ZENITH MINERALS LIMITED — Annual Report 2009

Sep 24, 2009

Zinc Co Australia Limited ABN 96 119 397 938

FINANCIAL REPORT

30 JUNE 2009

TABLE OF CONTENTS

Corporate Information
Directors' Report
Auditor's Independence Declaration
Financial Statements Income Statement Balance Sheet Statement Of Changes In Equity Statement Of Cash Flows Notes To The Financial Statements
Directors' Declaration
Independent Audit ReportT
Corporate Governance Statement

CORPORATE INFORMATION

DIRECTORS

Gary E Comb (Non-Executive Chairman) Stanley A Macdonald (Non-Executive Director) Rodney M Joyce (Non-Executive Director)

GENERAL MANAGER Tony Hespe (General Manager)

COMPANY SECRETARY (JOINT) Bruce Acutt

Alex Dermedgoglou

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS 3rd Floor 33 Ord Street WEST PERTH WA 6005

PO Box 1426 WEST PERTH WA 6872

(08) 9226 1110 Telephone: Facsimile: (08) 9321 0070

Email: info@zincco.com.au

AUDITORS

Mack & Co Level₂ 35 Havelock Street WEST PERTH WA 6005

Telephone: (08) 9322 2798 Facsimile: (08) 9481 2019

SHARE REGISTER

Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153

Telephone:	$(08)$ 9315 2333
Facsimile:	(08) 9315 2233

SECURITIES EXCHANGE LISTING

Australian Securities Exchange Home Exchange: Perth, Western Australia Code: ZNC, ZNCO

The Directors present their report, together with the financial report of Zinc Co Australia Limited ("the Company") for the year ended 30 June 2009, and the auditors' report thereon.

$\overline{1}$ . DIRECTORS

The Directors of the Company at any time during or since the end of the financial year are:

Gary E Comb Qualifications Experience	- Non Executive Chairman, appointed 2 March 2007 - B.E Mech, BSc, Dip Ed - Gary Comb has spent over 25 years in the Australian Mining Industry, both with mining companies and in mining contractor roles. He was previously the Chief Executive Officer of BGC Contracting Pty Ltd, the mining contracting arm of West Australian construction group BGC Ltd.
Other current directorships	- Managing Director of Jabiru Metals Limited.
Special Responsibilities	- Chairman of the Board
options	Interest in shares and - 100,000 shares (beneficially held) 50,000 25c options, expiring 30 November 2009 (50,000 beneficially held)
Experience	Stanley A Macdonald - Non Executive Director, appointed 24 April 2006 - Stan Macdonald has been associated with the mining and exploration industry for over 20 years.
Other current directorships	- Director of Giralia Resources NL since April 1991, Carpentaria Exploration Limited since April 2007 and U3O8 Limited since 6 October 2005.
Special Responsibilities	- Company promotion and project acquisition
options	Interest in shares and - 2,102,528 shares (562,177 beneficially held) 1,051,275 25c options, expiring 30 November 2009 (281,089 beneficially held)
Rodney M Joyce Qualifications Experience	- Non Executive Director, appointed 6 December 2006 - BSc (Hons), MSc, DIC - Mike Joyce is a geologist with over 25 years experience in mineral exploration, following graduation in 1979 with a BSc (Hons) degree in Geology from Monash University. He also holds an MSc in Mineral Exploration from the Royal School of Mines, University of London, UK. Prior to joining Giralia in late 1998, he was the leader of a successful gold exploration team at Aberfoyle Resources Ltd, responsible for significant gold discoveries at Carosue Dam and Davyhurst in Western Australia.
Other current directorships Special Responsibilities	- Managing Director of Giralia Resources NL and Chairman of PacMag Metals Limited. - Technical and corporate
Interest in shares and - options	1,031,759 shares (beneficially held) - 515,880 25c options, expiring 30 November 2009 (515,880 beneficially held)

$1.1$ Key Executive

Anthony Michael Hespe (BSC, Dip Geosciences, MBT) was appointed General Manager in May 2007. He is a geologist with over 30 years experience in mineral exploration and mine geology. After graduation in 1974, he worked with Amoco Minerals as a Geophysicist until 1980, then in exploration and mine geology roles with Aberfoyle Resources Ltd and Western Metals Ltd, including 15 years in senior management. He has extensive experience in all of the major zinc provinces in Australia.

$2.$ COMPANY SECRETARIES

Bruce Richard Acutt was appointed to the position of Company Secretary on 24 April 2006. Bruce trained and worked as an accountant with major accounting firms in the audit and resources sector. He has been associated with the mining and exploration sector for over twenty years. Bruce is currently Company Secretary for Giralia Resources NL, PacMag Metals Limited, Convergent Technologies Ltd and Greenland Minerals and Energy Ltd.

Alex Dermedgoglou is a Chartered Accountant with over 15 years experience in the auditing of a wide range of enterprises including companies engaged in the mining and exploration industry. Alex was appointed Joint Company Secretary on 29 June 2007. Alex is Company Secretary of U3O8 Limited.

$3.$ DIRECTORS' MEETINGS

The number of Directors' meetings (including meeting of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are:

	Meetings	Circular Resolution in Writing
Mr Gary E Comb	3
Mr S A Macdonald	3	З
Mr R M Joyce	વ	3

$A =$ Number of meetings attended

$B$ = Number of meetings held during the time the Directors held office during the year.

REMUNERATION REPORT - AUDITED $\boldsymbol{4}$ .

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

• Principles used to determine the nature and amount of remuneration Α.
• B. Details of remuneration
• Service agreements $C₁$
• Share-based compensation D.
• Additional information E.

The information provided under headings A-D includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred from the financial report and have been audited. The disclosures in Section E are additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001, which have not been audited.

Details of the remuneration of the directors and key management personnel of Zinc Co. Australia Limited are set out in the following tables. The key management personnel of Zinc Co Australia Limited include the directors, as per note 1 and note 4(c) to this report, and the following executive officers:

A M Hespe	$\blacksquare$	General Manager
B R Acutt	$\blacksquare$	Joint Company Secretary
A A Dermedgoglou	$\overline{\phantom{0}}$	Joint Company Secretary

Principles used to determine the nature and amount of remuneration - audited A.

Compensation levels for Directors and Executives of the entity are competitively set to attract and retain appropriately qualified and experienced Directors and Executives.

The objective of the Company's reward framework is to ensure reward for performance is competitive and appropriate. The Board ensures that remuneration satisfies the following criteria for reward:

• competitiveness and reasonableness
• $\bullet$ transparency
• attracts and retains high calibre executives
• rewards capability and experience

Remuneration of Directors and Executives for the year ending 30 June 2009 has been determined by the Board. In this respect consideration is given to normal commercial rates of remuneration for similar levels of responsibility.

Remuneration of Non-Executive Directors and Executives comprise fees, quantified by having regard to industry practice and the need to obtain appropriately qualified, independent persons. Fees may contain non-monetary elements.

Fixed Compensation

Fixed compensation consists of base compensation (which is calculated on a total basis and includes any FBT charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.

Details of remuneration - audited B.

The following table discloses the remuneration of the Directors of the Company and key management personnel (as defined in AASB 124 Related Party Disclosures) of Zinc Co Australia Limited.

		Short-term benefits			Post-employment benefits	Share- based		The key management personnel of Zinc Co Australia Limited include the directors and the following executive officers of the Company: S300A(1)(e)(i)	S300A(1)(e)(vi)
	salary & Cash fees	bonus Cash	monetary benefits Non-	annuation Super-	Retirement benefits	payment Options	TOTAL	Proportion of remuneration performance related	Value of options as remuneration proportion of
2009	↔	↮	မာ	↮	↔	↔	↔	వ్	ಸ
Non-executive directors
(Chairman) GE Comb	40,000				ţ		43,600 32,700
SA Macdonald	30,000			3,600 2,700					ī
RM Joyce	30,000	1		2,700	I		32,700	$\mathbf{1}$	п
	100,000	ı	1	9,000		Ŧ	109,000
Management Other Key Personnel
AM Hespe	218,229	t		16,771 ı	I.	19,500 1	254,500	ı	7.8
BR Acutt								ı	1
AA Dermedgoglou	I 218,229			$\begin{array}{c} \hline \end{array}$ 16,771	I.	19,500	254,500	ı	ł
TOTAL:	318,229	ı		25,771 ŧ	t	19,500	363,500		ï

Directors' interests in contracts with the Company are disclosed in Note 21.
'For parameters used to value options refer to Note 23.

Zinc Co Australia Limited

DIRECTORS' REPORT

$\Gamma$

		Short-term benefits		Post-employment benefits		Share- based		S300A(1)(e)(i)	S300A(1)(e)(vi)
	salary & Cash fees	bonus Cash	monetary benefits Non-	annuation Super-	Retirement benefits	payment Options	TOTAL	Proportion of remuneration performance related	Value of options as remuneration proportion of
Jon-executive irectors $\frac{80}{2}$	↮	မာ	↔	↮	↮	↮	ക	Ş.	వ్
Chairman) SA Macdonald JE Comb	40,000 30,000				١			Î	Ï
RM Joyce	30,000			000 0000 0.2700	ì		43,600 32,700 32,700	ſ	t ı
	100,000		ï	9,000	I	ī	109,000		ŧ
Management Other Key ersonnel						57,250	263,083		21.3
ላM Hespe 3R Acutt ኣA Dermedgoglou	189,303			16,530	ı			Ĩ
				I	Ŧ	t	1	ŧ
	189,303			16,530		57,250	263,083		ī
TOTAL:	289,303	J		25,530	ŧ	57,250	372,083	1

$\infty$

Zinc Co Australia Limited

C. Service agreements - audited

Remuneration and other terms of employment for other key management personnel are formalised in service agreements. The major provisions of the agreement relating to remuneration are set out below.

Gary E Comb	- Non Executive Chairman, appointed - Annually renewable contract - Annual Base Salary of \$40,000, plus superannuation of 9%
Stanley A Macdonald	- Non Executive Director, appointed - Annually renewable contract - Annual Base Salary of \$30,000, plus superannuation of 9%
Rodney M Joyce	- Non Executive Director, appointed 6 December 2006 - Annually renewable contract - Annual Base Salary of \$30,000, plus superannuation of 9%
Anthony M Hespe Terms of Agreement	- General Manager The agreement is annually renewable. To terminate the agreement, the Company must provide 6 months notice or the General Manager must provide 3 months notice. If serious misconduct is committed by the executive, the agreement may be immediately terminated by the Company. On termination, the Company may provide the executive with a payment in lieu of notice of termination for all or part of the notice period.
Remuneration and Benefits	- Annual Salary of \$235,000 inclusive of superannuation and allowances.

D. Share-based compensation - audited

Options granted under the Zinc Co Australia Limited Employee Option Plan were approved by a directors resolution dated 27 April 2006, as outlined in the Company's prospectus. The Board may offer free options to persons who are:

• full time or part time employees (including a person engaged by the Company under a $(i)$ consultancy agreement); or
• Directors of the Company or any subsidiary based on a number of criteria including $(ii)$ contribution to the Company, period of employment, potential contribution to the Company in the future and other factors the Board considers relevant.

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

Grant date	Expiry date	Exercise price	Value per option at grant date	Date exercisable	Number Issued
29 May 2007	30 June 2009	\$0.25	\$0.207	Immediate	1,900,000
13 August 2007	30 June 2009	\$0.25	\$0.229	Immediate	250,000
21 August 2008	1 Feb 2013	\$0.16	\$0.039	Immediate	500,000

Options granted under the plan carry no dividend or voting rights.

When exercisable, each option is convertible into one ordinary share within fourteen days after the receipt of a properly executed notice of exercise and application monies. The Company will issue to the option holder, the number of shares specified in that notice. The Company will apply for official quotation of all shares issued and allotted pursuant to the exercise of the options.

Subject to the ASX Listing Rules, the options are fully transferable.

Details of options over ordinary shares in the Company provided as remuneration to each director of Zinc Co Australia Limited and each of the key management personnel of the entity are set out below. When exercised, each option is convertible into one ordinary share of Zinc Co Australia Limited. Further information on the options is set out in Note 22 - Key Management Personnel Disclosures to the financial statements.

Name	Number of options granted during the		Number of options vested during the
	vear		year
	2009	2008	2009	2008
Directors of Zinc Co Australia Limited
Gary E Comb
Stanley A Macdonald
Rodney M Joyce
Other key management personnel compensation
Bruce R Acutt
Alex A Dermedgoglou
Anthony M Hespe	500,000	250,000	500,000	250,000
TOTAL	500,000	250,000	500,000	250,000

All options were vested and exercisable at the end of the year.

The expected price volatility is based on the historic volatility, if available, (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information and volatility within the mining industry.

No ordinary shares in the Company were issued as a result of the exercise of remuneration options to each director of Zinc Co Australia Limited and other key management personnel during the financial period ended 30 June 2009.

Additional information - unaudited E.

Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance.

The overall level of executive reward takes into account the performance of the Company over the year, with greater emphasis given to the current year given the current year is the first year of operation.

Details of remuneration: cash bonuses and options

For each cash bonus and grant of options included in Section D, the percentage of the available grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria, is set out below. There are no vesting conditions.

Share-based compensation: Options

Further details relating to options are set out below.

Name	consisting of options	Remuneration Value at grant date	Value at exercise date	Value at lapse date	Total of columns B-D
A M Hespe	7.66%	19,500	£ -	-	19,500

• The percentage of the value of remuneration consisting of options, based on the $A =$ value at grant date set out in column B.
• The value at grant date calculated in accordance with AASB 2 Share-based $B =$ Payment of options granted during the year as part of remuneration.
• The value at exercise date of options that were granted as part of remuneration $C =$ and were exercised during the year.
• The value at lapse date of options that were granted as part of remuneration and $D =$ that lapsed during the year.

Loans to directors and executives

There are no loans to directors and executives.

Shares under option

Unissued ordinary shares of Zinc Co Australia Limited under option at the date of this report are as follows:

Date options granted	Expiry date	Issue price of shares	Number under option
11 December 2007	- 30 November 2009 -	\$0.25	26,392,407
21 August 2008	1 February 2013	\$0.16	550,000

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

Shares issued on the exercise of options

No ordinary shares of Zinc Co Australia Limited were issued during the year ended 30 June 2009 on the exercise of options granted under Zinc Co Australia Limited's Employee Option Plan.

Directors' Interests

The relevant interest of each director in the shares, debentures, interests in registered schemes and rights or options over such instruments issued by the Company, as notified by the directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

	Number Directly Held	Fully Paid Ordinary shares Number Beneficially Held	TOTAL	Number Directly Held	Options Number Beneficially Held	TOTAL
G E Comb R M Joyce S A Macdonald	1,540,371	100,000 1,031,759	100,000 1,031,759 562,177 2,102,548	770,186	50,000 515,880 281,089	50.000 515,880 1,051,275
TOTAL	1,540,371		1,693,936 3,234,307	770,186	846,969	1,617,155

5. PRINCIPAL ACTIVITIES

The principal activity of the Company during the course of the financial year was mineral exploration.

Following listing on ASX on 29 May 2007, the Company commenced exploration activity on zinc projects in Western Australia and China.

There was no significant change in the nature of the activity of the Company during the year.

6. OPERATING & FINANCIAL REVIEW

Overview

During the year, Zinc Co Australia Limited undertook mineral exploration activities in Australia and China.

Objectives

The Company's objectives are to pursue advanced opportunities in exploration and mining for zinc in areas which are highly prospective for zinc mineralisation.

1. Financial Results

The loss for the financial year ended 30 June 2009 attributable to members of Zinc Co Australia Limited after income tax is \$707,565 (2008: \$331,242)

1. Shareholder earnings (loss) per share

	2009	2008
	Cents	Cents
Loss attributable to members of Zinc Co Australia Limited
Basic loss per share	(1.08)	(0.51)

No dividends were paid or recommended for payment during the financial year ended 30 June 2009.

1. Review of finances and operations

Zinc Co Australia Limited listed on ASX on 29th May 2007 after raising \$5,000,000 (before costs of listing). The Company does not produce minerals at this stage, and any income is derived from interest on cash deposits.

The Directors consider that the Company holds a valuable portfolio of mineral tenements with a fair value as at 30 June 2009 of \$2,082,596 (2008: \$1,206,912)

The Company is subject to various legislative and other external requirements, such as Native Title. Environmental Laws, Occupational Health and Safety Laws, Stock Exchange Rules, Corporation Act and Mines Department Laws.

4. State of Affairs

There were no significant changes in the state of affairs of Zinc Co Australia Limited during the year ended 30 June 2009.

EVENTS SUBSEQUENT TO BALANCE DATE $\overline{7}$ .

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and/or unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years.

FUTURE DEVELOPMENTS 8.

The Company will continue to pursue its policy of acquiring and testing attractive zinc properties with a view to developing properties capable of economic mineral production.

Further information about likely developments in the operations of the Company and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Company.

ENVIRONMENTAL REGULATION 9.

The Company is subject to significant environmental regulation in relation to its exploration activities and aims to ensure that the highest standard of environmental care is achieved. and that it complies with all relevant environmental legislation. The Directors are not aware if any significant breaches during the period covered by this report.

INSURANCE OF OFFICERS $10.$

During the financial year. Zinc Co Australia Limited paid a premium of \$11,746 to insure the directors and officers of the Company who are: Gary E Comb, Stanley A Macdonald, Rodney M Joyce, Anthony M Hespe, Bruce R Acutt, Alex A Dermedgoglou.

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 the Company, 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 of the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. The insurance policies outlined above do not contain details of the premiums paid in respect of individual officers of the Company.

PROCEEDINGS ON BEHALF OF THE COMPANY $11.$

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the period.

NON-AUDIT SERVICES $12₁$

Details of the amounts paid or payable to the auditor (Mack & Co) for audit and non-audit services provided during the year are set out below.

During the year the following fees were paid or payable for services provided by the auditor of the Company:

	2009 \$	2008 \$
Assurance services Audit services Mack & Co:
Audit and review of financial reports and other audit work under the Corporations Act 2001	39,000	22,325
Total remuneration for audit services	39,000	22,325
Other assurance services
Total remuneration for other assurance services
Total remuneration for audit and assurance services	39,000	22,325

DIVIVENDS $13.$

No dividends were paid or provided for during the year

14. SHARE OPTIONS

As at the date of this report there were 26,392,407 listed options and 550,000 unlisted options on issue.

15. AUDITORS' INDEPENDENCE DECLARATION

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is attached.

This report is made in accordance with a resolution of directors.

Signed in accordance with a resolution of the directors.

Gary E Comb PERTH

CHAIRMAN

25 SEPTEMBER 2009

2ND FLOOR, 35 HAVELOCK ST, WEST PERTH WA 6005 PO BOX 609, WEST PERTH WA 6872

TELEPHONE +61 8 9322 2798 FACSIMILE +61 8 9481 2019 E-MAIL: MAIL@MACKCO.COM.AU WEB: MACKCO.COM.AU

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF ZINC CO AUSTRALIA LIMITED

I declare that, to the best of my knowledge and belief during the year ended 30 June 2009 there have been:

• $\mathbf{i}$ . no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• ii. no contraventions of any applicable code of professional conduct in relation to the audit.

Mack and

S S FERMANIS PARTNER WEST PERTH

DATE: 25^th September 2009

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2009

Continuing operations	NOTE	2009 \$	2008 \$
Other income Finance income - interest Total Income		1,023 158,041 159,064	292,131 292,131
Administration expenses Compliance expenses Director's fees Depreciation Employee benefits Equity Compensation benefits Exploration expenses written off Fringe Benefits Tax Paid Insurance Management fee	5 13	(91, 970) (37, 682) (106, 689) (9,652) (103, 465) (21.450) (353,963) (1,752) (20,006) (120,000)	(96, 690) (62, 898) (110, 957) (9,363) (48,002) (57, 250) (99, 808) (18, 405) (120,000)
Results from operating activities		(866, 629) (707, 565)	(623, 373) (331, 242)
Loss before income tax expense Income tax expense	8	(707, 565)	(331, 242)
Net Operating Loss after income tax expense		(707, 565)	(331,242)
LOSS PER SHARE Basic loss per share (cents) Diluted loss per share (cents)	7 7	(1.08) (1.08)	(0.51) (0.51)

The Income Statement is to be read in conjunction with the notes to the Financial Statements

BALANCE SHEET AS AT 30 JUNE 2009

	NOTE	2009 \$	2008 \$
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets	9 10 11	2,329,312 30,330 29,243	3,805,723 91,176 43,700
TOTAL CURRENT ASSETS		2,388,885	3,940,599
NON-CURRENT ASSETS Plant and equipment Exploration and evaluation expenditure	12 13	22,729 2,082,596	29,325 1,206,912
TOTAL NON-CURRENT ASSETS		2,105,325	1,236,237
TOTAL ASSETS		4,494,210	5,176,836
CURRENT LIABILITIES Trade and other payables Employee benefits	14 15	80,084 44,716	116,402 13,909
TOTAL CURRENT LIABILITIES		124,800	130,311
NON-CURRENT LIABILITIES Employee benefits	15	9,000
TOTAL NON-CURRENT LIABILITIES		9,000
TOTAL LIABILITIES		133,800	130,311
NET ASSETS		4,360,410	5,046,525
EQUITY Issued capital Reserves Accumulated losses	16 17(a) 17(b)	5,092,500 782,027 (1,514,117)	5,092,500 760,577 (806, 552)
TOTAL EQUITY		4,360,410	5,046,525

The Balance Sheet is to be read in conjunction with the notes to the Financial Statements

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009

	Note	Issued Capital S	Reserves \$	Accumulated Losses \$	Total \$
At 1 July 2008		5,092,500	760,577	(806, 552)	5,046,525
Share based payments	23		21,450		21,450
Share issue costs	17(a)
Loss attributable to members	17(b)			(707,565)	(707, 565)
Balance at 30 June 2009		5,092,500	782,027	(1, 514, 117)	4,360,410
At 1 July 2007		5,092,424	465,750	(475, 310)	5,082,864 76
Contribution from Issue of share capital		76
Contribution from Issue of options			263,928		263,928
Share based payments			57,250		57,250
Share issue costs			(26, 351)		(26, 351)
Loss attributable to members				(331, 242)	(331, 242)
Balance at 30 June 2008		5,092,500	760,577	(806, 552)	5,046,525

The Statement of Changes in Equity is to be read in conjunction with the notes to the Financial Statements

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2009

	NOTE	2009 \$	2008 \$
CASH FLOWS FROM OPERATING ACTIVITIES Cash paid to suppliers Interest received Net GST and other taxes received (paid) NET CASH (USED IN) OPERATING ACTIVITIES	24	(509, 273) 153,124 112,442 243,707)	(440, 665) 294,227 (146, 438)
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of plant and equipment Exploration expenditure NET CASH (USED IN) INVESTING ACTIVITIES		(3,056) (1,229,648) (1, 232, 704)	(16, 432) (989,052) (1,005,484)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of share capital Payment of share issue costs Loan from related entities NET CASH PROVIDED BY FINANCING ACTIVITIES			237,654 (16, 237) 221,417
Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period		(1,476,411) 3,805,723	(930, 505) 4,736,228
Cash and cash equivalents at 30 June 2009	9	2,329,312	3,805,723

The Statement of Cash Flows is to be read in conjunction with the notes to the Financial Statements

1. REPORTING ENTITY

Zinc Co Australia Limited (the "Company") is a company domiciled in Australia, incorporated in Australia, publically listed on the ASX and limited by shares. The address of the Company's registered office is Level 3, 33 Ord Street, West Perth, Western Australia, 6005.

The Company is involved in mining exploration.

2. BASIS OF PREPARATION

Statement of Compliance $(a)$

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs), pronouncements adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

The financial report of the Company complies with International Financial Reporting Standards (IFRSs) and Australian Accountancy Standards.

The financial statements were approved by the Board of Directors on 25^th September 2009. Comparative information is for period 01 July 2007 to 30 June 2008.

Basis of measurement $(b)$

These financial statements have been prepared on the historical cost and accrual accounting basis.

Functional and presentation currency $(c)$

These financial statements are presented in Australian dollars, which is the Company's functional currency.

Use of estimates and judgements $(d)$

Estimates and judgements incorporated in the financial report are based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company.

Taxation $\left( i\right)$

Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from temporary differences, are recognised only where it is considered more likely than not they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences are recognised to the extent that there are future profits.

(ii) Exploration and Evaluation Expenditure

The Company capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet concluded. Such capitalised expenditure is carried at reporting date at \$2.08m.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

2. BASIS OF PREPARATION

(d) Use of estimates and judgements (cont)

(ii) Exploration and Evaluation Expenditure (cont) As at 30 June 2009, the carrying value of capitalised exploration expenditure is \$2,082,596 (2008: \$1,206,912).

(iii) Impairment

The company assesses impairment at each reporting date by evaluating conditions specific to the company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Impairment loss recorded in the current financial year was \$353,963 (2008: \$99,808).

(iv) Share based payments

The Company measures the cost of equity settled transactions with consultants and employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black Scholes model, using the assumptions detailed in note 23.

(v) Deferred tax assets

The Company expects to have carried forward tax losses which have not been recognised as deferred tax assets as it is not considered sufficiently probable at this point in time, that these losses will be recouped by means of future profits taxable in the relevant jurisdictions

Going Concern Basis $(e)$

The financial report has been prepared on the going concern basis. As at 30 June 2009 the company had net assets of \$4,360,410 and continues to incur expenditure on its exploration tenements drawing on its cash balances. As at 30 June 2009 the company had \$2,329,312 in cash and cash equivalents. The ultimate recoupment of costs carried forward for exploration and evaluation is dependent on the successful development and commercial exploitation or sale of the respective areas of interest. Ultimate exploitation of the assets will depend on raising necessary funding in the future. At this time the directors are of the opinion that no asset is likely to be realised for an amount less that the amount in the financial report. Accordingly there has been no adjustment in the financial report relating to the recoverability and classification of the asset carrying amounts, or the amounts and classification of liabilities that might be necessary, should the company be unable to raise capital as and when required, and the exploitation of the areas of interest not be successful, or the company not continue as a going concern.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied unless otherwise stated.

Financial Instruments $(a)$

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Financial Instruments (cont) $(a)$

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Company becomes a party to the contractual Financial assets are derecognised if the Company's provisions of the instrument. contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Company's obligations specified in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Accounting for finance income and expense is discussed in note 3(d).

Held-to-maturity investments

If the Company has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Available-for-sale financial assets

The investments in equity securities and certain debt securities are classified as availablefor-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(k)(i)), and foreign exchange gains and losses on available-for-sale monetary items (see note 3(b)(i)), are recognised directly in a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

Financial assets at fair value through profit or loss

An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit and loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company's documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Other

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Share Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Segment reporting $(b)$

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

Revenue recognition $(c)$

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amount collected on behalf of third parties.

Interest Revenue

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

Other Revenue

Other revenue is recognised when the amount of revenue can be reliably measured and control of the right to receive the revenue has passed.

Finance Income and Expenses $(d)$

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Company's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit and loss using the effective interest method. Foreign currency gains and losses are reported on a net basis.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

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

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Impairment $(f)$

Financial Assets $(i)$

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

Non-financial assets $(ii)$

The carrying amounts of the Company's non-financial assets, deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash flows of other assets or groups of assets (the "cashgenerating unit"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Non-financial assets $(ii)$

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Cash and cash equivalents $(g)$

Cash includes cash on hand and at call and deposits with banks or financial institutions and investments in money market instruments which are readily convertible to cash and used in the cash management function on a day to day basis.

Loans and receivables $(h)$

Trade receivables, loans and other receivables are recognised initially at fair value and subsequently measured at amortised cost less impairment. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.

A provision for doubtful receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provisions is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

Property, plant and equipment $(i)$

Recognition and measurement $(i)$

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Subsequent costs $(ii)$

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its costs can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Depreciation $(iii)$

Depreciation is calculated on a reducing balance basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. The estimated useful live, residual values and depreciation method is reviewed at the end of each annual reporting period.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Property, plant and equipment $(i)$

(iii) Depreciation

The following rates are used in the calculation of depreciation: $3%$

Plant and equipment	10% - 3
Motor vehicles	25%
and the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contra	٬^^

• Office furniture and fittings 10%
• 33% Computer & Office Equipment

Exploration and Evaluation Expenditure $(i)$

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Company has obtained the legal rights to explore an area are recognised in the income statement.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

• (i) the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
• (ii) activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or other wise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment For the purposes of impairment testing, exploration and accounting policy 2(d)(iii). evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit is never larger than the area of interest.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment.

Rehabilitation, restoration and environmental costs

Long-term environmental obligations are based on the Company's environmental management plans, in compliance with current environmental and regulatory requirements.

The costs will include obligations relating to reclamation, waste site closure, plant closure and other costs associated with the restoration of the site, when relevant.

Full provision is made based on the net present value of the estimated cost of restoring the environment disturbance that has been incurred as at the balance date. Increases due to additional environmental disturbance (to the extent that it relates to the development of an asset) are capitalised and amortised over the remaining lives of the mines.

Annual increases in provision relating to the change in the present value of the provision are accounted for in earnings.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Exploration and Evaluation Expenditure $\mathbf{D}$

The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure.

Trade and other payables $(k)$

Trade payables and other accounts payable are recognised when the Company becomes obliged to make future payments resulting from the purchase of goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

$(1)$ Provisions

Provisions are recognised when the Company has a present obligation the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

$(m)$ Employee benefits

Wages, salaries and annual leave $(i)$

Liabilities for wages and salaries, including non-monetary benefits and annual 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.

Long service leave $(ii)$

The provision for employee benefits to long service leave is the amount of future benefit that employees have earned in return for their services in the current and prior periods. The provision is calculated using current future increases in wage and salary rates.

$(ii)$ Share-based payment transactions

Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of a Black & Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest.

The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market conditions not being met.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Equity $(n)$

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Earnings per share $(0)$

Basic earnings per share $(i)$

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial years, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share $(ii)$

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.

Goods and services tax $(p)$

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
• for receivables and payables which are recognised inclusive of GST.

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

Cash flows are included in the Cash Flow Statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

New Accounting Standards for Application in Future Periods $(a)$ The following Australian Accounting Standards have been issued or amended but are not vet effective. They have not been adopted in the preparation of the financial statements for the vear ended 30 June 2009.

The AASB has issued new, revised and amended standards and interpretations that have mandatory application dates for future reporting periods. The Company has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Company follows:

• AASB 3: Business Combinations, AASB 127: Consolidated and Separate Financial Statements, AASB 2008-3: Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASBs 1, 2, 4, 5, 7, 101, 107, 112, 114, 116, 121, 128, 131, 132, 133, 134, 136, 137, 138 & 139 and Interpretations 9 & 107] (applicable for annual reporting periods commencing from 1 July 2009) and AASB 2008-7: Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136] (applicable for annual reporting periods commencing from 1 January 2009). These standards are applicable prospectively and so will only affect relevant transactions and consolidations occurring from the date of application. In this regard, its impact on the Company will be unable to be determined. The following changes to accounting requirements are included:
• acquisition costs incurred in a business combination will no longer be recognised in goodwill but will be expensed unless the cost relates to issuing debt or equity securities:
• contingent consideration will be measured at fair value at the acquisition date and may only be provisionally accounted for during a period of 12 months after acquisition;
• a gain or loss of control will require the previous ownership interests to be remeasured to their fair value:
• there shall be no gain or loss from transactions affecting a parent's ownership interest of a subsidiary with all transactions required to be accounted for through equity (this will not represent a change to the Company's policy);
• dividends declared out of pre-acquisition profits will not be deducted from the cost of an investment but will be recognised as income:
• impairment of investments in subsidiaries, joint ventures and associates shall be considered when a dividend is paid by the respective investee; and
• where there is, in substance, no change to Company interests, parent entities inserted above existing Groups shall measure the cost of its investments at the carrying amount of its share of the equity items shown in the balance sheet of the original parent at the date of reorganisation.

The Company will need to determine whether to maintain its present accounting policy of calculating goodwill acquired based on the parent entity's share of net assets acquired or change its policy so goodwill recognised also reflects that of the non-controlling interest.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

New Accounting Standards for Application in Future Periods (cont'd) $(a)$

• AASB 8: Operating Segments and AASB 2007-3: Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038] (applicable for annual reporting periods commencing from 1 January 2009). AASB 8 replaces AASB 114 and requires identification of operating segments on the basis of internal reports that are regularly reviewed by the Company's Board for the purposes of decision making. While the impact of this standard cannot be assessed at this stage, there is the potential for more segments to be identified. Given the lower economic levels at which segments may be defined, and the fact that cash generating units cannot be bigger than operating segments, impairment calculations may be affected. Management does not presently believe impairment will result however.
• AASB 101: Presentation of Financial Statements, AASB 2007-8: Amendments to Australian Accounting Standards arising from AASB 101, and AASB 2007-10: Further Amendments to Australian Accounting Standards arising from AASB 101 (all applicable to annual reporting periods commencing from 1 January 2009). The revised AASB 101 and amendments supersede the previous AASB 101 and redefines the composition of financial statements including the inclusion of a statement of comprehensive income. There will be no measurement or recognition impact on the Company. If an entity has made a prior period adjustment or reclassification, a third balance sheet as at the beginning of the comparative period will be required.
• AASB 123: Borrowing Costs and AASB 2007-6: Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12] (applicable for annual reporting periods commencing from 1 January 2009). The revised AASB 123 has removed the option to expense all borrowing costs and will therefore require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. Management has determined that there will be no effect on the Company as a policy of capitalising qualifying borrowing costs has been maintained by the Company.
• AASB 2008-1: Amendments to Australian Accounting Standard Share-based Payments: $\bullet$ Vesting Conditions and Cancellations [AASB 2] (applicable for annual reporting periods commencing from 1 January 2009). This amendment to AASB 2 clarifies that vesting conditions consist of service and performance conditions only. Other elements of a sharebased payment transaction should therefore be considered for the purposes of determining fair value. Cancellations are also required to be treated in the same manner whether cancelled by the entity or by another party.
• AASB 2008-2: Amendments to Australian Accounting Standards Puttable Financial Instruments and Obligations Arising on Liquidation [AASB 7, AASB 101, AASB 132 & AASB 139 & Interpretation 2] (applicable for annual reporting periods commencing from 1 January 2009). These amendments introduce an exception to the definition of a financial liability to classify as equity instruments certain puttable financial instruments and certain other financial instruments that impose an obligation to deliver a pro-rata share of net assets only upon liquidation.
• AASB 2008-5: Amendments to Australian Accounting Standards arising from the Annual Improvements Project (July 2008) (AASB 2008-5) and AASB 2008-6: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (July 2008) (AASB 2008-6) detail numerous non-urgent but necessary changes to accounting standards arising from the IASB's annual improvements project. No changes are expected to materially affect the Company.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

New Accounting Standards for Application in Future Periods (cont'd) $(q)$

• AASB 2008-8: Amendments to Australian Accounting Standards Eligible Hedged Items [AASB 139] (applicable for annual reporting periods commencing from 1 July 2009). This amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation as a hedged item should be applied in particular situations and is not expected to materially affect the Company.
• AASB 2008-13: Amendments to Australian Accounting Standards arising from AASB Interpretation 17 - Distributions of Non-cash Assets to Owners [AASB 5 & AASB 110] (applicable for annual reporting periods commencing from 1 July 2009). This amendment requires that non-current assets held for distribution to owners be measured at the lower of carrying value and fair value less costs to distribute.
• AASB Interpretation 15: Agreements for the Construction of Real Estate (applicable for annual reporting periods commencing from 1 January 2009). Under the interpretation, agreements for the construction of real estate shall be accounted for in accordance with AASB 111 where the agreement meets the definition of 'construction contract' per AASB 111 and when the significant risks and rewards of ownership of the work in progress transfer to the buyer continuously as construction progresses. Where the recognition requirements in relation to construction are satisfied but the agreement does not meet the definition of 'construction contract', revenue is to be accounted for in accordance with AASB 118. Management does not believe that this will represent a change of policy to the Company.
• AASB Interpretation 16: Hedges of a Net Investment in a Foreign Operation (applicable for annual reporting periods commencing from 1 October 2008). Interpretation 16 applies to entities that hedge foreign currency risk arising from net investments in foreign operations and that want to adopt hedge accounting. The interpretation provides clarifying guidance on several issues in accounting for the hedge of a net investment in a foreign operation and is not expected to impact the Company.
• AASB Interpretation 17: Distributions of Non-cash Assets to Owners (applicable for annual reporting periods commencing from 1 July 2009). This guidance applies prospectively only and clarifies that non-cash dividends payable should be measured at the fair value of the net assets to be distributed where the difference between the fair value and carrying value of the assets is recognised in profit or loss.

The Company does not anticipate early adoption of any of the above reporting requirements and does not expect these requirements to have any material effect on the Company's financial statements.

4. SEGMENT REPORTING

The Company operates predominantly in one business and geological segment, being mineral exploration in Australia. $2000$ 2008

	Zuuj \$	ZUUU \$
5. ADMINISTRATION EXPENSE
Accounting and Admin Services	9,370	12,925
6 Auditors Remuneration	38,500	22,325
Capital Expenses	3.224	8,115
Communication	1,521	4.326
Legal Expenses	1,505	630
Motor Vehicle Expenses	2,403	4,501
Shareholder Expenses	3,108	3,872
Staff Recruitment		12,000
Stationery, Postage & Printing	6,605	10,911
Storage	6,873
Subscriptions, Publications, Memberships	7,176	5,447
Travel & Accommodation	11,685	7.033 4,605
Sundry Administration Expenses	91,970	96,690
6. AUDITORS' REMUNERATION
Audit Services
Auditors of the Company Audit and review of financial reports - Mack & Co	38,500	22,325
	38,500	22.325
	2009	2008
7. LOSS PER SHARE	Cents	Cents
Basic loss per share	(1.08)	(0.51)
	2009	2008
Basic loss per share	\$	\$
The loss and weighted average number of ordinary shares used in
the calculation of basic loss per share are as follows:
Loss used in calculation of earnings per share	(707, 565)	(331, 242)
Weighted average number of ordinary shares for the purposes
of basic loss per share	65,300,304	65,300,144

		2009 \$	2008 \$
(a)	8. INCOME TAX EXPENSE The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:
	Prima facie tax benefit on loss at 30% (2008: 30%)	(212, 270)	(99, 373)
	Add: Tax effect of: Other non-allowable items Share based payments Overs/unders from prior year Deferred tax balances not recognised (recognised) Less: Tax effect of: Other deferred tax balances not recognised	6,435 287,413 293,848	150 17,175 72,816 9,232 99,373
	Income tax expense
	The applicable average weighted tax rates are as follows:	0%	$0\%$
(b)	The following deferred tax balances have not been recognised:
	Deferred Tax Assets: At 30%:
	Carry forward revenue losses Capital raising costs Provisions and accruals	296,643	394,078 54,057 12.451
		296.643	460.586

The tax benefits of the above deferred tax assets will only be obtained if:

• the company derives future assessable income of a nature and of an amount sufficient to $(a)$ enable the benefits to be utilised;
• the company continues to comply with the conditions for deductibility imposed by law; and $(b)$
• no changes in income tax legislation adversely affect the company in utilising the benefits. $(c)$

	2009 5	2008 S
Deferred Tax Liabilities:
At 30%:
Exploration and evaluation expenditure		360 250
Interest income accrued		4.241
Property, plant and equipment		5,285
		369,776

The above Deferred Tax Liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the Deferred Tax Asset has not been recognised.

9. CASH & CASH EQUIVALENTS	111,192
Cash at bank and in hand		210,242
Deposits at call	209,711	2,085,783
Term Deposits	2,008,409
Bank Bills		1,509,698
	2,329,312	3,805.723
Reconciliation to cash at the end of the year (a) The above figures are reconciled to cash at the end of the financial year, as shown in the Cash Flow Statement, as follows:
Balances as above Cash and cash equivalents in statement of cash flows	2,329,312 2,329,312	3,805,723 3,805.723

The company's exposure to interest rate risk and sensitivity analysis for financial assets and
liabilities are disclosed in note 18.

	2009 5	2008 S
10. TRADE AND OTHER RECEIVABLES Accrued Interest Other Receivables (a)	4.917 25,413	14.138 42,469
Owed by Related Party (note 22)		34,569
	30,330	91.176

(a) Terms and conditions

Other receivables are non-interest bearing and are normally settled on 60 day terms. $(i)$

			2009 \$	2008 \$
OTHER CURRENT ASSETS 11. Bonds & Deposits Prepayments Prepayments and other assets			12,235 17,008 29,243	10,800 32,900 43,700
	Plant & Equipment	Motor Vehicles	Computer Equipment & Software	Total
12. PROPERTY, PLANT & EQUIPMENT Cost or Deemed Cost
Balance at beginning of the period	403	11 145	12,529	24,077
Additions	5.797	1,560	9,075	16,432
Balance at 30 June 2008	6,200	12.705	21,604	40,509
Additions	1,137		1,919	3,056
Balance at 30 June 2009	7,337	12.705	23,523	43,565

	Plant & Equipment	Motor Vehicles	Computer Equipment & Software	Total
12. PROPERTY, PLANT & EQUIPMENT (conťd)
Depreciation
Balance at 30 June 2008	445	3,957	6,782	11,184
Depreciation for the year	1.954	2,187	5,511	9,652
Balance at 30 June 2009	2,399	6,144	12,293	20,836
Carrying Amount
At 30 June 2008	5,755	8,748	14,822	29,325
At 30 June 2009	4,938	6,561	11,230	22,729
			2009	2008
			\$	\$
13. EXPLORATION & EVALUATION EXPENDITURE
Balance at beginning of financial period			1,206,912	317,668
Acquisition of tenements
Capitalised expenditure			1,229,647	989,052
Less exploration expenditure written off			(353,963)	(99,808)
Balance at 30 June 2009			2,082,596	1,206,912

Exploration and evaluation assets

The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest.

	2009 S	2008 S
14. TRADE AND OTHER PAYABLES
Trade Payables (a)	36,692	89,563
Accrued Fees and Employment Expenses (b)	38,535	25,981
Owed to Related Parties (note 22)	4857	858
	80.084	116,402

Terms and conditions

Terms and conditions relating to the above financial instruments

Trade creditors are non-interest bearing and are normally settled on 30 day terms. $(a)$

Sundry creditors and accruals are non-interest bearing and have an average term of $(b)$ $30$ davs.

-------	2009	2008 S
15. EMPLOYEE BENEFITS
Accrued annual leave	44.716	13,909
Accrued long-service leave	9,000
	53,716	13.909

	16. ISSUED CAPITAL	Shares No	2009 \$	Shares No.	2008 \$
(a)	Share capital Fully paid ordinary shares Balance at beginning of year	65,300,304	5,092,500	65,300,000	5.092,424
	Options exercised into shares Transaction costs arising on the share issues			304	76
		65,300,304	5,092,500	65,300,304	5,092,500

Ordinary shares $(b)$

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

Options $(c)$

Information relating to Zinc Co Australia Limited's Employee Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in Note 23.

$(d)$ Capital Management

The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the company. At balance date, the company has no external borrowings. The Directors have no current plans to raise capital on the market through the issue of shares. The company is not subject to any externally imposed capital requirements.

	2009 \$	2008 \$
17. RESERVES & RETAINED LOSSES
(a) Reserves
Share-based Payment Reserve (i)	544 450	523,000
Options Premium Reserve (ii)	237.577	237,577
	782,027	760,577
i) Share-based Payment Reserve Balance at beginning of financial year Issue of 550,000 options under terms of employee	523,000	465,750
share option plan	21,450	57,250
	544 450	523,000

		No.	2009 S	2008 5
	17. RESERVES & RETAINED LOSSES (cont'd) Options Premium Reserve ii).
	Balance at beginning of financial year Issue of options at 1 cent each	26,392,407	237,577	263.928
	Less: Cost of option issue Less: Option exercised during the year			(26, 351)
		26,392,407	237,577	237,577
			2009 \$	2008 S
(b)	Accumulated losses Movements in accumulated losses were as
	follows: Balance at beginning of period Loss for the year		806,552 707,565	475,310 331,242

Share-based payments reserve

The share-based payments reserve is used to recognise the benefit on the issue of options.

Options premium reserve

The options premium reserve is used to recognise premiums paid for options issued.

18. FINANCIAL INSTRUMENTS

Overview

The Company has exposure to the following risks from their use of financial instruments:

• credit risk
• liquidity risk
• market risk

This note presents information about the Company's exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Company does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes

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 company through regular reviews of the risks.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers and investment securities. For the Company it arises from receivables due from director related parties. At the balance sheet date there were no significant concentrations of credit risk.

Cash and cash equivalents

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

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2009

18. FINANCIAL INSTRUMENTS (cont'd)

Trade and other receivables

As the Company 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.

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

Exposure to credit risk

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

	2009	2008
Loans and receivables	42,565	101.976
Cash and cash equivalents	2,329,312	3,805,723

Impairment losses

None of the Company's other receivables are past due (2008: nil).

The allowance accounts in respect of other receivables and held-to-maturity investments are used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the financial asset directly. At 30 June 2009 the Company does not have any collective impairment on its other receivables (2008: nil).

Guarantees

Company policy is to not provide financial guarantees. No guarantees have been provided during the year.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company'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 Company's reputation.

The Company manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows. The Company does not have any external borrowings.

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

Company 30 June 2009

	amount	Carrying Contractual cash flows	6 mths or less	$6-12$ mths	1-2 years 2-5 years		More than 5 vears
Trade and other payables	80,084		80.084	$\blacksquare$	$\bullet$	$\bullet\bullet$

FOR THE YEAR ENDED 30 JUNE 2009

18. FINANCIAL INSTRUMENTS (cont'd)

Company 30 June 2008	Carrying amount	Contractual cash flows	6 mths or less	$6-12$ mths		1-2 years 2-5 years	More than 5 vears
Trade and other payables	116,402	$\overline{\phantom{a}}$	116,402	$\blacksquare$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The Company is not exposed to currency risk on investments, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, which is the Australian dollar (AUD).

The Company has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or payments that are denominated in a foreign currency.

Exposure to currency risk

The Company has no exposure to foreign currency risk at balance date (2008: nil)

Interest rate risk

The Company is exposed to interest rate risk, however to maintain liquidity, Cash is invested for periods not exceeding 90 Days.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below:

	2009 Profit or Loss		2008 Profit or Loss
	100 bp	100 bp	100 bp	100 bp
	Increase	Decrease	Increase	Decrease
Variable rate instruments	23,293	(23.293)	38,057	(38,057)
Cash & cash equivalents	23,293	(23, 293)	38,057	(38, 057)

18. FINANCIAL INSTRUMENTS (cont'd) Fair values

Fair values versus carrying amounts

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

	30 June 2009		30 June 2008
	Carrying amount	Fair value	Carrying amount	Fair value
Trade & Other receivables	30,330	30,330	91.976	91.976
Cash & Cash Equivalents	2,329,312	2,329,312	3,805,723	3,805,723
Trade & Other Payables	(80, 084)	(80,084)	(116, 402)	(116, 402)
	2,279,558	2,279,558	3,781,297	3,781,297

Capital Management

The Company's objectives when managing capital is to safeguard the Company's ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects.

In order to maintain or adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets for in-specie distributions. The company's focus has been to raise sufficient funds through equity to fund exploration and evaluation activities.

The Company monitors capital on the basis of the gearing ratio, however there are no external borrowings as at balance sheet date. The Company encourages employees to be shareholders through the issue of free options to employees.

There were not changes in the Company's approach to capital management during the year. The Company is not subject to any externally imposed capital requirements.

19. OPERATING LEASE COMMITMENTS

The Company has an agreement with U3O8 Limited, a director related company, whereby the Company is provided with accounting and secretarial services and office facilities for a monthly fee of \$10,000. The agreement is reviewed annually.

20. EXPLORATION COMMITMENTS

The Company has certain obligations to perform minimum exploration work and expend minimum amounts on works on mining tenements on order to retain its interests in these tenements, which would be approximately \$610,900 during the next 12 months (2008: \$445,255). There are no commitments bevond 12 months in relation to tenements. These obligations may be varied from time to time, subject to approval, and are expected to be fulfilled in the normal course of operations of the entity.

21. KEY MANAGEMENT PERSONNEL DISCLOSURES

$(a)$ Directors

The following persons were directors of Zinc Co Australia Limited during the financial year: appointed 2 March 2007 Gary E Comb appointed 24 April 2006 Stanley A Macdonald appointed 6 December 2006 Rodney M Joyce

Other key management personnel $(b)$

The following persons also had authority and responsibility for planning, directing and controlling the activities of Zinc Co Australia Limited, directly or indirectly, during the financial year:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2009 21. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont'd)

Name Anthony Hespe Bruce R Acutt Alex A Dermedgoglou	Employer Position Zinc Co Australia Limited General Manager Giralia Resources NL Joint Company Secretary U3O8 Limited Joint Company Secretary
		2009 \$	2008 \$
Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments		318,229 25,771 19,500 363,500	289,303 25 5 30 57.250 372,083

Information regarding individual directors and executives compensation is provided in the Remuneration Report section of the Directors Report. The Company has applied the option under the Corporations Amendment Regulation 2006 to transfer Key Management Personnel disclosures required by AASB 124 to the remuneration report.

• Equity instrument disclosures relating to key management personnel $(d)$
• Option holdings $(i)$

$(c)$

The number of options over ordinary shares in the Company held during the financial year by each director of Zinc Co Australia Limited and other key management personnel, including their personally related parties, are set out below:

2009 Name	start of the vear	Balance at the Granted during the year as compensation	Exercised during the vear	Other changes during the year	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Zinc Co Australia Ltd
Gary E Comb	550,000			$(500,000)^{1}$	50,000	50,000
Rodney M Joyce	1,015,880	۰		$(500,000)^1$	515,880	515.880
Stanley A Macdonald	1,551,275			$(500.000)^{1}$	1.051,275	1,051,275
Other key management personnel compensation
Bruce R Acutt	437,966			$(200,000)^{1}$	237,966	237,966
Alex D Dermedgoglou	272,019		Ξ.	$(200,000)^{1}$	72,019	72,019
Anthony Hespe	250,000	500,000	÷	$(250,000)^{1}$	500,000	500,000

$⁽¹⁾$ - Expired options. All options vested and are exercisable at the end of the year

2008 Name	Balance at the start of the year	Granted during the year as compensation	Exercised during the year	Other changes during the vear	Balance at the end of the year	Vested and exercisable at the end of the year
Directors of Zinc Co Australia Limited
Gary E Comb	500,000	$\bullet$		50,000	550,000	550,000
Rodney M Joyce	500,000		$\overline{\phantom{a}}$		515,880 1,015,880	1,015,880
Stanley A Macdonald	500,000	$\bullet$		$-1,051,275$ 1,551,275		1,551,275
Other key management personnel compensation
Bruce R Acutt	200,000	$\blacksquare$	$\blacksquare$	237,966	437,966	437,966
Alex D Dermedgoglou	200,000	$\overline{\phantom{0}}$	$\blacksquare$	72,019	272.019	272,019
Anthony Hespe		250,000			250,000	250,000

KEY MANAGEMENT PERSONNEL DISCLOSURES (cont'd) $21.$

Share holdings $\mathbf{ii}$

The number of shares in the Company held during the financial year by each director of Zinc Co Australia Limited and other key management personnel, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

2009 Name	Balance at the start of	Purchases	Received during the year on the exercise	Other changes Balance at during the year the end of	the year
	the year		of options
Directors of Zinc Co Australia Limited
Gary E Comb	100,000				100,000
Rodney M Joyce	1,031,759				1,031,759
Stanley A Macdonald	2,102,548				2,102,548
Other key management personnel
Anthony Hespe
Bruce R Acutt	475,930				475,930
Alex D Dermedgoglou	144,037				144,037
2008 Name	Balance at the	Purchases	Received during the year	Other changes Balance at during the year the end of
	start of		on the exercise	(1)	the year
	the year		of options
Directors of Zinc Co Australia Limited
Gary E Comb	100,000				100,000
Rodney M Joyce Stanley A Macdonald	607.944 797,279			423,815 1,305,269	1,031,759 2,102,548
Other key management personnel
Anthony Hespe
Bruce R Acutt Alex D Dermedgoglou	289,505 100,000	45,152 40,000		141,273	475,930

$(1)$ In specie distribution from Giralia NL to Giralia shareholders. Not granted as compensation.

22. RELATED PARTY TRANSACTIONS

Parent entity and ultimate controlling party $(a)$ The Company does not have an ultimate controlling entity. Giralia Resources NL which at 30 June 2007 owned 61.26% of the issued ordinary shares of Zinc Co Australia Limited, reduced its holding to 12.25% in July 2007.

$(b)$ Key management personnel Disclosures relating to key management personnel are set out in Note 21.

22. RELATED PARTY TRANSACTIONS (cont'd)

$(d)$

• Transactions with related parties $(c)$ The following transactions occurred with related parties during the financial year:
• The Company has a service agreement with U3O8 Limited, which is also a director- $(i)$ related entity of Mr Stanley A Macdonald. U3O8 Limited provides the Company with the following services: a) accounting and secretarial services and

b) provision of fully furnished and equipped offices.

Under the agreement, U3O8 Limited is remunerated by the Company monthly on a basis of actual cost reimbursement of services provided, plus a service fee of \$10,000 per month. The total management service fee paid to U3O8 Limited for the year ended 30 June 2009 is \$120,000 (2008: \$120,000).

The Company also paid U3O8 Limited \$575 for reimbursement of expenses not covered by the agreement (2008: \$3,365). The Company received \$27,741 (2008: nil) from U3O8 Limited for reimbursement of expenses.

The Company is the operating joint venture partner in two farm-in joint ventures with $(ii)$ Giralia Resources NL, an entity related to Directors; S A Macdonald and R M Joyce. The Company has the right to earn up to 75% interest in all minerals (other than nickel) at the Cardinals project, and up to 75% interest in all minerals (other than gold) at the Conquistador project.

In 2009, amounts owing by (to) Giralia Resources NL relate to their portion of shared exploration expenditure.

	2009 \$	2008 \$
Giralia Resources NL received no remuneration during the year from the Company
The Company was remunerated by Giralia Resources NL during the year as follows:
Reimbursement of expenses incurred.	36,567	17,093
	36.567	17,093
Amounts owing by (to) related parties at 30 June 2009 are:
U3O8 Limited	1.271	(858)
Giralia Resources NL	3,586	34,569
	4.857	33,711

The amounts owing between related entities relate to expenses incurred by one party reimbursable by the other. No interest is payable on these amounts and balances are repayable on reasonable notice having regard to the financial stability of the Company.

23. SHARE BASED PAYMENTS

$(a)$ Employee Option Plan

The establishment of the Zinc Co Australia Limited's Employee Option Plan was approved by Directors resolution dated 27 February 2007 as outlined in the Company's prospectus. The Board may offer free options to persons ("Eligible Persons") who are:

• $(i)$ full time or part time employees (including a person engaged by the Company under a consultancy agreement); or
• $(ii)$ Directors of the company or any subsidiary based on a number of criteria including contribution to the Company, period of employment, potential contribution to the Company in the future and other factors the Board considers relevant.

Options granted under the plan carry no dividend or voting rights.

When exercisable, each option is convertible into one ordinary share within fourteen days after the receipt of a properly executed notice of exercise and application monies. The Company will issue to the option holder, the number of shares specified in that notice. The

Company will apply for official quotation of all shares issued and allotted pursuant to the exercise of the options.

Options may not be transferred other than to an associate of the holder.

Set out below is the summary of options granted under the plan:

Grant Date	Expiry Date	Exercise Price	Balance at Granted start of the during the during the during the end of the vear Number	vear Number	Exercised vear Number	vear Number	vear Number	Expired Balance at Exercisable at end of the year Number
29 May 2007 30 June 2009			\$0.25 2,250,000	$\blacksquare$	0	2.250.000	0	0
7 August 2007 30 June 2009		SO 25	250,000		0	250,000	0	0
21 August 2008 2 Feb 2013		\$0.16	$\mathbf{m}$	550,000	0	0	550,000	550,000
Weighted average exercise price \$0.16 2,500,000				550,000	0	0	550,000	550,000

No options were forfeited during the period covered by the above table.

No options were exercised during the period covered by the above table.

The weighted average remaining contractual life of share options outstanding at the end of the period was 3.58 years.

Fair Value of options Granted

The assessed fair value at grant date of options granted during the year ended 30 June 2009 was \$0.039 per option. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the terms of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

23. SHARE BASED PAYMENTS (cont'd)

The model inputs for options granted during the year ended 30 June 2009 included:

• options are granted for no consideration, have a 4.4 year life expiring 1^st February $(i)$ 2013
• exercise price: \$0.16 $(ii)$
• grant date: 21^st August 2008
  expiry date: 1^st February 2013 $(iii)$
• $(iv)$
• share price at grant date: \$0.08 $(v)$
• expected price volatility of the company's shares: 75% $(v_i)$
• expected dividend yield: Nil $(vii)$
• risk-free interest rate: 6.25% (viii)
• estimated value of each option at grant date \$0.039 $(ix)$

The expected price volatility is based on the historic volatility, if available, (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information and volatility within the mining industry.

Expenses arising from share-based payment transactions $(b)$

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

	2009 \$	2008 \$
Options issued under employee option plan	21,450	57,250
24. RECONCILIATION OF LOSS BEFORE INCOME TAX EXPENSE TO NET CASH USED IN OPERATING ACTIVITIES
Loss for the year	(707, 565)	(331, 242)
Add.
Non cash items
Employee benefits expense – option based payments	21 450	57,250
- employee entitlements	39.807	13,909
Mining Tenement expenditure written off	353,963	99,808
Depreciation	9.652	9,363
Changes in operating assets and liabilities:
Decrease/(Increase) in trade and other receivables	60.847	(58, 138)
Decrease/(Increase) in other assets	14,457	(19,217)
Increase/(Decrease) in trade and other payables	(36, 318)	81,829
Net cash (used in) operating activities	(243, 707)	(146, 438)

25. SUBSEQUENT EVENTS

Since 30 June 2009, there have been no material events which may significantly affect the operations of the Company.

26. DIVIDENDS

No dividends have been paid or provided for.

27. CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets and liabilities at reporting date.

DIRECTORS' DECLARATION

• In the opinion of the directors of Zinc Co Australia Limited ("the Company"): $\mathbf{1}$ .
• the financial statements and notes, and the Remuneration report in the Directors' $(a)$ report, set out on pages 5 to 12 are in accordance with the Corporations Act 2001, including:
  • giving a true and fair view of the financial position of the Company's financial $(i)$ position as at 30 June 2009, and of its performance for the financial year ended on that date; and
  • complying with Australian Accounting Standards (including the Australian $(ii)$ Accounting Interpretations) and the Corporations Regulations 2001;
• the financial report also complies with International Financial Reporting Standards as $(b)$ disclosed in note 2(a);
• there are reasonable grounds to believe that the Company will be able to pay its debts $\left( c\right)$ as and when they become due and payable.
• The directors have been given the declarations required by Section 295A of the $2.$ Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2009.

Dated at Perth this 25^th Day of September 2009

Signed in accordance with a resolution of the directors:

Gary E Comb Chairman

2ND FLOOR, 35 HAVELOCK ST, WEST PERTH WA 6005 PO BOX 609, WEST PERTH WA 6872

TELEPHONE +61 8 9322 2798 FACSIMILE +61 8 9481 2019 E-MAIL: MAIL@MACKCO,COM.AU WEB: MACKCO,COM.AU

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ZINC CO AUSTRALIA LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Zinc Co Australia Limited (the Company), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the Company at the year 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 and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the Company, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor's Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, 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 and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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.

Auditor's Opinion

In our opinion:

• (a) the financial report of Zinc Co Australia Limited is in accordance with the Corporations Act 2001, including:
• $(i)$ giving a true and fair view of the Company's financial position as at 30 June 2009 and of its performance for the year ended on that date; and
• $(ii)$ complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2.

Report on the Remuneration Report

We have audited the remuneration report included in the directors' Report for the year ended 30 June 2009. 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 Zinc Co Australia Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001.

Markand Co.
MACK&CO.

S STERMANIS PARTNER WEST PERTH

DATE: 25^Th September 2009

LORGIAN JAMELO BY A SCHOOL AND AND UNDER PROBATIONAL SECURITIES LORGI VIEW

This statement outlines the main corporate governance practices in place throughout the financial year, which comply with the ASX Corporate Governance Council recommendations unless otherwise stated.

PRINCIPLES OF BEST PRACTICE RECOMMENDATIONS

PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Role of Board and Responsibilities

The Board of Directors of Zinc Co Australia Limited is responsible for the corporate governance of the Company. The Board monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected, and to whom they are accountable.

The relationship between the Board and senior management is critical to the Company's longterm success. The Directors are responsible to the shareholders for the performance of the Company in both the short and longer term, and seek to balance sometimes competing objectives in the best interests of the Company. Their focus is to enhance the interests of shareholders and other key stakeholders, and to ensure the Company is properly managed.

The Board operates in accordance with the broad principles set out in its charter, which is available from the Corporate Governance Information Section of the Company website at www.zincco.com.au. The charter details the Board's composition and responsibilities.

Board Responsibilities

(ASX CGC Recommendation 1.1) The responsibilities of the Board include:

• supervising the Company's framework of control and accountability systems to enable risk $\bullet$ to be assessed and managed:
• ensuring the Company is properly managed, for example by:
• appointing and, where appropriate, removing any Managing Director, Chief Executive Officer (or equivalent) of the Company;
• ratifying the appointment and, where appropriate, the removal of any Chief Financial Officer and the Company Secretary:
• formulating short term and long term strategies to enable the Company to achieve its objectives and ensuring that the Company has the resources to meet its strategic objectives;
• input into and final approval of management's development of corporate strategy and performance objectives:
• reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal compliance:
• monitoring senior management's performance and implementation of strategy and ensuring appropriate resources are available; and
• establishing, monitoring and determining the powers and duties of any and all of the Company's committee's;
• approving and monitoring the progress of major capital expenditure, capital management. and acquisitions and divestitures:
• approving the annual budget:
• monitoring the financial performance of the Company;
• approving and monitoring financial and other reporting;
• providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company:
• appointing the external auditor and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the Board must be ratified by shareholders at the next AGM of the Company:
• liaising with the Company's external auditors; and
• monitoring and ensuring compliance with all of the Company's legal obligations, in particular those obligations relating to the environment, native title, cultural heritage and occupational health and safety.

Senior Executive Responsibilities

The Company is served by three senior executives;

A General Manager and joint Company Secretaries/Chief Financial Officers.

The General Manager is responsible for:-

• Managing all exploration activity including the selection of area to be subject to exploration, determining the nature, type and extent of exploration activity;
• Ensuring that tenements are maintained in good standing with applicable State Authorities;
• Reporting to the Board on exploration activity;
• Reporting to Board on financial activity;
• Preparation of Exploration Budget;
• Periodical high-level review of key controls to ensure that they are operating as required/designed.

The joint Company Secretaries/Chief Financial Officers are responsible for:

• Ensuring the efficient operation of the registered office of the company;
• Preparation of monthly financial reports
• Preparation of half-year and annual financial statements
• Ensuring compliance with ASX Listing rules and applicable Australian Securities and $\bullet$ Investment Commission requirements
• Ensuring the continuous operation of key controls
• Maintenance of company's risk register
• Maintenance of company records

Evaluation of Senior Executive Performance

(ASX CGC Recommendation 1.2)

The General Manager is accountable to the Board for management of the Company, with authority levels approved by the Board, and is subject to the supervision of the Board. Similarly, the performance of the two Company Secretaries/CFO's is evaluated by the Board annually.

(ASX CGC Recommendation 1.3)

All senior executives were evaluated during the current financial year against the responsibilities identified above and following the process disclosed above.

PRINCIPLE 2 - STRUCTURE OF THE BOARD TO ADD VALUE

Current Board and its composition

Details of the current directors of the Company, their expertise and length of service as a director are contained in the Directors' Report (page 4).

Composition and functions of the Board

The composition of the Board is determined in accordance with the following principles and quidelines:

The Board shall comprise at least three Directors, increasing where additional expertise is considered desirable in certain areas.

• Where possible the Board is to comprise a majority of non-executive directors who are considered by the Board to be independent.
• Directors may bring characteristics which allow a mix of qualifications, skill and experience.
• At any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Company, and directors with an external or fresh perspective; and
• the size of the Board is conducive to effective discussion and efficient decision-making.

The Board reviews its composition on an annual basis to ensure that it has the appropriate mix of expertise and experience to adequately discharge its responsibilities and duties. Where a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board will select appropriate candidates with relevant qualifications, skills and experience.

Details of members of the Board, their experience, expertise, qualifications, term of office and independent status are set out in the Directors' Report under the heading "1. Directors". There are three non-executive directors' one of whom is deemed independent under the principles set out below, at the date of signing the Directors' Report.

Term of office

The Company's Constitution specifies that any Director other than the Managing Director must retire from office no later than the third annual general meeting (AGM) following their last election.

Directors' independence

(ASX CGC Recommendation 2.1)

The Board has adopted the specific principles in relation to Directors' independence. These state that to be deemed independent, a director must be a non-executive and:

• not be a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
• within the last three years, not have been employed in an executive capacity by the Company or been a director after ceasing to hold any such employment;
• within the last three years not have been a principal of a material professional advisor or a material consultant to the Company or an employee materially associated with the service provided:
• not be a material supplier or customer of the Company, or an officer of or otherwise associated, directly or indirectly, with a material supplier or customer;
• must have no material contractual relationship with the Company or another Company member, other than as a director of the Company;
• be free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the Company:
• not have been on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the Company. Materiality for these purposes is determined on both quantitative and qualitative bases. An amount of over 10% of the current year operating result of the Company or 10% of the pro forma net assets is considered material for these purposes. In addition, the Company applies materiality based on qualitative assessments including if matters impact on the reputation of the Company and if they involve a related party.

There is one non-executive director who is deemed independent at the date of signing the Directors' Report, as outlined in the Directors' Report under the heading "Information on Directors".

Conflict of interests

Entities connected with Mr R M Joyce and Mr S Macdonald had business dealings with the entity during the year, as described in Note 22 - Related Party Transactions, to the financial statements. In accordance with the Board charter, the Directors concerned declared their interests in those dealings to the Company and took no part in decisions relating to them or the preceding discussions.

Chairman

(ASX CGC Recommendation 2.2, 2.3)

The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board's relationship with the Company's senior executives.

Mr Gary E Comb, an independent non executive director, was appointed Chairman by the board on 2 March 2007. Mr Comb has no executive role in the running of the Company.

The Chairperson's responsibilities are set out in the Board Charter, which is available from the corporate governance information section of the Company website at www.zincco.com.au.

Board committees

Each committee may be comprised of executive and non-executive Directors. Due to the small size and structure of the Board, there are no separate audit, nomination and remuneration committees. Instead, the Board considers it more appropriate to set aside time at Board meetings to specifically address matters that would ordinarily be considered by audit, nomination or remuneration committees. When considering these matters, the Board functions in accordance with its Audit Committee Charter and Remuneration Committee Charter.

Each written charter sets out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. All of these charters are reviewed on an annual basis and are available on the Company website.

All matters determined by committees are submitted to the full Board as recommendations for Board decisions.

Minutes of committee meetings are tabled at the subsequent Board meeting. Additional requirements for specific reporting by the committees to the Board are addressed in the charter of the individual committees.

Nomination committee

(ASX CGC Recommendation 2.4)

There is no separate nomination committee. The Board considers those matters and issues arising that would usually fall to a nomination committee. The following Directors comprise the Board which considers nomination related matters:

G E Comb (Non-Executive Chairman)

R M Joyce (Non-Executive Director)

S A Macdonald (Non-Executive Director)

When considering nomination matters, the Board operates in accordance with its charter which is available on the Company website at www.zincco.com.au.

The main responsibilities are to:

• conduct an annual review of the membership of the Board having regard to present and future needs of the Company, and to make recommendations on Board composition and appointments:
• propose candidates for Board vacancies;
• oversee the annual performance assessment program;
• oversee Board succession, including the succession of the Chairman; and
• assess the effectiveness of the induction process.

Candidates for the Board are considered and selected by reference to a number of factors which include, but are not limited to, their relevant experience and skills, compatibility within the Company's scope of activities, and ability to undertake Board duties and responsibilities.

The Board then appoints the most suitable candidate who must stand for election at the next annual general meeting of the Company.

Details of the nomination, selection and appointment processes are available on the Company website.

Notices of meetings for the election of Directors comply with the ASX Corporate Governance Council's best practice recommendations.

New directors are provided with a letter of appointment setting out the Company's expectations, their responsibilities and rights, and the terms and conditions of their employment. All new directors participate in a comprehensive, formal induction program which covers the operation of the Board and its committees and financial, strategic, operations and risk management issues.

It is the Company's practice to allow it's directors to accept appointments outside the Company with prior written approval of the Board. No appointments of this nature were accepted during the year ended 30 June 2009.

The commitments of non-executive directors are considered by the Board, prior to the directors' appointment to the Board of the Company and are reviewed each year as part of the annual performance assessment.

Prior to appointment or being submitted for re-election, each non-executive director is required to specifically acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company.

Performance assessment

(ASX CGC Recommendations 2.5)

The Chairman undertakes an annual assessment of the performance of the Directors and its committees. The result of his assessment is presented to the Board. Directors whose performance is unsatisfactory are asked to retire.

Each Director has the right to seek independent advice at the Company's expense, however prior approval by the Chairman is required, which will not be unreasonably withheld.

Commitment

The Board held three board meetings during the year and three circular resolutions in writing during the year. Non-executive Directors are expected to prepare for and attend Board and committee meetings and associated activities.

The number of meetings of the Company's Board of Directors and of each Board committee held during the year ended 30 June 2009, and the number of meetings attended by each Director, is disclosed on page 5 of the Directors' Report.

The commitments of non-executive Directors are considered by the nomination committee prior to the Directors' appointment to the Board of the Company and are reviewed each year as part of the annual performance assessment.

Prior to appointment or being submitted for re-election, each non-executive Director is required to specifically acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company.

CORPORATE GOVERNANCE STATEMENT

PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING Code of conduct and trading policy

(ASX CGC Recommendation 3.1)

The Company has developed a statement of values and a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all directors and employees. The Code is requilarly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company's integrity.

In summary, the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Company policies and that individuals are responsible and accountable for reporting and investigating reports of unethical behaviour.

(ASX CGC Recommendation 3.2)

Directors, employees and contractors are required to comply with the Company's comprehensive Share Trading Policy when dealing in the Company's securities. This policy outlines the law on insider trading and restricts people working for or associated with the company from dealing in company securities. The policy prohibits Directors or employees to deal in Company's securities when they are in possession of price sensitive information that is not generally available to the market.

(ASX CGC Recommendation 3.2)

A Code of Conduct applicable to all directors, senior executives and staff and the policy to be followed by all directors, senior executives and staff in dealing in the Company's securities is contained in the Company's Corporate Governance Policies accessible via the Company's website - www.zincco.com.au.

PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Audit Committee

(ASX CGC Recommendation 4.1, 4.2)

There is no separate audit committee. This is because, in the opinion of the Board, the added expense associated with the establishing a separate independent audit committee, can not be justified in a Company the size of Zinc Co Australia Limited.

The Board considers those matters and issues arising that would normally fall to the audit committee. The Board, acting as the audit committee, has appropriate financial expertise and all members are financially literate and have an appropriate understanding of the industries in which the Company operates.

For details of the Board members please refer to the Directors Report (page 4).

The Board, acting as the audit committee, operates in accordance with a charter which is available on the Company website. The main responsibilities are to:

• review, assess and approve the annual full reports, the half-year financial report and all other financial information published by the company or released to the market
• assist the Board in reviewing the effectiveness of the organization's internal control environment covering:
• effectiveness and efficiency of operations $\circ$
• reliability of financial reporting $\circ$
• compliance with applicable laws and regulations $\circ$
• determine the scope of the internal audit function and ensure that its resources are adequate and used effectively, and assess its performance, including independence

• oversee the effective operation of the risk management framework

• recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess performance

• consider the independence and competence of the external auditor on an ongoing basis. Each reporting period, the external auditor provides and independence declaration in relation to the audit
• review and approve the level of non-audit services provided by the external auditors and ensure it does not adversely impact on auditor independence
• review and monitor related party transactions and assess their propriety
• report to the Board on matters relevant to the committee's role and responsibilities

In fulfilling its responsibilities, the Board:

• receives regular reports from management and external auditors
• meets with management and external auditors at least twice a year, or more frequently if necessary
• reviews the processes the General Manager and CFO's have in place to support their certifications to the Board
• discuss external audit plans, identifying significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review external audit fees proposed for the audit work to be performed
• reviews the half year and annual report prior to lodgement with the ASX, and any significant adjustments required as a result of the auditor's findings
• reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved, the adequacy of accounting and financial controls, and to monitor the implementation of any recommendations made
• provides management and external auditors with a clear line of direct communication at any time to the Chairman of the Board.

The Board, acting as the audit committee, has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

External auditors

The Company and audit committee policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration the assessment of performance, existing value and tender costs.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors report and in note 7 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the audit committee.

The external auditor is requested to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report

Audit Committee Charter

(ASX CGC Recommendation 4.3)

The Audit Committee Charter is contained in the Company's Corporate Governance Policies accessible via the Company's website - www.zincco.com.au.

PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

Continuous disclosure and market communication

(ASX CGC Recommendation 5.1, 5.2)

The Company has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company's securities. These policies and procedures are designed to ensure that shareholders and the market are provided with equal, timely and balanced access to material information concerning the Company. A summary of these policies and procedures is available on the company's website.

The General Manager and the Company Secretaries are responsible for interpreting the company's policy, ensuring compliance with continuous disclosure and informing the Board where necessary. Both Company Secretaries have been nominated as the persons responsible for communications with the Australian Stock Exchange (ASX) and overseeing and coordinating information disclosure to analysts, brokers, shareholders, the media and the public. All senior management are informed of the Companies continuous disclosure policy and understand the processes involved in relation to the timely disclosure of information.

All information disclosed to the ASX is posted on the Company's website (www.zincco.com.au) as soon as possible after it is disclosed to the ASX. When analysts are briefed on aspects of the Company's operations, the material used in the presentation is released to the ASX and posted on the company's web site. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately released to the market.

PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS Shareholder communication

(ASX CGC Recommendations 6.1, 6.2)

The Board's continuous disclosure and communications policies and procedures are designed to encourage effective, timely, balanced and understandable information concerning the company to its shareholders and the market. Initiatives to facilitate this include making all company announcements, media briefings, and details of company meetings, press releases for the last three years and financial reports for the last five years available on the company's website. All information released to the market and related information (such as information provided to analysts or the media) is placed on the Company's website as soon as possible following the release to the ASX.

The full annual report is provided via the Company's website to all shareholders, unless a shareholder has specifically requested to receive a physical copy or not to receive the document. The annual report includes relevant information about the operations and activities of the Company and its subsidiaries during the year, changes in the state of affairs and details of future developments. The half year report contains summarised financial information and a review of operations of the Company and its subsidiaries. This is sent to shareholders upon shareholder request.

The website also includes a feedback mechanism and an option for shareholders to register their email address for direct email updates on company matters.

Full texts of notices of meetings and explanatory material are placed on the company's website.

The Company encourages full and effective shareholder participation at general meetings. Shareholders generally participate in these meetings through the appointment of a proxy.

The Company's external auditor attends the annual general meetings to answer shareholder questions in relation to the conduct of the audit, the preparation and content of the audit report, accounting policies adopted by the Company and the independence of the auditor in relation to the conduct of the audit.

PRINCIPLE 7: RECOGNISE AND MANAGE RISK

Risk assessment and management

(ASX CGC Recommendations 7.1, 7.2, 7.4)

The Board, acting as the audit committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. These policies are available on the company website. In summary, the Company policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Company's business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of Conduct is required at all times and the Board actively promotes a culture of quality and integrity.

Ultimate responsibility for risk oversight and risk management rests with the full Board. Management is responsible for developing and implementing a sound system of risk management and internal control. Management carries out regular systematic monitoring of control activities and reports to the Board. Detailed control procedures cover management accounting, financial reporting, project appraisal, environment, health and safety, IT security, compliance and other risk management issues.

(ASX CGC Recommendations 7.2)

The Board has required management to design and implement a risk management and internal controls system to manage the Company's material business risks. This has resulted in a register of risks which will be reviewed in accordance with the Company's Risk Management policy. The Company's Risk Management policy forms part of the Corporate Governance Policy and is accessible at www.zincco.com.au

(ASX CGC Recommendations 7.3)

The Board has obtained a written confirmation from the General Manager and the Company Secretaries, that the statement in relation to s.295A of the Corporation Act, is founded on a sound system of risk management and internal compliance and control and that the system is operating efficiently and effectively in all material respects.

The Board ensures that appropriate controls are in place to effectively manage those risks, which is reviewed at least annually.

PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

Remuneration committee

(ASX CGC Recommendation 8.1, 8.2, 8.3)

There is no separate remuneration committee. This is because the Board is of the opinion that the Company is too small to justify the extra expense of forming and running a remuneration committee. Accordingly, the Board considers those matters and issues arising that would usually fall to the remuneration committee. The following directors comprise the Board which considers the remuneration committee matters:

G E Comb (Chairman) - (Non-executive and Independent Director)

R M Joyce (Non-executive Director)

S A Macdonald (Non-executive Director)

When considering matters of remuneration, the Board functions in accordance with its Remuneration Committee Charter, which is contained in the Corporate Governance Policies, accessible via the Company's website. The Remuneration Committee Charter requires the Board to review matters on remuneration and incentive policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors.

The Board, acting as the remuneration committee, may receive regular briefings from an external remuneration expert on recent developments on remuneration and comparisons of remuneration within the industry.

Non-executive directors' remuneration consists of a fixed amount paid plus statutory superannuation. Senior executive remuneration consists of a balance of fixed and incentive pay plus statutory superannuation. Other than statutory superannuation, no directors' or senior executives are entitled to any other retirement benefits.

Senior executives sign a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description.

Further information on directors' and executives' remuneration is set out in the directors' report under the heading "Remuneration report".

The remuneration committee's terms of reference include responsibility for reviewing any transactions between the organisation and the directors, or any interest associated with the directors, to ensure the structure and the terms of the transaction is in compliance with the Corporations Act 2001 and are appropriately disclosed.

The remuneration committee's charter is maintained in the Corporate Governance Policies which is available on the Company's website.

The committee also assumes responsibility for management succession planning, including the implementation of appropriate executive development program and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.