VYSARN LIMITED — Interim / Quarterly Report 2011

Mar 9, 2011

interim report 31 DECEMBER 2010

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contents

1 CoRpoRatE DiRECtoRy 2 DiRECtoRs REpoRt 6 aUDitoRs’ inDEpEnDEnCE DEClaRation 7 finanCial REpoRt 16 DiRECtoRs’ DEClaRation 17 inDEpEnDEnt aUDit REpoRt to thE MEMBERs

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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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corporate directory

DiRECtoRs

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

BankERs

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

sECREtaRy Richard Rybak

stoCk ExChangE listings MHM Metals Limited shares are listed on the Australian Securities Exchange

shaRE REgistER

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

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

REgistERED offiCE in aUstRalia

aUDitoR

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

soliCitoRs

Level One, 20 Kings Park Road West Perth WA 6005 phone: +61 8 9321 6777 facsimile: +61 8 9324 1293 email: info@mhmmetals.com website: www.mhmmetals.com

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

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directors report

Your directors present their report on the consolidated entity consisting of MHM Metals Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2010.

DiRECtoRs

The following persons were directors of MHM Metals Limited during the whole of the half- year and up to the date of this report:

financial position

At the end of the half- year MHM Metals Limited had net cash balances of $11,730,805 and net assets of $22,197,939.

Total liabilities amounted to $1,657,710 being trade and other payables of $1,040,046 borrowings of $104,705, and a deferred tax liability of $512,959.

October 2010, raising $12 million at $1.00 per share. The funds will be used to expand MHM’s aluminium business into the United States and for working capital. The placement is 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.

Corporate

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B A Conti F A Rogers B W Mead N R Allen

MHM Metals Limited (MHM) has made significant progress in the reporting period with respect to the aluminium salt slag processing business, both in Australia and the United States, and the mineral assets located in Australia and Africa.

P Robertson resigned as director on 29 November 2010.

pRinCipal aCtivitiEs

The Company has changed its name from Macquarie Harbour Mining Limited to MHM Metals Limited. The ASX code remains MHM. The new name more accurately reflects the MHM business, particularly the fastgrowing aluminium operations.

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 half year and the directors do not recommend the payment of a dividend.

A private placement of shares to new and existing sophisticated investors occurred during

REviEw of opERations

income statement

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2010
$
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	2010 $
Revenue from continuing operations Loss before income tax expense Income tax expense Proft attributable to members of MHM Metals Limited	2,242,124
	(503,673) 932,987
	429,314

Director Peter Robertson resigned from the Company in October 2010, for personal reasons unrelated to the Company. MHM thanks Mr. Robertson for his contributions. Mr. Robertson remains involved with the Company as a provider of the aluminium salt slag treatment technology, for which MHM has contracted exclusive global rights.

australian aluminium operations

Background

MHM Metals owns an Aluminium Salt Slag processing business in Victoria, Australia, that is operated by a wholly-owned subsidiary Alreco Pty Ltd (Alreco).

This business treats a waste product from the secondary aluminium industry, Aluminium Salt Slag (also known as Aluminium Salt Cake), and separates it into its individual components of aluminium metal (10-20%), aluminium oxide (3040%) and a salt and potassium chloride blend (50%).

Aluminium Salt Slag is produced when scrap aluminium is remelted, whereby salt and potassium chloride are introduced to the furnace to act as a flux and

INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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increase the efficiencies of the process. Once the molten aluminium has been recovered, the remaining waste product must be removed and treated. This by-product is known as Aluminium Salt Slag.

Traditionally the Aluminium Salt Slag was placed in a landfill, though the practice is no longer permitted in Australia. The EPA has designated Aluminium Salt Slag a hazardous material, and hence it may no longer be disposed of in this manner.

Alreco holds the exclusive global rights to a proprietary technology that provides a closed-loop treatment of this waste – all recovered materials are valuable and there is no resultant landfill.

Alreco’s operation in Victoria treats all of the Aluminium Salt Slag produced in Australia, and has a program to progressively process previously landfilled material and recover all valuable commodities.

Alreco processes material for Alcoa Australia Rolled Products Pty Ltd, a wholly-owned subsidiary of Alcoa Inc, and Sims Aluminium Pty Ltd, a wholly-owned subsidiary of Sims Metal Management Limited – the world’s largest recycling company.

In January 2010, Alreco acquired the salt slag business from Sims Aluminium Pty Ltd which was operating using a different technology. The Sims processing technology at the facility does not provide a closed-loop solution, requiring significant volumes of residue to be landfilled.

Alreco is presently upgrading the technology on site to the specifications of the closed-loop, landfill-free process for which it has exclusive global rights. The Company is continuing to operate the existing Sims technology during the upgrade, which will be installed with no significant interruption to ongoing operations. The residue from the existing process that was previously being landfilled is now stockpiled, and will be reprocessed once the upgrade is complete.

operational Update

MHM’s Australian aluminium operations continued to be profitable during the reporting period, delivering Gross Half Yearly Cash Receipts of $2,515,782 and a Gross Half Yearly Operating Cash Surplus of $442,324. Profits are expected to increase substantially once the technology upgrade has been finalised.

MHM’s operations at Moolap, Victoria are proceeding to high levels of satisfaction, but will be improved further when salt ponds are constructed. To complete the closed-loop, landfill-free salt slag treatment, MHM requires the use of evaporation ponds for an initial period to be followed by installation of an instant salt crystallisation system. This system will recover over 120 million litres of water each year from the Geelong operations. Instant salt crystallisation systems also enable MHM to establish salt slag processing facilities at sites where solar evaporation is not viable.

MHM is moving closer to council approval for evaporation ponds to be built adjacent to the Company’s operations south of Geelong Victoria. Approval is being sought to construct the ponds on a nine-hectare property that has been leased to MHM by Alcoa for $1 a year. MHM has also submitted an application on an alternative location upon which ponds can be built – a two-anda-half hectare property owned by Frank Rogers (Managing Director of MHM) that shares a common boundary with the nine-hectare Alcoa property.

Alreco Pty Ltd, MHM’s whollyowned operating subsidiary for the Australian operations, submitted an initial application for evaporation pond approval in June 2010. The process has been delayed because the council gave conflicting advice about the need for a Cultural Heritage Management Plan (CHMP). A CHMP is a study to assess and manage cultural heritage values.

The application for evaporation pond approval on the original Alcoa lease site was advertised to the community without objection. The Company has now been given new advice from the council that a CHMP is required. Alreco has concluded the CHMP and it is being considered by the relevant authorities.

Consultants have advised MHM that this alternate property owned by Frank Rogers would not need a CHMP. Community advertising on this property is underway.

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DIRECTORS REPORT

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It is important that shareholders note that the delay in approval is unrelated to the viability of the salt slag processing technology. Large sections of the upgraded processing plant in Geelong have been commissioned and these operations have exceeded expectations.

Plant operations have continued uninterrupted during the technology upgrade, though throughput was lower than anticipated in the fourth quarter of 2010 due to modifications that prevented full capacity operation of the Moolap facility. The changes incorporate aluminium oxide (NMP) treatment technology in anticipation of aluminium oxide sale contracts. These anticipated contracts will generate additional revenue for MHM.

MHM is completing negotiations for an ongoing processing agreement with Sims Aluminium Pty Ltd and continues to receive material for processing from Sims under the terms of the initial contract.

Us aluminium operations Update

During the reporting period, MHM announced an agreement with Smelter Service Corporation (SSC) to conduct a joint feasibility 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 single purpose (mono-fill) salt slag landfill that may be suitable for reprocessing.

MHM executives conducted meetings in the United States with SSC and Alcoa Inc with a view to commencing construction of the first closed-loop salt slag processing facility in the US by mid-2011. Meetings have also been held with Tennessee state and local government

officials and the responses to MHM’s technology have been overwhelmingly positive.

Executive Director Ben Mead has relocated to the US to drive forward the Company’s expansion. To commence construction in mid-2011 the company will need to address:

• » Permitting

• » Site determination

• » Supply contracts

• » Additional salt slag feedstock from other sources

• » SSC landfill test work and due

• diligence

• » Other landfill identification, test

• work and due diligence

• » Government grants and concessions

• » Staff and training

• » Community Relations

• » Other matters as required

Mr Mead has reported that activities in the US are progressing well on all fronts. The US operating subsidiary has been incorporated in Delaware, under the name MHM Metals Corporation.

silica project Update

Discussions and meetings with key stakeholders regarding the Tasmanian silicon smelter proposal are positive and ongoing. Given the potential size of the capital investment in a silicon smelter, the timeframe for reporting development in this respect cannot be stated with certainty. A number of parties remain engaged with negotiations for the Tasmanian silicon smelter proposal.

MHM also continues negotiation for offtake of both lump silica and silica flour, and has received enquiries for tonnage with

price to be finalised. Testing of additional samples provided to possible offtake partners provides positive results.

MHM has now received sufficient enquiry for offtake that a drilling program over the Cape Sorell Project Area is warranted. The program is in the preliminary stages of planning with drill rigs being sought.

tasmanian Exploration Update

During the reporting period the exploration team concentrated on ground-truthing and soil sampling of high priority VTEM anomalies on several highly prospective copper, gold, lead and zinc targets in western Tasmania. These priority targets include the Birthday Bay, North Butler and Noddy Creek project areas. A total of 157 samples were collected and sent for analysis. Preliminary results are being assessed.

A research/laboratory-based study has begun to characterise and understand the environment of formation of the different mineralised targets within the MHM tenements.

Review of the old drill holes at the Thomas Creek porphyry copper 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 (coppergold) mineralisation further to the north.

The rock sequence from Hill 99 gold, zinc, lead prospect show striking similarities to those rock units which host the major zinc, lead, silver mines in Western Tasmania – Hellyer, Que River, Roseberry and Hercules. Analysis is ongoing. Rock and mineral

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samples are being prepared for analysis to compare the signatures of these prospects to other deposits in the region.

african gold project Update

As announced on 14 May 2010, MHM has signed a Letter of Intent with African Eagle Resources plc (AIM:AFE) (African Eagle) concerning a Joint Venture in respect of African Eagle’s Miyabi Gold Project located in the Lake Victoria Goldfields, Tanzania.

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 6.

aUDitoR

Miyabi has a JORC-compliant resource containing 520,000 ozs of gold, summarised in the table below.

Classifcation	tonnage	(Mt) grade g/t au	ounces (Moz)
Indicated	7.88	1.45	0.37
Inferred	4.49	1.01	0.15
total	12.37	1.29	0.52

Miyabi Resource Estimate 0.5g/t cut off

It was previously reported by MHM that a decision to proceed would be expected by the end of November 2010, however a request for an extension of the assessment period was granted until February 2011 by African Eagle and discussions are currently ongoing. MHM will endeavour to provide further updates in the near future.

JoRC Compliance / Competent person’s 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 mineralization 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 Australasian Code for Reporting of Exploration Results, 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.

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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Basil Conti Chairman

10 March 2011

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DIRECTORS REPORT / RENUMERATION REPORT

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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

10 March 2011

Board of Directors MHM Metals Limited Level 1, 20 Kings Park Rd WEST PERTH WA 6005

Dear Sirs,

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

As lead auditor of MHM Metals Limited for the period ended 31 December 2010, 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 review; and

• any applicable code of professional conduct in relation to the review.

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

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Peter Toll Director

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BDO Audit (WA) Pty Ltd Perth, Western Australia

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financial report

8 ConsoliDatED statEMEnt of CoMpREhEnsivE inCoME 9 ConsoliDatED statEMEnt of finanCial position 10 ConsoliDatED statEMEnt of ChangEs in EqUity 11 ConsoliDatED statEMEnt of Cashflows 12 notEs to finanCial statEMEnts 16 DiRECtoRs’ DEClaRation 17 inDEpEnDEnt REviEw REpoRt to thE MEMBERs

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FINANCIAL REPORT

consolidated statement of comprehensive income

For the half-year ended 31 December 2010

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half-year
notes 2010 2009
$ $
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notes	half-year 2010 $ 2009 $
Revenue from continuing operations 3 Cost of sales Administrative expenses Consultancy fees Depreciation expenses Employee beneft expenses Employee entitlements expenses Insurance expenses Offce accommodation expenses Option expenses Professional fees Shareholder expenses Other expenses loss before income tax expense Income tax beneft proft/(loss) for the half-year and total comprehensive income proft/(loss) and comprehensive income attributable to members of MhM Metals Earnings per share for proft/(loss) attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share	2,242,124 56,942 (469,514) - (14,241) (27,373) (22,400) (80,323) (117,192) (16,813) (953,082) (51,043) (33,095) (6,832) (88,779) (10,533) (56,283) (44,860) (316,978) (38,401) (87,844) (53,982) (112,444) (41,730) (473,945) (125,019) (503,673) (439,967) 932,987 - 429,314 (439,967)
	429,314 (439,967)
	Cents Cents
	0.005 (0.007)
	0.003 (0.004)

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

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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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consolidated statement of financial position

As at 31 December 2010

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31 December 30 June
notes 2010 2010
$ $
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notes	31 December 30 June 2010 $ 2010 $
assets Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets non-current assets Other fnancial assets Exploration and evaluation Property, plant and equipment Deferred tax assets Total non-current assets total assets liabilities Current liabilities Trade and other payables Borrowings Total current liabilities non-current liabilities Deferred tax liabilities Borrowings Other payables Total non-current liabilities total liabilities net assets Equity Contributed Equity 4 Share based payments reserve Accumulated losses total equity	11,730,805 2,286,132 760,559 1,105,223 3,044 -
	12,494,408 3,391,355
	50,660 32,968 1,916,991 1,460,057 7,405,383 5,885,066 1,988,207 -
	11,361,241 7,378,091
	23,855,649 10,769,446
	1,035,223 1,531,372 35,369 38,255
	1,070,592 1,569,627
	512,959 8,846 69,336 69,336 4,823 3,211
	587,118 81,393
	1,657,710 1,651,020
	22,197,939 9,118,426
	23,997,304 11,664,083 906,964 589,986 (2,706,329) (3,135,643)
	22,197,939 9,118,426

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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FINANCIAL REPORT

consolidated statement of changes in equity

For the half-year ended 31 December 2010

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issued Capital Retained share Based total
Earnings payment Reserve
$ $ $ $
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	$ $ $ $
Balance 1 July 2009 Proft/(Loss) for the half-year Total comprehensive income for the half-year Shares issued Options issued Balance 31 December 2009 Balance 1 July 2010 Proft/(Loss) for the half-year Total comprehensive income for the half-year Shares issued Options issued Balance 31 December 2010	5,490,483 (1,113,398) 254,415 4,631,500
	- (439,967) - (439,967)
	- (439,967) - (439,967) 6,172,508 - - 6,172,508 - - 38,401 38,401
	11,662,991 (1,553,365) 292,816 10,402,442
	11,664,083 (3,135,643) 589,986 9,118,426
	- 429,314 - 429,314 - 429,314 - 429,314 12,333,221 - - 12,333,221 - - 316,978 316,978
	23,997,304 (2,706,329) 906,964 22,197,939

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

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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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consolidated statement of cash flows

For the half-year ended 31 December 2010

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half-year
notes 2010 2009
$ $
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notes	half-year 2010 $ 2009 $
Cash fows from operating activities Receipts from customers Payments to suppliers and employees Receipts from refund of tenement bonds Interest received net cash infows from operating activities Cash fows from investing activities Payments for plant and equipment Payments for Subsidiary Payments for related party Exploration and evaluation expenditure net cash outfow from investing activities Cash fows from fnancing activities Proceeds from issues of securities 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 period Cash and cash equivalents at the end of the fnancial period	2,515,782 - (2,117,116) (254,589) - 29,050 43,658 56,942
	442,324 (168,597)
	(2,306,114) (321,797) - (100,000) - (7,504) (462,369) (128,746)
	(2,768,483) (558,047)
	11,782,114 6,172,508 (11,282) (10,140)
	11,770,832 6,162,368
	9,444,673 5,435,724 2,286,132 2,524,633
	11,730,805 7,960,357

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

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FINANCIAL REPORT / NOTES TO THE FINANCIAL STATEMENTS

notes to the financial statements

For the period ended 31 December 2010

1 Basis of pREpaRation of half- yEaRly REpoRt

(a) interim financial Reporting

This general purpose interim financial report for the half-year reporting period ended 31 December 2010 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by MHM Metals Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

2 sEgMEnt infoRMation

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.

segment information provided to the strategic steering committee

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half-year 2010 prospecting and aluminium salt slag total
Mining Exploration processing
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half-year 2010	prospecting and Mining Exploration aluminium salt slag processing total
total segment Revenue Cost of Sales Other Overhead Expenses total segment Expenses adjusted EBitDa total segment assets 31 December 2010 30 June 2010	- 2,198,466 2,198,466
	- 469,513 469,513 1,481,826 672,869 2,154,695
	1,481,826 1,142,382 2,624,208
	(1,481,826) 1,056,084 (425,742)
	2,748,368 7,388,269 10,136,637
	2,349,005 6,134,309 8,483,314

A reconciliation of adjusted EBITDA to operating loss before income tax is provided as follows;

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half-year 2010
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	half-year 2010
adjusted EBitDa Interest Revenue Finance Costs Depreciation and amortisation expense proft/(loss) before income tax from continuing operations	(425,742) 43,659 (4,398) (117,192)
	(503,673)

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3 pRofit foR thE half-yEaR

Profit for the half-year includes the following item that is unusual because of their nature, size or incidence;

	notes 2010 $	half-year 2009 $
other income:
Interest Received	43,659	56,942

4 EqUity sECURitiEs issUED

share capital 2010 number 2009 number	2010 $ 2009 $
Ordinary shares – fully paid 101,181,910 87,532,800 Options – unlisted 6,981,225 7,280,750 Options – listed 26,511,260 27,460,385 Share issue costs - -	25,008,240 12,650,418 - - 274,979 274,979 (1,285,915) (1,262,406)
	23,997,304 11,662,991

(a) ordinary shares

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

During the half-year ended 31 December 2010 the following fully paid ordinary shares were issued:

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Date Details number of issue price $ $
ordinary shares
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At beginning of reporting period – 01 July 2010 87,538,260 - 06 October 2010 Exercise of Options 10,000 0.20 25 October 2010 Exercise of Options 110,000 0.20 26 October 2010 Issued 12,000,000 1.00 02 November 2010 Exercise of Options 1 0.20 02 November 2010 Exercise of Options 350,000 0.28 22 November 2010 Exercise of Options 7,500 0.20 01 December 2010 Exercise of Options 1,116,225 0.20 20 December 2010 Exercise of Options 49,924 0.20 Less: Transaction costs arising on share issue - - 31 December 2010 Balance 101,181,910	12,651,510 2,000 22,000 12,000,000 - 98,000 1,500 223,245 9,985
	25,008,240
	(1,285,915) 23,722,325

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FINANCIAL REPORT / NOTES TO THE FINANCIAL STATEMENTS

(b) options

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

• »

• »

• »

• »

• »

• »

• »

• »

• 2,131,225 unlisted options exercisable at 20 cents and expiring 31 August 2012;

• 26,511,260 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;

• 450,000 unlisted options exercisable at 25 cents and expiry 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; and

• 300,000 unlisted options exercisable at 85 cents and expiring 6 October 2015.

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Date Details number of options issue price $ $
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At	the beginning of the period		34,836,135	-	274,979
06	October 2010	Option Issue	300,000	-	-
06	October 2010	Exercise of Options	(10,000)	-	-
25	October 2010	Exercise of Options	(110,000)	-	-
02	November 2010	Exercise of Options	(350,001)	-	-
22	November 2010	Exercise of Options	(7,500)	-	-
01	December 2010	Exercise of Options	(1,116,225)	-	-
20	December 2009	Exercise of Options	(49,924)	-	-
31	December 2010	Balance	33,492,485		274,979

5 ContingEnCiEs

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

6 RElatED paRty tRansaCtions

Bonuses

During the half-year, the following bonuses were paid to executive directors in recognition of the achievements of the company to November 2010;

name $ F A Rogers 200,000 B W Mead 200,000

options

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Current period

No options were issued to related parties as compensation benefits during the half-year ended 31 December 2010.

prior period

The following options were issued to related parties as compensation benefits during the half-year ended 31 December 2009. All options granted for ordinary shares in MHM Metals Limited which confer a right of one ordinary share for every option held.

INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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name	grant Date	number	Exercise price	vesting Date	Expiry Date	Underlying share price at grant date	Expected volatility	Risk free Rate
B A Conti	30/11/09	250,000	$0.28	30/11/14	30/11/14	$0.28	120%	5.25%
P Robertson	30/11/09	250,000	$0.28	30/11/14	30/11/14	$0.28	120%	5.25%
N Allen	30/11/09	250,000	$0.28	30/11/14	30/11/14	$0.28	120%	5.25%
F A Rogers	30/11/09	750,000	$0.28	30/11/14	30/11/14	$0.28	120%	5.25%
B W Mead	30/11/09	750,000	$0.28	30/11/14	30/11/14	$0.28	120%	5.25%

The amount of options expensed for the half-year ended 31 December 2009 was $3,805 each to F A Rogers, B W Mead, $1,903 each to F A Rogers, B W Mead, B A Conti, to N Allen and to P Robertson.

7 DiviDEnDs

No dividends were declared or paid during the half year.

8 CRitiCal aCCoUnting EstiMatEs anD JUDgEMEnts

Estimated impairment of property plant and Equipment

In accordance with AASB 136 Impairment of Assets, the Group assesses at each reporting date where there is an indication that an asset may be impaired. An asset is impaired if its carrying amount exceeds its recoverable amount which is the amount to be recovered through use or sale of the asset.

No impairment charge has been recorded during the half-year period.

9. sUBsEqUEnt EvEnt

No subsequent events occurred after the reporting period.

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FINANCIAL REPORT / NOTES TO THE FINANCIAL STATEMENTS

directors’ declaration

For the half-year ended 31 December 2010

In the directors’ opinion:

(a) the financial statements and notes set out on pages 12 to 15 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards, International Financial Reporting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of their performance for the financial period ended on that date; and

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

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

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Basil Conti Chairman

10 March 2011

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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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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

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

Report on the Half-Year Financial Report

We have reviewed the accompanying consolidated half-year financial report of MHM Metals Limited, which comprises the statement of financial position as at 31 December 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the halfyear ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year’s end or from time to time during the year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the disclosing entity are responsible for the preparation of the half-year financial report in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of MHM Metals Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, 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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FINANCIAL REPORT / NOTES TO THE FINANCIAL STATEMENTS

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of MHM Metals Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

BDO Audit (WA) Pty Ltd

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Peter Toll Director

Perth, Western Australia Dated this the 10[th] day of March 2011.

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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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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FINANCIAL REPORT / NOTES TO THE FINANCIAL STATEMENTS

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INTERIM REPORT 31 DECEMBER 2010 ABN: 41 124 212 175

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