes during the year	Balance at the end of the year
Directors of mhm metals limited Ordinary shares
B A Conti	456,250	-	-	456,250
B W Mead	1,940,001	-	-	1,940,001
F A Rogers	10,631,256	-	270,000	10,901,256
N R Allen	225,001	200,000	-	425,001
P L A Robertson (resigned 30/11/10)	312,502	250,001	(562,503)	-
S H Wells (appointed 31/3/11)	-	-	-	-

2010 name	Balance at the start of the year	Received during the year on the exercise of the options	Other changes during the year	Balance at the end of the year
Directors of mhm metals limited Ordinary shares
B A Conti	365,000	-	91,250	456,250
B W Mead	2,040,001	-	(100,000)	1,940,001
F A Rogers	13,025,006	-	(2,393,750)	10,631,256
N R Allen	200,001	-	25,000	225,001
P L A Robertson	250,001	-	62,501	312,502

(c) loans to key management personnel

There are no loans to Directors or other key management personnel of MHM Metals Limited.

(d) Other transactions with key management personnel

During the year, the Group was charged $93,758 (2010: $57,931) 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 year, the Group was charged $NIL (2010: $87,626) 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 year, the Group was charged $NIL (2010: $31,260) 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.

During December 2009 a wholly owned subsidiary of the Company, Alreco Pty Ltd (Alreco) contracted with a joint venture of parties (Joint Venture), which included entities controlled by Mr Frank Rogers and Mr Peter Robertson, to sub-licence the right to use the aluminium salt slag processing technology owned by the Joint Venture for application by Alreco in activities conducted within Australia and exclusive usage rights in overseas applications. In addition, Alreco and the Joint Venture executed a processing and sales agreement under which Alreco agreed to process contracted Australian salt slag waste on behalf of all parties for a contracted fee. The fees payable by Alreco for the access to the technology in Australia and exclusive international access rights have been calculated in accordance with normal commercial terms.

During January 2010, a wholly owned subsidiary of the Company, Alreco Pty Ltd (Alreco) contracted Project Development Corporation Pty Ltd (PDC) to undertake the upgrade of the existing plant acquired as part of the Sims Metal’s aluminium processing facility to implement the new aluminium salt slag technology. PDC is a company associated with Mr F A Rogers. The total contracted sum of $2,000,000 was calculated in accordance with normal commercial terms. To the 30th June 2011 amounts totaling $2,474,276 had been paid in respect to the plant upgrade and technology implementation to Project Development Corporation Pty Ltd.

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

Aggregate amounts of each of the above types of other transactions with key management personnel of MHM	Aggregate amounts of each of the above types of other transactions with key management personnel of MHM	Aggregate amounts of each of the above types of other transactions with key management personnel of MHM
Metals Limited:
Amounts recognised as expense
harden, East & Conti Pty ltd
Accountancy	91,250	56,160
Travel	2,508	1,771
Rogers Engineering Services Pty ltd
Aluminium facilitation	-	23,820
Motor vehicle expense	-	80
Repairs and maintenance	-	6,155
Telephone	-	1,205
Ageicion Pty ltd
Consulting fees	-	87,280
Travel	-	346
mr f A Rogers
Salaries and wages	440,000	84,711
Superannuation contributions	20,812	16,875
mr B A Conti
Directors’ fees	33,838	-
Superannuation contributions	26,160	26,160
mr B W mead
Directors’ fees	-	6,000
Salaries and wages	400,000	105,417
Superannuation contributions	18,000	10,028
mr n R Allen
Directors’ fees	27,523	12,000
Superannuation contributions	2,477	1,080
mr P l A Robertson
Directors’ fees	11,468	12,000
Superannuation contributions	1,032	1,080
mr P lucas
Directors’ fees	-	7,000
mr S h Wells
Salaries and wages	10,656	-
Superannuation contributions	872	-
	1,086,596	459,168

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

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

	Consolidated 2011 $ 2010 $
Amounts recognised as property, plant and equipment Project Development Corporation Pty ltd Plant Upgrade 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 Pullinger Redhead lucas Legal Fees mr S h Wells Amounts paid in relation to exploration and evaluation Salaries and wages Superannuation Aggregate amounts payable to key management personnel of the Group at balance date relating to the above types of other transactions Current liabilities Harden East & Conti Pty Ltd Project Development Corporation Pty Ltd	623,386 1,850,890
	623,386 1,850,890
	- 2,840 60,000 183,762 6,188 5,625 - 3,944 28,094 - 2,616 -
	96,898 196,171
	6,083 18,769 43,065 789,030
	49,148 807,799

22 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:

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

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

	Consolidated 2011 $ 2010 $
Audit services (a) BDO Audit (WA) Pty Ltd Audit and review of fnancial reports Total remuneration for audit services non-audit services (b) Audit-related services BDO Corporate & International Tax (WA) Pty Ltd Taxation advice Total remuneration for non-audit services Total remuneration contingencies 23	47,428 32,380
	47,428 32,380
	8,200 1,929
	8,200 1,929

	55,628 34,309

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

24 commitments

(a) Capital commitments

Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

	Consolidated
	2011 $ 2010 $
Exploration and evaluation Payable: Within one year Later than one year but not later than fve years Later than fve years	240,968 75,958 - - - -
	240,968 75,958

(b) finance commitments

hire purchase liabilities

(i)

The Group finances various plant and equipment with a carrying amount of $69,336 (2010: $92,316) under hire purchase agreements expiring within the next five years.

Commitments in relation to hire purchase agreements are payable as follows:

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

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

note	Consolidated 2011 $ 2010 $
Within one year Later than one year but not later than fve years Later than fve years Minimum fnance payments Future fnance charges Total hire purchase liabilities Representing hire purchase liabilities: Current 15 Non-current 17	31,202 31,202 46,303 77,505 - -
	77,505 108,707 (8,169) (16,391)
	69,336 92,316
	25,394 22,980 43,942 69,336
	69,336 92,316

(ii) Insurance premium funding liabilities

The Group has financed an insurance premium with a carrying amount of $35,144 (2010: $NIL) under a funding agreement expiring within the next year.

Commitments in relation to insurance premium funding are payable as follows:

	Consolidated
note	2011 $ 2010 $
Within one year Later than one year but not later than fve years Minimum fnance payments Future fnance charges Total insurance premium funding liabilities Representing insurance premium funding liabilities: Current 15	36,094 - - -
	36,094 - (950) -
	35,144 -
	35,144 -

25 relateD party transactions

(a) Parent entities

The parent entity within the Group is MHM Metals Limited.

(b)

Subsidiaries

Interests in subsidiaries are set out in note 27.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 21.

(d) Transactions with related parties

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

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

Purchases of goods and services
Purchases of property, plant and equipment from other related parties	623,386	1,850,890
Purchases of consulting services from other related parties	-	87,280
Purchases of business and taxation services from other related parties	91,250	56,160
Superannuation Contributions
Contributions to superannuation funds on behalf of employees	78,157	60,848
Share-based payments
Compensation received from employee option plan (note 32)	-	257,778
Other transactions
Remuneration paid to Directors of the Australian parent entity	1,011,579	410,890
Payment of company expenses	2,508	23,972
Amounts paid in relation to exploration and evaluation	-	2,840
Amounts paid in relation to aluminium project	-	13,349
Outstanding balances arising from purchases of goods and services (e)
Current payables (purchases of services)
Other related parties	49,148	789,030

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) 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.

26 Business comBination

On 6 November 2009 the parent entity acquired 100% of the issued share capital of Alreco Pty Ltd.

On 15 January 2010, Alreco Pty Ltd acquired the Aluminium Salt Slag Processing assets and liabilities from SIMS Aluminium Pty Ltd.

Alreco Pty Ltd contributed revenues of $4,724,813 (15 January to 30 June 2010: $2,735,528) and a net profit of $1,473,142 (15 January to 30 June 2010: $1,008,021) to the group for the year ended 30 June 2011.

(a) Summary of acquisition

	$
Purchase consideration Cash Paid Total purchase consideration	3,000,000
	3,000,000

(b) Assets and liabilities acquired

The assets and liabilities recognised as a result of the acquisition are as follows:

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

fair Value
$
----- End of picture text -----

	fair Value $
Land and Buildings Plant & Equipment Provision for employee entitlements Goodwill written off Net assets acquired	1,500,000 1,554,950 (80,820) 25,870
	3,000,000

27 suBsiDiaries

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

name of entity	Country of incorporation	Class of shares	Equity holding 2011 % 2010 %	Equity holding 2011 % 2010 %
Goldstock Mining Pty Limited	Australia	Ordinary	100	100
Alreco Pty Ltd	Australia	Ordinary	100	100
Goldstock East Africa Limted	Tanzania	Ordinary	100	100
MHM Metals LLC	USA	Ordinary	100	-

28 events occurring after reporting Date

No matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect:

the Group’s operations in future financial years;

a.

b. the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
c.

29 reconciliation of profit after income tax to net cash infloW from operating activities:

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

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

	Consolidated 2011 $ 2010 $
Operating loss after income tax Loss on disposal of property, plant and equipment Employee Entitlements expense Borrowing costs Depreciation Option expense Formation expenses Non-cash exploration expense written off Income tax beneft Increase in trade and other receivables Increase in trade and other payables net cash outfow from operating activities	(306,828) (2,022,245) 10,817 5,862 231,511 78,771 158 158 501,355 150,202 476,914 335,571 - 5,326 102,745 641,330 (1,104,258) - (320,024) (1,086,060) 65,305 531,914
	(342,305) (1,359,171)

30 non-cash investing anD financing activities

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

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

Acquisition of Alreco Pty Ltd by means of share issue	-	10
earnings per share 31
Basic earnings per share (a)
Loss attributable to the ordinary equity holders of the company	(0.0032)	(0.0273)
Reconciliations of earnings used in calculating earnings per share (b)
Loss attributable to the ordinary equity holders of the company	(306,828)	(2,022,245)
Weighted average number of shares used as the denominator (c)
Weighted average number of ordinary shares	96,770,573	74,231,281

32 share BaseD payments

(a) Employee option plan

The establishment of the MHM Metals 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:

the contribution to the Company which has been made by the participant;

a.

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:

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

Grant date Expiry date Exercise Balance at Granted Exercised forfeited Balance Vested and
price the start during during during at end of exercisable
of the the year the year the year the year at end of
year the year
number number number number number number
----- End of picture text -----

Consolidated and parent entity – 2011	Consolidated and parent entity – 2011	Consolidated and parent entity – 2011	Consolidated and parent entity – 2011
07 Dec 07	31 Aug 12	$0.20	1,000,000	-	-	-	1,000,000	1,000,000
12 Dec 08	28 Nov 13	$0.20	1,200,000	-	100,000	-	1,100,000	1,100,000
18 Dec 08	14 Dec 13	$0.20	1,000,000	-	-	-	1,000,000	1,000,000
09 Oct 09	09 Oct 14	$0.25	450,000	-	80,000	-	370,000	370,000
17 Dec 09	30 Nov 14	$0.28	2,250,000	-	350,000	-	1,900,000	1,900,000
05 Jan 10	04 Jan 15	$0.28	100,000	-	-	-	100,000	100,000
06 Oct 10	06 Oct 15	$0.85	-	300,000	-	-	300,000	300,000
20 Jun 11	20 Jun 16	$1.80	-	300,000	-	-	300,000	300,000
Total			6,000,000	600,000	530,000	-	6,070,000	6,070,000
Weighted	average exercise price		$0.24	$1.32	$0.26	-	$0.34	$0.34
Consolidated and parent entity – 2010
07 Dec 07	31 Aug 12	$0.20	1,000,000	-	-	-	1,000,000	1,000,000
12 Dec 08	28 Nov 13	$0.20	1,200,000	-	-	-	1,200,000	1,200,000
18 Dec 08	14 Dec 13	$0.20	1,000,000	-	-	-	1,000,000	1,000,000
09 Oct 09	09 Oct 14	$0.25	-	450,000	-	-	450,000	450,000
17 Dec 09	30 Nov 14	$0.28	-	2,250,000	-	-	2,250,000	2,250,000
05 Jan 10	04 Jan 15	$0.28	-	100,000	-	-	100,000	100,000
Total			3,200,000	2,800,000	-	-	6,000,000	6,000,000
Weighted	average exercise price		$0.20	$0.28	-	-	$0.24	$0.24

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

The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2011 was $1.19 (2010 – not applicable).

The weighted average remaining contractual life of share options outstanding at the end of the period was 2.82 years (2010 – 3.68 years).

fair value of options granted

The assessed fair value at grant date of options granted during the year ended 30 June 2011 was $0.79 (average) per option (2010 –$0.12). 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 2011 included:

Option 1:

a. options are granted for no consideration and vest based on MHM Metals Limited’s TSR ranking within a peer group of 20 selected companies over a three year period.

b. exercise price: $0.85.
c. grant date: 6 October 2010.
d. expiry date: 6 October 2015.
e. share price at grant date: $1.02
f. expected price volatility of the company’s shares: 110%.
g. risk-free interest rate: 4.9%.

Option 2:

a. options are granted for no consideration and vest based on MHM Metals Limited’s TSR ranking within a peer group of 20 selected companies over a three year period.

b. Exercise price: $1.80
c. Grant date: 20 June 2011.
d. Expiry date: 20 June 2016.
e. Share price at grant date: $1.05.
f. Expected price volatility of the company’s shares: 110%.
g. Risk-free interest rate: 4.77%.

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 2011 $ 2010 $	Consolidated 2011 $ 2010 $
Options issued under employee option plan	476,914	335,571

33 guarantees

MHM Metals Limited 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 2011 are $82,700 (2010: $113,932) with undrawn amounts of $67,300 (2010: $36,068).

34 parent entity information

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

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2011 2010
$ $
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	2011 $ 2010 $
Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Share based payments reserve Accumulated losses Total equity Loss for the year Other comprehensive income for the year Total comprehensive loss for the year	8,712,168 2,275,994 13,267,241 7,133,142
	21,979,409 9,409,136
	373,667 249,066 718,916 69,336
	1,092,583 318,402
	24,088,404 11,664,083 1,066,900 589,986 (4,268,478) (3,163,335)
	20,886,826 9,090,734
	(2,109,238) (2,048,122) - -
	(2,109,238) (2,048,122)

(a) Contingencies

MHM Metals Limited has no contingent assets or liabilities to disclose at the date of this report.

(b) Commitments

(i) Capital commitments

MHM Metals Limited has no capital expenditure contracted for at the date of this report.

(ii) finance commitments

hire purchase liabilities

The Group finances various plant and equipment with a carrying amount of $69,336 (2010: $92,316) under hire purchase agreements expiring within the next five years.

Commitments in relation to hire purchase agreements are payable as follows:

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2011 2010
$ $
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	2011 $ 2010 $
Within one year Later than one year but not later than fve years Later than fve years Minimum fnance payments Future fnance charges Total hire purchase liabilities Representing hire purchase liabilities: Current (note 15) Non-current (note 17)	31,202 31,202 46,303 77,505 - -
	77,505 108,707 (8,169) (16,391)
	69,336 92,316
	25,394 22,980 43,942 69,336
	69,336 92,316

(c) Guarantees

DIreCtorS’ DeCLaratIon

for tHe Year enDeD 30 June 2011

The Directors of the group declare that:

a. The financial statements, comprising the statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001; and

i. comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
ii. give a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of it’s performance for the financial period ended on that date.

b. In the Directors opinion, there are reasonable grounds to believe that the group will be able to pay its debts as and when they become due and payable; and

c. In the Directors opinion, the consolidated entity has included in the Notes to the Consolidated Financial Statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

d. The remuneration disclosures set out on pages 16 to 25 of the Directors’ report (as part of the audited Remuneration Report) comply with section 300A of the Corporations Act 2001; and

e. The Directors have been given the declarations by the chief executive officer required by section 295A of the Cor porations Act 2001.

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

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B A Conti Director

Perth, Western Australia 30 September 2011

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MHM METALS LIMITED

Report on the Financial Report

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

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor’s Responsibility

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

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of MHM Metals Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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Opinion

In our opinion:

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

Report on the Remuneration Report

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

Auditor’s Opinion

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

BDO Audit (WA) Pty Ltd

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Peter Toll

Director

Perth, Western Australia Dated this 30[th] day of September 2011

aDDItIonaL InformatIon

Distribution of Shareholders and their holdings as at 30 June 2011	Distribution of Shareholders and their holdings as at 30 June 2011
Spread of holdings	holders number of Shares
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	280 159,433 724 2,358,706 524 4,399,040 964 32,189,792 157 62,510,439
	2,649 101,617,410

Distribution of Option holders and their holdings as at 30 June 2011
Spread of holdings	holders number of Shares
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	4 1,409 66 267,711 50 422,416 137 5,449,475 41 20,014,749
	298 26,155,760

Twenty largest Shareholders – Ordinary Shares as at 30 June 2011
Shareholder number held %
1 Rogers Southern Pty Ltd 10,600,006 10.43 2 UBS Wealth Management 7,764,861 7.64 3 Ageicion Pty Ltd 1,900,000 1.87 4 Joseph Psereckis 1,779,144 1.75 5 George McDougall & Geraldine Elmes 1,100,000 1.08 6 Ross Brown 1,049,910 1.03 7 Leuchter Investments Pty Ltd 810,000 0.80 8 Olivier Dupuy & Julie Dupuy 805,249 0.79 9 Murray M Bailey & Patricia J Bailey 800,000 0.79 10 Pargi Holdings Super Fund Pty Ltd 731,000 0.72 11 Mark Andrew Rogers 700,985 0.69 12 Sportpix Pty Ltd 628,000 0.62 13 Peter Kempinski & Paul Kempinski 603,700 0.59 14 Paul Pemberton & Cecilia Pemberton 558,000 0.55 15 Margaret Kempinski 543,333 0.53 16 Dieter Wirkus & Simone Wirkus 534,914 0.53 17 ABN AMRO Clearing Sydney Nominees Pty Ltd 502,653 0.49 18 Alison Wolfson & Andrea Wolfson 500,668 0.49 19 Brad Pty Ltd 500,000 0.49 20 Dorran Pty Ltd 500,000 0.49

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Twenty largest listed Option holders – 20 cents on or before 31 August 2012 as at 30 June 2011
Option holder number held %
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1	Rogers Southern Pty Ltd	6,500,003	24.85
2	Peter Gebhardt & Carlene Gebhardt	1,073,000	4.10
3	Joseph Psereckis	1,030,000	3.94
4	Ageicion Pty Ltd	1,000,000	3.82
5	JP Morgan Nominees Australia Limited	658,663	2.52
6	Philel Pty Ltd	646,049	2.47
7	Rosamund J Banyard & Phillip S Holten	642,000	2.45
8	Wirkus Developments Pty Ltd	640,000	2.45
9	Alison E Wolfson & Andrea Wolfson	634,576	2.43
10	Glenn Kapernick & Janelle Kapernick	620,000	2.37
11	Sebastiaan van der Meulen	579,600	2.22
12	Sebastiaan van der Meulen & Laura van der Meulen	429,000	1.64
13	E & T Equity Pty Ltd	370,231	1.42
14	Sportpix Pty Ltd	303,000	1.16
15	Elphi Pty Ltd	297,400	1.14
16	Vallelonga International Pty Ltd	263,700	1.01
17	Junama Pty Ltd	260,000	0.99
18	Craig Lucas	255,000	0.97
19	Steven Bolack	250,000	0.96
20	Ashley Carter	248,620	0.95

restricteD securities

The Group has no restricted securities (in accordance with ASX Listing Rules).

suBstantial shareholDers

The substantial shareholders as at 30 June 2011 were:

	Shareholder	number held	%
1	Rogers Southern Pty Ltd	10,600,006	10.43
2	UBS Wealth Management	7,764,861	7.64

voting rights

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

Options have no voting rights until such options are exercised as fully paid ordinary shares.

asx listing rule 4.10.19

In accordance with ASX Listing Rule 4.10.19, the Group states that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with it business objectives. The business objective is primarily mineral exploration and aluminium salt slag processing.

company secretary

The name of the company secretaries are Benjamin Mead, Richard Rybak and Annabelle Brooks.

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Statement of unquoted Securities
number of Options number of holders Exercise Price Date of Expiry
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2,131,225	9	$0.20	31/08/2012
1,100,000	5	$0.20	28/11/2013
1,000,000	2	$0.20	14/12/2013
370,000	3	$0.25	09/10/2014
1,900,000	4	$0.28	30/11/2014
100,000	1	$0.28	05/01/2015
300,000	2	$0.85	06/10/2015
300,000	2	$1.80	20/06/2016

option holDers With 20% or more

Options expiring 31 August 2012 Option holder	number held	%
Gregory J Wood and Associates Pty Ltd	859,475	40.33
Rogers Southern Pty Ltd	500,000	23.46
Ageicion Pty Ltd	500,000	23.46

Options expiring 28 november 2013 Option holder	number held	%
Rogers Southern Pty Ltd	250,000	22.73
Ageicion Pty Ltd	250,000	22.73
B A Conti Pty Ltd	250,000	22.73
Philip Lucas	250,000	22.73
Options expiring 14 December 2013 Option holder Rogers Southern Pty Ltd	number held 500,000	% 50.00
Ageicion Pty Ltd	500,000	50.00

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Options expiring 9 October 2014
Option holder number held %
Mark Rogers 150,000 40.54
John Richardson 120,000 32.43
Simon Wells 100,000 27.03
Options expiring 30 november 2014
Option holder number held %
Rogers Southern Pty Ltd 750,000 39.47
Ageicion Pty Ltd 750,000 39.47
Options expiring 4 January 2015
Option holder number held %
John Richardson 100,000 100.00
Options expiring 6 October 2015
Option holder number held %
Simon Wells 150,000 50.00
Mark Rogers 150,000 50.00
Options expiring 20 June 2016
Option holder number held %
Ben Smith 150,000 50.00
Richard Lindsay 150,000 50.00
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tenement scheDule

The group has an interest in the following tenements:

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

Project Tenement holder mhm Status
Interest %
----- End of picture text -----

Strahan	EL20/2007	Goldstock Mining Pty Ltd	100	Granted
Double Cove	EL21/2007	Goldstock Mining Pty Ltd	100	Granted
Hibbs	EL22/2007	Goldstock Mining Pty Ltd	100	Granted
Thomas Creek	EL23/2007	Goldstock Mining Pty Ltd	100	Granted
Modder River	EL61/2007	Goldstock Mining Pty Ltd	100	Granted
Macquarie Harbour	EL62/2007	Goldstock Mining Pty Ltd	100	Granted
Cape Sorell	EL63/2007	Goldstock Mining Pty Ltd	100	Granted
Marrawah	EL11/2009	Goldstock Mining Pty Ltd	100	Granted

AI assistant

VYSARN LIMITED — Annual Report 2011

66029_rns_2011-09-29_1fa7cddd-46cd-403d-9711-b8936db5ffe0.pdf

ContentS

Corporate DIreCtorY

Directors

Bankers

secretaries

stock exchange listings

share register

registereD office in australia

auDitor

solicitors

report from tHe CHaIrman

Dear Shareholder

reVIeW of operatIonS

introDuction

Australian Aluminium Waste Recycling Operations

Corporate

high Purity Silica Project Development

Other mineral Exploration Project Development

corporate

Change of name

Capital Raising

Appointment of Executive Director

Resignation of non-Executive Director

aluminium Waste recycling operations

What is aluminium salt slag?

What is aluminium black dross?

australian operations

Overview

Process feedstock

As of 30 June 2011 salt

Aluminium oxide offtake

us operations

In January 2011 MHM

Project feasibility analysis with Alcoa, Smelter Service Corporation and others

Appointment of Director of Operations, north America

landfill reclamation due diligence

State and county government support

Preliminary environmental permitting and approval appraisal

Investigation of non-dilutionary financing mechanisms

Engagement with parties with feedstock for additional recycling facilities

high purity silica project Development

other mineral exploration project Development

vtem geophysical stuDies

thomas creek copper golD project

JORC Compliance Statement

DIreCtorS’ report

Directors

principal activities

DiviDenDs

revieW of operations

earnings per share

matters suBsequent to the enD of the financial perioD

likely Developments anD expecteD results of operations

environmental regulation

information on Directors

B A Conti fCA, fCIS, fTIA. Chairman – non-executive.

Experience and expertise

Other current Directorships

Special responsibilities

Interests in shares and options

f A Rogers. managing Director.

Experience and expertise

Special responsibilities

Interests in shares

Experience and expertise

Other current Directorships

Special responsibilities

Interests in shares

Experience and expertise

Other current Directorships

Special responsibilities

Interests in shares

company secretary

Interests in shares

meeting of Directors

S h Wells.Executive Director.

Experience and expertise

VYSARN LIMITED Annual Report 2011