ZOONO GROUP LIMITED — Proxy Solicitation & Information Statement 2010

Oct 21, 2010

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gsh/psh/gsh800

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22 October 2010

The Manager Company Announcements Office Australian Securities Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000 Via ASX Online

Number of pages – 72

Dear Sir,

Re: Annual report and notice of annual general meeting

Enclosed for release to the market is the 2010 annual report of Goldsearch Limited together with the notice of annual general meeting and accompanying documents.

The 2010 annual general meeting of the members of the Company will be held in the Sir James Fairfax Room at the Radisson Plaza Hotel, 27 O’Connell Street, Sydney on Thursday 25 November 2010 at 11am.

The notice of annual general meeting and accompanying documents will be mailed to shareholders today.

The 2010 annual report can be viewed on, or downloaded from, the Company’s web site at www.goldsearch.com.au. A hard copy of the annual report will be mailed to those shareholders who have notified the Company’s share registry that they wish to receive a printed copy.

For and on behalf of the directors of Goldsearch Limited

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P S Hewson Secretary

Goldsearch Limited ACN 006 645 754

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Registered office Level 6 77 Castlereagh Street Sydney NSW 2000

Telephone: 02 9241 5999 Facsimile: 02 9241 5599

22 October 2010

Dear shareholder,

Enclosed with this letter are the following documents for your attention:

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• Notice of annual general meeting which is to be held in the Sir James Fairfax Room at the Radisson Plaza Hotel, 27 O’Connell Street, Sydney on Thursday 25 November 2010 at 11:00am.

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• Explanatory notes for the annual general meeting.

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• Proxy form which you are encouraged to complete and return in the enclosed envelope if you are unable to attend the annual general meeting in person. Please note that completed proxies are to be received by the Company no later than 11:00am Sydney time on Tuesday 23 November 2010.

The Company’s 2010 annual report, which includes the annual financial report, is able to be viewed on, and downloaded from, the Company web site at www.goldsearch.com.au. We are mailing a printed copy of the Company’s 2010 annual report to those shareholders who have notified the Company’s share registry that they wish to receive one.

I thank you for your support and look forward to seeing as many of you as possible at the annual general meeting.

Yours sincerely

John Landerer, CBE AM Chairman

Goldsearch Limited ACN 006 645 754

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Registered office Level 6 77 Castlereagh Street Sydney NSW 2000

NOTICE OF ANNUAL GENERAL MEETING

Telephone: 02 9241 5999 Facsimile: 02 9241 5599

NOTICE IS HEREBY GIVEN that the 2010 annual general meeting of the shareholders of Goldsearch Limited will be held in the Sir James Fairfax Room, Radisson Plaza Hotel, 27 O’Connell Street, Sydney NSW 2000 on Thursday 25 November 2010 at 11.00 am.

Ordinary business

1. To receive and consider the annual financial report for the year ended 30 June 2010 and to consider passing a non-binding resolution to adopt the remuneration report set out in the directors’ report.

2. To elect directors:-

3. (a) Mr A G Harris, retires as a director by rotation in accordance with rule 75 of the constitution of the Company and being eligible offers himself for re-election.

4. (b) Mr R B Leece, AM RFD retires as a director by rotation in accordance with rule 75 of the constitution of the Company and being eligible offers himself for re-election.

Information on these candidates is set out in the accompanying directors’ report.

1. To accept the resignation of Grant Thornton as auditor of the Company (see explanatory notes overleaf)

2. To appoint Grant Thornton Audit Pty Ltd as auditor of the Company (see explanatory notes overleaf)

3. Other business

4. By order of the Board

P S HEWSON Secretary

Sydney 22 October 2010

Proxies

• A member is entitled to appoint not more than two other persons (whether members or not) as his proxy or proxies to attend the meeting and vote on his behalf.

• Where two proxies are appointed each proxy must be appointed to represent a specified proportion of the member's voting rights, failing which each proxy may exercise half the member’s voting rights.

• A proxy shall be signed by the member or by his attorney or if a corporation under its common seal or under the hand of its attorney or in any other manner permitted by the Corporations Act 2001.

• The proxy, together with any power of attorney under which it is signed, shall be deposited at the registered office of the Company, or transmitted by facsimile to 02-9241 5599, not less than forty-eight (48) hours before the time set down for the holding of the meeting.

Voting entitlements

The directors have determined that voting entitlements at the meeting will be based on holdings registered at the close of business on Tuesday 23 November 2010.

SEE OVERLEAF FOR EXPLANATORY NOTES

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EXPLANATORY NOTES

These explanatory notes have been included to provide shareholders with sufficient information to assess the merits of the proposed resolutions and the business to be conducted at the meeting.

Item 1 – Annual financial report and remuneration report

Annual financial report

The Corporations Act 2001 requires that the annual financial report, which includes the directors’ report, the financial statements, the directors’ declaration and the auditor’s report, be received and considered at the annual general meeting.

There is no requirement under the Corporations Act, the Company’s constitution or the ASX Listing Rules for shareholders to vote on the annual financial report. However, shareholders will be given a reasonable opportunity at the meeting to ask questions on the report.

A representative of the Company’s auditor will be present at the meeting and shareholders, as a whole, will also be given a reasonable opportunity at the meeting to ask the auditor questions which are relevant to the conduct of the audit and the content of the audit report.

The Company’s 2010 annual report, which includes the annual financial report, is able to be viewed on, and downloaded from, the Company web site at www.goldsearch.com.au. If you have notified the Company’s share registry that you elect to receive a printed copy of the annual report, a copy of the Company’s 2010 annual report will be mailed to you under separate cover.

Remuneration report

The Corporations Act 2001 requires that the remuneration report be adopted by shareholders at the annual general meeting by way of a non-binding resolution. The remuneration report is included in the directors’ report on pages 20 to 24 of the Company's 2010 annual report.

The remuneration report sets out the principles used to determine the nature and amount of remuneration together with details of remuneration paid and share-based compensation given to key management personnel, including the non-executive directors, during the financial year. The information provided in the remuneration report includes remuneration disclosures that are required under Accounting Standard AASB 124 - Related Party Disclosures . These disclosures have been transferred from the financial statements and have been audited.

Shareholders will be given a reasonable opportunity at the meeting to ask questions in relation to the matters set out in the remuneration report.

Whilst the vote on the remuneration report is advisory only, and does not bind the directors or the Company, the directors will take into account the outcome of the vote, and any matters raised in discussion at the meeting, when considering future remuneration policies and levels.

The directors recommend that shareholders vote in favour of this non-binding resolution.

The chairman of the meeting intends to vote undirected proxies in favour of the resolution.

Item 2 – Election of directors

The constitution of the Company provides for the regular retirement of directors by rotation.

In accordance with rule 75 of the constitution of the Company, current directors Messrs A G Harris and R B Leece, AM RFD retire as directors at the conclusion of the meeting and, being eligible, offer themselves for re-election.

Mr Harris and Mr Leece have been directors of the Company since 1995 and 2002 respectively. Particulars of their background and experience are set out in the directors’ report on page 18 of the 2010 annual report.

The directors recommend that shareholders vote in favour of the re-election of both Mr Harris and Mr Leece.

The chairman of the meeting intends to vote undirected proxies in favour of both resolutions.

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EXPLANATORY NOTES (continued)

Items 3 and 4 – Resignation of auditor and appointment of replacement auditor

The Company’s auditor Grant Thornton has recently moved from a state-based federation into a single national firm in Australia. Since 1 July 2008, Grant Thornton has been operating under a new corporate structure as a part of its national model. In conjunction with this change in structure, their audit appointments are progressively moving from the previous structures maintained in each state to a national authorised audit company called Grant Thornton Audit Pty Ltd. To implement this it is necessary for the resignation of the old Grant Thornton partnership and the appointment of the new Grant Thornton company to be approved by shareholders at the annual general meeting of each company for which it acts as auditor. Accordingly Grant Thornton partnership has submitted its resignation as auditor of Goldsearch Limited, subject to ASIC consent and Grant Thornton Audit Pty Ltd has been nominated as replacement auditor, and has consented in writing to act as auditor of Goldsearch Limited. The written nomination for the appointment is set out below

NOMINATION OF AUDITOR

The members of Goldsearch Limited

Re: Appointment of auditor

Following the resignation of Grant Thornton subject to ASIC consent, I wish to nominate Grant Thornton Audit Pty Ltd as auditor of Goldsearch Limited at the forthcoming annual general meeting to be held on 25 November 2010.

I request that a copy of this nomination be sent to all persons entitled to receive notice of the annual general meeting and to Grant Thornton Audit Pty Ltd.

John Morgan Edwin Percival 5 October 2010 Member name Date

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PROXY FORM

«NameAddress1» «NameAddress2» «NameAddress3» «NameAddress4» «NameAddress5» «NameAddress6»

Goldsearch Limited ACN 006 645 754 Registered office Level 6 77 Castlereagh Street Sydney NSW 2000 Telephone: 02 9241 5999 Facsimile: 02 9241 5599

« Reference »

«Reference»

I/We being a member/members of Goldsearch Limited hereby appoint

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or failing him, the chairman of the meeting as my/our proxy to vote for me/us at the 2010 annual general meeting of the Company to be held in Sir James Fairfax Room, Radisson Plaza Hotel, 27 O’Connell Street, Sydney,NSW 2000 on Thursday 25 November 2010 at 11.00 am and at any adjournment thereof.

DATED the day of 2010

SIGNED by the said __________ Signature of shareholder

If you desire to direct your proxy how to vote please mark the appropriate box with a tick or cross.

Ordinary business FOR AGAINST ABSTAIN

Item 1 - adoption of the remuneration report Item 2(a) - re-election of director – Mr A G Harris Item 2(b) - re-election of director – Mr R B Leece, AM RFD Item 3 - resignation of Grant Thornton as auditor Item 4 - appointment of Grant Thornton Audit Pty Ltd as auditor

If you do not wish to direct your proxy how to vote please mark this box with a tick or cross.

By marking this box, you acknowledge that the chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him, other than as proxy holder, will be disregarded because of that interest. The chairman has indicated that he intends to vote in favour of the above resolutions in relation to undirected proxies.

Notes

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• A member is entitled to appoint not more than two other persons (whether members or not) as his proxy or proxies to attend the meeting and vote on his behalf.

• Where two proxies are appointed each proxy must be appointed to represent a specified proportion of the member's voting rights, failing which each proxy may exercise half the member’s voting rights.

• A proxy shall be signed by the member or by his attorney or if a corporation under its common seal or under the hand of its attorney or in any other manner permitted by the Corporations Act 2001.

• The proxy, together with any power of attorney under which it is signed, shall be deposited at the registered office of the Company, or transmitted by facsimile to 02-9241 5599 not less than forty-eight (48) hours before the time set down for the holding of the meeting.

• The directors have determined that voting entitlements at the meeting will be based on holdings registered at the close of business on Tuesday 23 November 2010.

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Annual Report 2010

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About the Company

Annual general meeting

Goldsearch Limited is an Australian public company listed on the Australian Securities Exchange Limited (ASX). It has adopted the following strategic objectives and policies:

The 2010 annual general meeting of the members of Goldsearch Limited will be held in the Sir James Fairfax Room at the Radisson Plaza Hotel, 27 O’Connell Street, Sydney NSW 2000 on Thursday 25 November 2010 at 11:00 a.m. A formal notice of meeting and proxy form will be mailed separately to all shareholders. Light refreshments will be served at the conclusion of the meeting.

• To undertake grass-roots exploration with the aim of discovering commercial deposits of minerals and precious metals.

• To attract joint venture partners able to contribute experience and skills and share exploration costs so as to maximise value for shareholders.

Corporate calendar

• To pursue strategic investments in companies with attractive mineral exploration and development projects focussed on target commodities.

Year end: 30 June

Annual accounts: mid-September

• To adopt best practices in environment and community responsibilities.

Annual report: mid-October

• To adopt best practices in exploration methods.

Annual general meeting: mid-November

• To identify and develop mineral assets and mining operations at an advanced stage of project development that provide rewards commensurate with the high risks inherent in exploration and mining activities.

Quarterly reports: 31 January, 30 April, 31 July, 31 October.

Half-year report: late February

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From top to bottom: John Landerer non-executive chairman, Albert G Harris non-executive director, John M E Percival Executive director - operations , Robert B Leece non-executive director, Terence V Willsteed non-executive director, Heath Hellewell Exploration Manager, Paul S Hewson Secretary

Darwin 

HÄllefors Sala4/Jugansbo [Stockholm]

Goldsearch in Sweden

[Mary Kathleen (JV)] [Duck Creek (JV)]

[East Musgrave (JV)]

Brisbane 

Perth 

Adelaide 

Mount Wellington Mount Wellington - Goldsearch mineralised trend

[Sydney] [Canberra] Shepperton Ballarat Walhalla

[Melbourne]

MCO

[Hobart]

Company focus for 2011

Mount Wellington project in Victoria East Musgrave project in South Australia Mary Kathleen project in Queensland

Contents

Contents
Chairman's statement	04
Review of operations	07
Schedule of mineral tenements Directors' report	14
(including remuneration report)	16
Declaration of audit independence	26
Statement of comprehensive income	27
Statement of fnancial position	28
Statement of changes in equity	29
Statement of cash fows	30
Notes to the fnancial statements	31
Directors' declaration	55
Independent audit report	56
Corporate governance	59
ASX information	62
Top 20 shareholders	63
Corporate directory	64
Review of operations - maps	65

Chairman’s Statement

During this past year there have been many serious challenges for small resource companies, the most noticeable being repercussions from the downturn in the international financial markets during 2008-2009. In many respects Goldsearch had previously taken action which ensured it was able to weather a crisis of this nature.

20-30% interest in each project and ultimately convert some of those interests into royalty agreements or shareholdings. This strategy allows diversification of the mining properties and minimisation of geopolitical risk with projects throughout Australia and the world.

Looking back over the past year the Company has been able to achieve some progress as outlined. The formation of Musgrave Minerals Limited to take forward the position in the East Musgrave Block in South Australia has been announced and further exploration in Victoria, Queensland and Sweden has been carried out.

Central to these strategies was the decision by the Goldsearch board to reduce ongoing operations and concentrate its efforts on the most important of its joint venture areas and exploration tenements. Goldsearch has emerged from the global credit collapse with a growth strategy and an initial acquisition plan to target advanced projects with near-term production. As its strategy unfolds, it expects its future will be leveraged to the price of gold and/or underlying strategic metals.

The Company’s most important development this year is the formation of Musgrave Minerals Limited. On 22 April 2010 the Company entered into an agreement with Mithril Resources Limited and Independence Group NL to promote a new company Musgrave Minerals Limited to acquire and explore the shareholders' combined interests in the Musgrave Block region of South Australia, with such exploration to be funded by Musgrave Minerals Limited which proposes to launch an initial public offer to raise $10 million and to list on the Australian Securities Exchange. At present the Company has a 29.4% interest in the newly formed company with Independence Group NL having a 30.6% interest and Mithril Resources

Goldsearch is currently in joint venture in three exciting areas and plans to analyse up to another ten prospective properties, with a view towards optioning up to three of those properties on terms and conditions acceptable to the board. From these optioned properties, the Company hopes to identify projects that can be advanced toward commercial production or joint venture.

The objective is to acquire multiple projects with multiple operators in different jurisdictions, retain up to a

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Limited having a 40% interest. The Company's interest will dilute as a result of the shares to be issued in the initial public offering but it will have a smaller interest in a much larger project with the interest being more liquid.

The East Musgrave joint venture (Musgrave Minerals Limited) now comprises tenements and applications covering approximately 50,000 square kilometres of the South Australian portion of the Musgrave Block. Most of the project area is held under Aboriginal freehold tenure and as a result has only been subject to cursory exploration in the past. The principal target is nickel-copper-platinum group elements mineralisation associated with the feeder conduits and dykes forming part of the extensive maficultramafic Giles Complex. Further to the west, Giles Complex intrusives host BHP Billiton’s Nebo and Babel nickel sulphide discoveries.

In late June, Musgrave Mineral's geologist's carried out geological mapping and sampling on three tenements held in joint venture with Barrick (EL 3939, EL 3941 and EL 3942). The main objectives of this trip were to assess the outcropping Giles intrusions for mineral potential and to trial several regional geochemical sampling methods over known mineralisation/anomalies. Several outcrop areas identified on air photo and satellite imagery, which have not

Your directors are looking to the future with guarded confidence and welcome your support. We look forward to meeting with you at our annual general meeting on 25 November 2010.

4 Goldsearch limited

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been visited by previous explorers, were mapped and sampled.

Highlights include the identification of “blebby” sulphides (pyrrhotitechalcopyrite-pentlandite) within an approximately 20 metre wide olivine bearing gabbroic dyke on EL 3942. The dyke has a two to three metre wide contaminated margin in places and is over seven kilometres long. Significantly, these results provide further support that the Giles rocks in the area are fertile for the formation of nickel sulphide deposits.

The joint venture on the Company’s Queensland Cloncurry district tenements with China Yunnan Copper Australia Limited (earning up to 70%) has advanced significantly during the year with exploration drilling at the Elaine Dorothy uranium copper deposit and the continuing copper exploration at Mount Dorothy. Significant coppercobalt sulphide mineralisation assays have been returned from the current drill program including 22 metres of 2.03% copper and 591 parts per million cobalt from a depth of 17 metres. The Cloncurry-Mount Isa areas have once again come to prominence with continuing strong results from drilling by Ivanhoe Australia Limited.

At Mount Wellington in Victoria (100% Goldsearch) the drilling program was halted by bad weather and poor ground conditions. It is hoped to restart the program and re-enter the last drill hole which was cased to 170 metres, with an expectation of drilling on to a programmed depth of 450 metres, when conditions improve in November. This program is partially funded by the Victorian State Government under the collaborative Rediscover Victoria initiative to an amount of $80,000. If this current program is successful in finding a significant mineralised zone, Goldsearch is hopeful of receiving further funding

for drilling under this proactive Victorian State Government initiative.

The Goldsearch equity investment portfolio has performed well over the past year with the Company's decision to invest in five million Morning Star Gold NL shares through its options. Significant success has been achieved, with the value almost doubling.

Independence Group has performed well, as a result of which Goldsearch has achieved pleasing results from the sale of Independence shares. The sale of all of the Company’s Rex Minerals position also produced positive results. The investments now have a more significant exposure to gold.

Goldsearch is actively reviewing investment and joint venture opportunities with a recent focus on other miners which have drill indicated gold resources.

Details of the Company’s exploration activities are described in the following Review of Operations.

Your directors are looking to the future with guarded confidence and welcome your support. We look forward to meeting with you at our annual general meeting on 25 November 2010.

John Landerer, CBE AM Chairman 22 October 2010

Annual Report 2010 5

Goldsearch-managed projects are currently focussing on the under-explored portions of well endowed mineral belts in the Woods Point region of Victoria and the Bergslagen district in Sweden.

Mount Wellington.

Review of operations

Summary

Investment and exploration philosophy

Goldsearch is currently exploring for high-grade precious metals, base metals and uranium deposits in eastern Australia and Sweden and for nickel in central Australia through joint venture at its Musgrave project. Goldsearchmanaged projects are currently focussing on the under-explored portions of well endowed mineral belts in the Woods Point region of Victoria and the Bergslagen district in Sweden.

Goldsearch is constantly reviewing the investment of its exploration expenditure as new geological information is accumulated at its projects. Goldsearch continues to focus on short lead-time, high priority exploration targets, which generally require relatively limited preliminary work prior to drill testing.

The previous year has seen significant advances on a number of Goldsearch’s properties, including the discovery of encouraging copper and cobalt mineralisation by joint venture partner China Yunnan Copper Australia within the Mary Kathleen project area.

New opportunities are constantly being reviewed with a view to both the generation of new projects, increasing Goldsearch’s position around existing priority projects and for quality junior resource company equity investments drawing on Goldsearch’s relevant inhouse experience.

Ongoing programs at the 100% owned Mount Wellington project has continued to provide encouragement and Goldsearch expects to drill a number of key targets in 2010. Goldsearch is receiving drilling subsidies from the Victorian State Government to assist with these programs.

Goldsearch also continues to attempt to maximise the benefits of strategic joint ventures with quality joint venture partners for shareholders.

Through joint venture dealings and direct investment over recent years Goldsearch is building a significant portfolio of liquid equity investments.

Further geophysical survey work is scheduled to be completed in Sweden by the end of 2010, where Goldsearch is earning a 70% interest in three exploration permits which cover areas of previously recognised high-grade silver, lead and zinc mineralisation.

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The Goldsearch and Independence Group joint venture over the East Musgrave properties in South Australia has combined efforts with Mithril Resources, another significant landholder in the region. The combined company Musgrave Minerals plans to undertake an initial public offering (IPO) in 2011 with the aim of raising $10 million to fund ongoing exploration.

Annual Report 2010 7

(continued) Review of operations

Mount Wellington, Victoria (100% GOLDSEARCH)

The Mount Wellington project is located 20 kilometres south-east of the town of Jamieson and 25 kilometres north-east of the Woods Point gold mining centre in eastern Victoria. The project currently consists of three granted exploration licences and one exploration licence application covering a total project area of approximately 384 square kilometres (Figure Three - back cover).

The project area covers the majority of a belt of well mineralised Cambrianaged calc-alkaline volcanic rocks. These rocks have been tentatively correlated with the highly prospective Mount Read Volcanics of western Tasmania and represent some of the oldest known rocks in Victoria. The volcanic rocks are overlain by a sequence of Silurian and Devonian sediments.

Detailed geological mapping identified a number of diorite dykes which cross cut the Cambrian sequence and are undeformed and unaltered and therefore interpreted to possibly be early Devonian in age. These dykes have similarities to the dykes hosting gold mineralisation in the Woods

Point belt to the west and a genetic relationship between mineralisation at Mount Wellington and at Woods Point is postulated.

At Mount Wellington there are several known mineral occurrences. Significant gold (+/- silver and copper, zinc) mineralisation has been intercepted in drilling by both Goldsearch and previous explorers at the Hill 800 (Table One) and Rhyolite Creek target areas.

At Hill 800 an inferred mineral resource of 1,118,000 tonnes with an average grade of 1.5 grams per tonne (g/t) gold for 52,200 contained ounces of gold has been calculated by Goldsearch based on previous drilling. The most significant zones of alteration and mineralisation at Mount Wellington are spatially associated with significant regional aeromagnetic and gravity features in geophysical data. The scale of these geophysical signatures is consistent with the potential for large hydrothermal mineralising systems capable of producing a major ore deposit. The presence of deep-seated geophysical anomalies is consistent with Goldsearch’s genetic model for mineralisation based on Devonianaged magmatic intrusions driving major mineralising hydrothermal systems.

During the year Goldsearch completed further drilling on the Rhyolite Creek target area where previous drilling had returned encouraging gold and base metal results and had identified a significant zone of gold and base metal bearing hydrothermal alteration. To date Goldsearch has drilled a total of four holes and has defined a significant gold and base metal alteration system at Rhyolite Creek. This work has helped Goldsearch refine its geological models and concepts for the greater project area as Goldsearch looks to test a number of other targets in the Mount Wellington project.

Whilst the mineralisation at Rhyolite Creek is very encouraging the limited wide spaced drill program completed to date, has not defined what are likely to be economic metal accumulations.

During the next year Goldsearch has committed to a definitive drill test of the Long Ridge target area, where programs were previously suspended in early 2010 due to the onset of winter weather conditions. This program is being partially funded by the Victorian State Government through its Rediscover Victoria collaborative drilling program.

Table one. Hill 800 significant historical drilling results

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Hole ID East (GDA94 Z55) North (GDA94 Z55) Interval (m) Gold (g/t) From (m) To (m)
HEC1 444767 5868594 33 4.30 0 33
HEC8 444779 5868580 27 1.83 0 27
HEC13 444783 5868670 13 10.88 0 13
incl. 3 38.76 0 3
HEC18 444810 5868737 22 1.35 38 60
HEC45 444767 5868606 25 4.72 3 28
HEC48 444749 5868735 18 5.06 86 104
HEC49 444755 5868730 28 4.45 79 107
HEC8 444779 5868580 27 1.83 0 27
HED1 444769 5868585 32.2 4.28 0.5 32.7
7 22.05 184 191
incl. 1 122.00 188 189
incl. 1 28.90 184 185
----- End of picture text -----

(Note: g/t - grams per tonne, m – metre)

8 Goldsearch limited

Musgrave Ranges.

(continued) Review of operations

East Musgrave project, South Australia

(GOLDSEARCH 49%)

The East Musgrave Block tenements cover parts of the highly prospective Giles Complex Proterozoic rocks and its interpreted extension into the eastern Musgrave Block in South Australia.

The East Musgrave project is a joint venture between Goldsearch Limited (49%) and Independence Group NL (51%).

In April 2010 the Joint venture partners signed a Heads of Agreement with Mithril Resources Limited, whereby the three companies will combine their respective Musgrave interests into a new company, Musgrave Minerals Limited. Musgrave Minerals proposes to conduct an initial public offering (IPO) of shares to raise $10,000,000 and will seek admission to the official list of the Australian Securities Exchange (ASX) and quotation of its shares.

Mary Kathleen, Queensland

(GOLDSEARCH diluting to 30%)

Goldsearch is exploring for Mary Kathleen-style uranium/rare earth element deposits and copper/gold deposits in the highly prospective Mount Isa Inlier, North Queensland. The project area is located to the north and south of the former Mary Kathleen mine between Mount Isa and Cloncurry and is comprised of three granted tenements, EPM 14019, EPM 14022 and EPM 15257 covering a total area of approximately 160 square kilometres.

In August 2009 Goldsearch signed a joint venture agreement with China Yunnan Copper Australia, whereby China Yunnan can earn up to a 70% interest in the project by spending $1.5 million within three years.

As consideration, China Yunnan Copper Australia also issued Goldsearch with 3,000,000 unlisted options exercisable at 0.40 each.

Copper/gold exploration

In August 2010 joint venture partner China Yunnan Copper Australia completed an initial reverse cycle (RC) drilling program at the Mount Dorothy target area. This program intercepted highly encouraging copper and cobalt mineralisation as detailed in Table Two. A follow up program of six diamond drill holes is planned for late 2010. The mineralised zone is interpreted to consist of a lower grade halo of disseminated native copper mineralisation with a higher grade, structurally controlled core of chalcopyrite/chalcocite sulphide copper mineralisation. This fault controlled, higher grade core zone is interpreted to represent a potential “feeder” zone to the widespread mineralisation.

Uranium/REE exploration

Mineralisation at the former Mary Kathleen uranium mine is hosted in metamorphosed calcareous sediments of the Corella Formation proximal to the Burstall Granite, an upper plate granite with elevated uranium levels. Key factors in targeting further uranium mineralisation are the regional faults intersecting the reactive Corella Formation lithologies and associated source granite.

Table two. Mount Dorothy significant phase one RC drilling result

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Hole ID East (GDA94 Z54) North (GDA94 Z54) Interval (m) Copper (%) Cobalt (ppm) From (m) To (m)
MDR001 380720 7695002 32 0.18 44 122 154
MDR001 12 0.19 301 181 193(EOH)
MDR002 380623 7695016 89 0.74 190 17 106
Incl. 22 2.03 591 17 39
Incl. 6 1.27 81 46 52
MDR002 15 0.28 32 139 154
MDR003 380621 7695021 11 0.30 116 59 70
MDR004 380293 7695296 7 0.28 509 56 63
----- End of picture text -----

(Note: ppm – parts per million, m – metre)

10 Goldsearch limited

The joint venture has a priority target at Elaine Dorothy six kilometres south of Mary Kathleen on the trace of the Mary Kathleen Syncline. The Elaine Dorothy target area is a distinct uranium anomaly in the airborne radiometric data.

A program of confirmation drilling was completed during the year at Elaine Dorothy. High grade uranium and rare earth element (REE) mineralisation was intercepted in drill hole MEKD003 which intercepted 3 metres grading 1.32 kilograms per tonne (kg/t) uranium oxide (U3O8), 1.17% cerium and 0.59% lanthanum from 27.5 metres down hole.

On the basis of the confirmation drilling an initial JORC inferred resource of 83,000 tonnes grading 283 parts per million (ppm) U3O8 and 0.32% rare earth oxides (5,200 pounds contained U3O8) was calculated from historic drill holes.

Surface geochemical sampling programs to target further drilling at the Elaine Dorothy target are being completed in late 2010.

Bergslangen joint venture, Sweden (GOLDSEARCH EARNING 70%)

In May 2008 Goldsearch entered an agreement with Toronto listed Tumi Resources Ltd to earn an interest in a number of prospective base metals areas in Sweden. Goldsearch is earning a 70% interest in three exploration licences which cover two separate target areas approximately 200 kilometres north-west of Stockholm.

Airborne electro magnetic surveys highlighted significant bedrock conductors in the Jugansbo area where drilling by previous explorers had intercepted best results of 9.2 metres grading 222 g/t silver, 7.48% zinc, 2.27% lead from 81.4 metres down hole and 6.45 metres grading 77 g/t silver, 4.31% zinc and 2.66% lead from 99.25 metres.

Goldsearch completed an initial program of gradient array induced polarisation (IP) geophysics at the Jugansbo target in late 2009. The survey highlighted a number of areas for further evaluation. Field investigations are currently underway with further detailed induced polarisation (IP) geophysics scheduled for late 2010.

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Photos of Mary Kathleen project.

Annual Report 2010 11

(continued) Review of operations

Equity investments

Over recent years Goldsearch has been building a significant portfolio of equity investments. These investments have been accumulated either through the sale or joint venture of exploration properties in return for shares or share options or alternatively through outright purchase of shares or share options.

Currently Goldsearch has some investment exposure to the following companies and their projects.

Independence Group NL

www.independencegroup.com.au

Independence Group (ASX: IGO) is one of Australia’s lowest cost nickel miners, producing nickel from the highly profitable Long Nickel Mine near Kambalda in Western Australia. Independence Group and its partner AngloGold Ashanti Limited are currently undertaking feasibility studies on the development of a mine to exploit the 5 million ounce gold resource at the Tropicana Gold project east of Kalgoorlie in Western Australia. Independence Group also has a number of highly prospective gold and nickel exploration areas in Australia including an interest in the joint venture with Goldsearch and Mithril Resources Limited in the East Musgrave Block in South Australia.

Morning Star Gold NL

www.morningstargold.com.au Morning Star Gold (ASX: MCO) is currently undertaking trial underground mining and bulk sampling at its namesake mine in eastern Victoria. Previous calculations have defined a high-grade resource at Morning Star of 910,000 ounces of gold at an average grade of 11.6 grams per tonne gold. An 80,000 tonne per annum gravity plant has recently been commissioned.

China Yunnan Copper Australia Limited

www.cycal.com.au

China Yunnan Copper Australia Limited is currently drilling at the Mount Dorothy and Elaine Dorothy prospects which are part of the Mary Kathleen joint venture with Goldsearch. Recent drilling at the Mount Dorothy target area has intercepted encouraging zones of copper and cobalt mineralisation. Preliminary soil geochemical sampling at the Elaine Dorothy prospect, has identified a ~ 1 kilometre long copper anomaly grading greater than 200 ppm copper, trending north-west through the prospect area. The copper potential for this area has never been targeted.

Queensland Mining Corporation Limited

www.queenslandminingcorporation.com.au Queensland Mining Corporation (ASX: QMN) is currently evaluating a number of priority copper/gold exploration targets in the Cloncurry district in northwest Queensland.

Musgrave Minerals Limited (Unlisted – IPO planned April 2011)

www.musgraveminerals.com.au

Goldsearch’s interest in the East Musgrave Block of South Australia has been vended into the newly formed Musgrave Minerals Limited in return for an initial 29.4% equity interest in that company. Proposed capital raisings will dilute this equity interest to approximately 11%.

12 Goldsearch limited

Declaration

Aspects of this report that relate to mineralisation, mineral resources or ore reserves are based on information prepared by Mr Heath Hellewell, BSc (Hons) Geology, who is a Member of the Australian Institute of Geoscientists, and has sufficient relevant experience of the activity undertaken and of the mineralisation styles and type of deposits described. He qualifies as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves” (JORC Code). The above statement fairly reflects the information prepared by this Competent Person, who consents to the inclusion of this information in the form and context in which it appears.

Mount Wellington.

Schedule of mineral tenements

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Date of Approximate
Tenement Locality Date of grant expiry area (km [2] ) Holder & % interest
South Australia
EL 3954 Everard Park H.S. 19.10.2007 18.10.2010 714 Goldsearch Limited 49%, Independence Group NL 51%
ELA 260/96 Ernabella under application 500 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
ELA 262/96 Indulkana North under application 350 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
ELA 336/96 Wright Hill under application 650 Miltonpak Pty Ltd 100% (Independence Group NL has the right to 51%)
ELA 337/96 Streich Hills under application 2,050 Miltonpak Pty Ltd 100% (Independence Group NL has the right to 51%)
ELA 338/96 Purndu Hills under application 600 Miltonpak Pty Ltd 100% (Independence Group NL has the right to 51%)
ELA 339/96 Punkerri Hills under application 1,350 Miltonpak Pty Ltd 100% (Independence Group NL has the right to 51%)
ELA 340/96 Birksgate Range under application 2,200 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
ELA 341/96 Ayliffe Hill under application 1,100 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
ELA 342/96 Musgrave Ranges under application 2,250 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
EL 3955 Echo Hill 19.10.2007 18.10.2011 1,906 Goldsearch Limited 49%, Independence Group NL 51%
ELA 534/96 Bull Hill under application 1,790 Caytale Pty Ltd 100% (Independence Group NL has the right to 51%)
ELA 35/99 Myall Swamp under application 540 Goldsearch Limited 100% (Independence Group NL has the right to 51%)
Subtotal 16,000
Northern Territory
ELA 22687 Petermann Range under application 1,485 Goldsearch Limited 51% Allender 16.33% Hosking 16.33% LeBrun 16.33%
ELA 22688 Petermann Range under application 1,430 Goldsearch Limited 51% Allender 16.33% Hosking 16.33% LeBrun 16.33%
ELA 22689 Petermann Range under application 1,528 Goldsearch Limited 51% Allender 16.33% Hosking 16.33% LeBrun 16.33%
ELA 22690 Petermann Range under application 630 Goldsearch Limited 51% Allender 16.33% Hosking 16.33% LeBrun 16.33%
Subtotal 5,073
Victoria
EL 4843 Mount Wellington 03.05.2006 02.05.2011 126 Goldsearch Limited 100%
EL 4976 Licola 20.09.2006 19.09.2011 51 Goldsearch Limited 100%
EL 5046 Mike's Bluff 29.08.2007 28.08.2012 168 Goldsearch Limited 100%
ELA 5232 Mount Wellington Two under application 20 Goldsearch Limited 100%
Subtotal 365
Queensland
EPM 15257 South Mary Kathleen 27.09.2006 26.09.2011 2 Goldsearch Limited 100% (China Yunnan Copper Australia earning 70%,
Goldsearch diluting to 30%)
EPM 14019 Mary Kathleen 18.07.2003 17.07.2010 67 Central West Gold NL 100% (Goldsearch has the right to 100%)
EPM 14022 Mary Kathleen 31.07.2003 30.07.2011 90 Central West Gold NL 100% (Goldsearch has the right to 100%)
EPM 13336 Duck Creek 16.05.2001 15.05.2009 31 Goldsearch Limited 95%, Hutton 5% (Queensland Mining Corporation earning 70%)
EPM 15718 Duck Creek South 27.03.2008 26.03.2012 6 Goldsearch Limited 100% (Queensland Mining Corporation has the right to 75%)
Subtotal 196
Sweden
2005:292 Hällefors Nr 1 29.12.2005 29.12.2011 7.94 TM Resources AB 100% (Goldsearch Limited earning 70%)
2005:274 Sala Nr 4 14.12.2005 14.12.2011 2.26 TM Resources AB 100% (Goldsearch Limited earning 70%)
2006:173 Jugansbo Nr 1 08.06.2006 01.07.2011 14.06 TM Resources AB 100% (Goldsearch Limited earning 70%)
Subtotal 24.26
Total area 21,658.26 square kilometres
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NB: Miltonpak Pty Limited and Caytale Pty Limited are wholly owned subsidiaries of Goldsearch Limited

14 Goldsearch limited

Financial report

for the year ended 30 June 2010

Goldsearch Limited

aBN 73 006 645 754

Contents

Contents
Directors’ report
- including remuneration report	16
Declaration of audit independence	26
Statement of comprehensive income	27
Statement of fnancial position	28
Statement of changes in equity	29
Statement of cash fows	30
Notes to the fnancial statements	31
Directors’ declaration	55
Independent audit report	56

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Director’s report

Your directors have pleasure in submitting the statement of financial position of the Company at 30 June 2010 together with related statement of comprehensive income, statement of cash flows, statement of changes in equity and notes thereto for the year then ended and report as follows:

Directors

The names of the directors in office at the date of this report and throughout the year are:

Mr J. Landerer, CBE AM Mr A.G. Harris Mr R.B. Leece, AM RFD Mr J.M.E. Percival Mr T.V. Willsteed

Company secretary

The name of the company secretary in office at the date of this report and throughout the year is:

Mr P.S. Hewson

Principal activities

The principal activities of the Company during the year were exploration for gold and other minerals and investment. There were no significant changes in the nature of the activities of the Company that occurred during the year.

Results

The result for the financial year was a profit of $1,401,965 (2009: Loss of $1,063,694) after income tax expense of $nil (2009: $nil).

Dividend

No dividends were paid or declared during the year by the Company and no recommendation for payment of dividend has been made.

Review of operations

The following occurred during the year under review:

• The Company expended and capitalised $1,142,095 on exploration and wrote off $29,978 of capitalised exploration expenditure.

• On 30 July 2009 the directors issued 7,500 shares pursuant to the exercise of quoted options.

• On 26 August 2009 the directors advised having entered into a farm-out and joint venture agreement with China Yunnan Copper Australia Limited over the mineral tenements comprising the Company’s Mary Kathleen project.

• On 3 September 2009 the Company announced having made a strategic investment in Morning Star Gold NL.

• On 17 September 2009 the directors issued 7,500 shares pursuant to the exercise of quoted options.

• On 11 October 2009 the Company announced the commencement of a drilling program by China Yunnan Copper on the Elaine Dorothy uranium target in the Mary Kathleen joint venture.

• In the report for the quarter ended 30 September 2009 released to ASX on 29 October 2009 the Company advised that:

• Independence Group NL is conducting geophysical surveys over priority targets on the East Musgrave joint venture tenements.

• Ground induced polarisation surveys are to commence in November 2009 over the Jugansbo target at the Bergslagen joint venture in Sweden.

• On 2 November 2009 the Company announced that the remaining 90,417,809 quoted options on issue by the Company had not been exercised by their 31 October 2009 expiry date and, under the terms of their issue, had now lapsed.

• On 4 February 2010 the Company announced that the 16,000,000 unquoted options on issue by the Company had not been exercised by their 31 January 2010 expiry date and, under the terms of their issue, had now lapsed.

• On 2 March 2010 the directors announced that a drill program had commenced at the Company’s Mount Wellington project in Victoria.

16 Goldsearch limited

• On 22 April 2010 the directors advised having entered into an agreement with Mithril Resources Limited and Independence Group NL to form a new company Musgrave Minerals Limited to acquire and explore their combined interests in the Musgrave Block region of South Australia with such exploration to be funded by an initial public offering of Musgrave Minerals Limited.

• In the report for the quarter ended 31 March 2010 released to ASX on 29 April 2010 the Company advised that:

• Drill Hole RC004 at Mount Wellington intercepted 4.2 metres grading 0.55 grams per tonne (g/t) gold, 0.1% copper and 2.15% zinc from 233.6 metres and 6 metres grading 1.31% zinc from 260.7 metres.

• At Mary Kathleen a JORC compliant inferred resource of 83,000 tonnes grading 283 parts per million (ppm) uranium oxide (U3O8) and 0.32% rare earth oxides (5,200 pounds contained uranium oxide) has been calculated based on a uranium cut - off grade of 200 ppm.

• Goldsearch and Independence Group have agreed to combine their Musgrave interests with Mithril Resources to form Musgrave Minerals Limited which proposes to launch an initial public offer (IPO) to raise $10 million and to list on the Australian Securities Exchange (ASX).

• In the report for the quarter ended 30 June 2010 released on 29 July 2010 the Company advised that, during the quarter:

• Drilling commenced at the Mount Dorothy prospect in the Mary Kathleen project to follow up on previous copper results intercepted in drilling by MIM in 1992;

• Musgrave Minerals Limited has been incorporated and the first tranche of seed capital has been subscribed by the parties; and

• The market value of the Company’s listed investments at 30 June 2010 was $2,636,500.

Significant changes

There were no significant changes to the state of affairs of the Company which occurred during the financial year ended 30 June 2010.

Financial position

At 30 June 2010 the Company held cash and receivables totalling $297,994 (2009: $502,949). However the Company also held listed securities and other available for sale securities with a market value at 30 June 2010 of $2,636,500 (2009: $2,080,500).

These liquid assets, together with the existing joint venture arrangements, are sufficient to cover the Company’s commitments for the next two years. However the directors will consider raising further working capital in the short term should the opportunity arise.

Events subsequent to reporting date

Other than the matters described in Note 30 to the attached financial statements, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations, the result of those operations, or the state of affairs of the Company in financial years subsequent to the financial year ended 30 June 2010.

Likely developments

The directors intend the Company to continue to explore the Company’s mineral tenements both by direct exploration and by joint venture and to seek new exploration or development projects. They also intend to continue to invest a proportion of the Company’s surplus funds in investments in selected listed mining and exploration companies with compatible interests. Otherwise there are no known likely developments in the operations of the Company.

Information on directors

John Landerer, CBE AM

(non-executive chairman of directors and member of the audit committee)

• Appointed as director and non-executive chairman on 11 October, 1995.

• A qualified lawyer – LL.B., Sydney University.

• Senior partner of Sydney Lawyers, Landerer & Company.

• A director of a number of prominent private family companies.

• Beneficially holds 5,725,872 fully paid ordinary shares and has an indirect interest in a further 4,243,129 ordinary fully paid shares.

• During the past three years has not acted as director of any other Australian listed public company.

Annual Report 2010 17

(continued) Director’s report

Albert G. Harris

(non-executive director, member of the audit committee and overseer of risk management)

• Appointed a director on 11 October 1995.

• Member of the Institute of Measurement and Control.

• Has been involved in the international petroleum and mineral resources industries for over 50 years.

• Has had senior management responsibility for exploration operations and the development of petroleum and mineral projects in Australia, the Middle East, West Africa and the USA.

• Beneficially holds 220,000 fully paid ordinary shares.

• Over the past three years has acted as a non-executive director of other Australian listed public companies as follows:

• Takoradi Limited (director since 1992)

• Pepinnini Minerals Limited (director since 31 January 2005)

Robert B. Leece, AM RFD

(non-executive director and member of the audit committee)

• Appointed a director on 7 August 2002.

• A civil engineer with extensive experience in infrastructure development projects exceeding $40 billion.

• Formerly Deputy Director General of the Olympic Co-ordination Authority and chief executive of the Olympic Roads and Transport Authority.

• Has been involved as a director of several public and private development companies.

• Has also been chief operating officer of Tenix Pty Limited, Australia’s largest defence and applied technology contractor.

• Is currently Infrastructure Co-ordinator General, NSW.

• Chairman, Health Infrastructure, NSW.

• Trustee, Sydney Opera House.

• Indirectly holds 11,996,465 fully paid ordinary shares in the capital of the Company.

• During the past three years has not acted as director of any other Australian listed public company.

John M.E. Percival

(executive director – ‘Director-Operations’ and attends audit committee meetings)

• Appointed a director on 11 October 1995.

• Has been involved in investment and merchant banking for over 25 years including 15 years as investment manager of Barclays Bank New Zealand Limited.

• Has had extensive experience in stockbroking, corporate finance and investment management.

• Beneficially holds 4,000 fully paid ordinary shares in the capital of the Company and has an indirect interest in a further 7,481,709 ordinary shares in the capital of the Company.

• During the past three years has acted as a non-executive director of the following Australian listed public company:

• Silver Mines Limited (director from August 2006 to October 2007)

Terence V. Willsteed

(non-executive director and member of the audit committee)

• Appointed a director on 20 July 2004.

• A qualified mining engineer - BE (Mining) Queensland University and a Fellow of the Australian Institute of Mining and Metallurgy with over 45 years experience in mining operations, mineral processing, corporate management and consulting practice.

• Substantial activities have been involved in gold, uranium, base metal, PGM, oil shale and coal resource projects. Gained operational and management experience with Zinc Corporation Limited, Mount Isa Mines Limited and Consolidated Goldfields Australia Limited.

• Principal of Terence Willsteed & Associates, Consulting Mining Engineers since 1973.

• As a member of the Mineral Industry Consultants Association Board of Management has participated in the formation of the Joint Ore Reserves Committee and the formulation of the Australian Code for the Reporting of Resources and Ore Reserves.

• Indirectly holds 3,308,000 fully paid ordinary shares in the capital of the Company.

18 Goldsearch limited

• Over the past three years has acted as a non-executive director of other Australian listed public companies as follows:

• Climax Mining Limited (resigned 2007)

• Austral Gold NL (resigned 2007)

• European Gas Limited (resigned 1 September 2009)

• International Ferro Metals Limited (current since September 2005)

• Citygold Limited (current since October 2006)

Information on company secretary

Paul S Hewson, BEc CPA FFin

• Appointed secretary of the Company on 11 October 1995 on an outsourced basis.

• An economics graduate from Sydney University, a qualified accountant and a fellow of the Financial Services Institute of Australia.

• Has over 30 years experience in administration of listed public companies and has variously held the positions of executive director, nonexecutive director and company secretary of a number of Australian listed public companies both in the mining and industrial sectors.

Directors’ meetings

Attendance of individual directors at board meetings held during the year ended 30 June 2010 was as follows:

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Director Meetings held Meetings attended
J. Landerer, CBE AM 7 6
A.G. Harris 7 7
R.B. Leece, AM RFD 7 5
J.M.E. Percival 7 7
T.V. Willsteed 7 7
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In addition meetings of the audit sub-committee were attended by directors as follows:

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Director Meetings held Meetings attended
J. Landerer, CBE AM 2 2
A.G. Harris 2 2
R.B. Leece, AM RFD 2 0
J.M.E. Percival 2 2
T.V. Willsteed 2 2
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Directors’ and auditors’ indemnification

During or since the end of the financial year the Company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

• Under the provisions of the constitution of the Company every officer (and former officer) of the Company is indemnified, to the extent permitted by law, against all costs expenses and liabilities incurred as such an officer providing it is in respect of a liability to another person (other than the Company or a related body corporate) where such liability does not arise out of conduct involving a lack of good faith and it is in respect of a liability for costs and expenses incurred in defending proceedings in which judgement is given in favour of the officer or in which the officer is acquitted or is granted relief under the Law.

• During the year the Company paid a premium on a policy to insure each of the directors and executives of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or executive of the Company, other than conduct involving a wilful breach of duty in relation to the Company. Total liability covered under the policy is $5 million for an annual premium of $16,400.

Non-audit services

There were no non-audit services provided to the Company during the year by Grant Thornton.

Annual Report 2010 19

Director’s report (continued)

Auditor’s independence declaration

The Company’s independent auditor has provided an independence declaration to the Company for the year ended 30 June 2010. A copy of the declaration is attached to and forms part of this directors’ report.

Options

On 24 June 2008 the Company issued a total of 90,463,630 loyalty bonus options pro-rata to shareholders on the basis of one option for each four shares held at the record date of 17 June 2008. These options were quoted on ASX. During the previous year a total of 15,000 of these options were exercised and converted into 15,000 fully paid ordinary shares at an exercise price of 10 cents per option. The balance of these options were not exercised by their expiry date of 31 October 2009 and have accordingly lapsed. Otherwise no options were issued or exercised during the financial year or to the date of this report. Further particulars on options are set out in Note 16 to the attached financial statements.

Remuneration report (audited)

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

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

2. Details of remuneration

3. Executive contractual arrangements

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

The performance of the Company depends upon the quality of the directors and executives. The philosophy of the directors in determining remuneration levels is to set competitive remuneration packages to attract and retain high calibre employees.

The board has not established a separate remuneration committee due to the small size of the Company. The board itself sets the remuneration policies and undertakes regular reviews of the performance and remuneration of Company executives.

In accordance with ASX Corporate Governance best practice (Recommendation 8.2), the structure of non-executive director and executive remuneration is separate and distinct as follows.

a. Non-executive directors’ remuneration

Fixed remuneration:

The board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of a high calibre, whilst incurring a cost that is acceptable to shareholders.

The ASX Listing Rules specify that the maximum aggregate remuneration of non-executive directors shall be determined from time to time by shareholders. The constitution of the Company further provides that the remuneration of non-executive directors will not be more than the aggregate fixed sum determined by a general meeting of shareholders.

The maximum aggregate remuneration sought to be approved by shareholders and the manner in which it is to be apportioned amongst the non-executive directors is reviewed from time to time. The board considers external independent advice from remuneration consultants, and takes into account the fees paid to non-executive directors of comparable companies, when undertaking such reviews.

Directors’ fixed fee remuneration is inclusive of committee fees and superannuation.

At the annual general meeting held on 22 November 2007 shareholders approved a maximum annual aggregate remuneration for nonexecutive directors of $250,000 per annum. The aggregate amount which the directors agreed to draw from this for the financial year ended 30 June 2010 was $148,000 per annum which was apportioned between themselves as follows:

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Fixed fees Year ended 30 June 2010 Year ended 30 June 2009
Base fee
- chairman $40,000 $40,000
- other non-executive directors $36,000 each $36,000 each
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The directors have agreed that, subject to the Law, non-executive directors are to be entitled to a payment of one year’s directors fees upon their retirement from office.

20 Goldsearch limited

Variable remuneration:

The Company provides directors with incentives designed to align their remuneration with the interests of shareholders. This is done through the issue of options to acquire ordinary shares in the Company. All such issues require the approval of shareholders in a general meeting of members. The number and the terms of the options for which shareholder approval is sought is determined by the directors based on advice from remuneration consultants and a review of variable remuneration paid to directors of comparable companies.

b. Company executive and executive director remuneration

Remuneration of Company executives and executive directors consists of fixed remuneration and variable remuneration by way of a share option scheme.

Fixed remuneration:

Fixed remuneration of senior executives is reviewed annually by the directors. The process consists of a review of relevant comparative remuneration in the employment market for the industry and within the Company and, where appropriate, external independent advice is obtained from remuneration consultants.

Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms and are offered the opportunity to enter into “salary sacrifice” arrangements with the Company where appropriate. It is intended that the manner of payment chosen will be optimal for the recipient without creating additional cost for the Company.

There is no relationship between executive remuneration and the performance of the Company.

Variable remuneration:

Long-term incentives

The Company provides long-term incentives to executives in a manner that aligns this element of remuneration with the creation of shareholder wealth. This is done under the terms of the Company’s Employee and Director Share Option Plan (“EDSOP”) which was approved by shareholders at the 2006 annual general meeting of members.

The Company’s EDSOP provides for executives and other employees to be issued with options to acquire shares in the Company. The number and the terms of the options issued is determined by the directors after consideration of the employee’s performance and his or her ability to contribute to the achievement of the Company’s objectives.

As the options confer a right, but not an obligation on the recipient of the options, the directors do not consider it necessary to establish a policy in relation to the executive limiting his or her exposure to risk as a consequence of holding such options.

c. Share-based compensation

i) Options to acquire shares

As stated above, options are issued to directors and executives under the Company’s EDSOP as part of their remuneration. Such options are not issued based on performance criteria, but are issued to the majority of directors and executives to increase goal congruence between executives, directors and shareholders.

Participation in the EDSOP is at the sole discretion of the board. For each option issued, the board specifies the vesting period, exercise price and exercise period in accordance with the provisions of the EDSOP. The exercise price must not be less than the market price at the date of the issue of option. The exercise period cannot exceed five years.

Each option initially entitles the holder to subscribe for one fully paid ordinary share in the Company at the issue price specified, at any time from the issue date until the expiry of the options subject to any vesting requirements. The option holders are not entitled as a matter of course to participate in any share issues of the Company. Options granted under the EDSOP carry no dividend rights or voting rights and are issued for nil consideration.

Options issued to non-executive directors are issued under the terms of the EDSOP but also require separate specific approval by shareholders in a general meeting of members and the information set out in the notice of meeting must comply with relevant ASX Listing Rules.

No options have been issued to key management personnel, including directors, as remuneration during or since the end of the financial year. Further information on the options is set out in Note 18 to the annual financial statements.

The number of options held by all key management personnel including directors and the most highly remunerated Company executives, is detailed in Table 2.

Annual Report 2010 21

Director’s report (continued)

c. Share-based compensation (continued)

ii) Shares issued on exercise of remuneration options

No shares were issued pursuant to exercise of remuneration options during the year ended 30 June 2010 or to the date of this report. iii) The following share-based payment arrangements, granted as remuneration, were in existence during the during the financial year:

					Exercise price	Fair value at grant
	Options series	Number	Grant date	Expiry date	(cents)	date (cents)
(1) (2)	Issued 7 December 2006 Issued 7 December 2006	8,000,000 (1) 8,000,000 (1)	07/12/06 07/12/06	31/01/10 31/01/10	5.5 7.5	3.4 3.1

Note 1 each of these options is an option to subscribe for 1.25 shares

The weighted average fair value of the share options granted during the financial year is Nil cents (2009: Nil cents). The options fair value was valued using a Black Scholes option pricing model. Expected volatility is based on the historical share price volatility of the Company.

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Inputs into the model Options series (1) Options series (2)
Grant date share price Cents 4.9 4.9
Exercise price Cents 5.5 7.5
Expected volatility % 114 114
Option life Months 48 48
Dividend yield % Nil Nil
Risk-free interest rate % 5.85 5.85
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2. Details of remuneration

Details of the remuneration paid during the year to key management personnel (as defined in AASB 124 Related Party Disclosures) are set out in Table 1 which follows.

The key management personnel of Goldsearch Limited, including the directors and the following executives, have authority and responsibility for planning, directing and controlling the activities of the Company.

J.M.E. Percival - Director Operations

H. Hellewell - Exploration Manager

These executives comprise the Company executives who make or participate in making decisions that affect the whole, or a substantial part, of the business or who have the capacity to affect significantly the Company’s financial standing.

3. Executive contractual arrangements

The terms and conditions of the appointment and retirement of both non-executive and executive directors are set out in a letter of appointment which covers remuneration, expectations, terms, the procedures for dealing with conflicts of interest and the availability of independent professional advice.

Executive directors and key management personnel

J.M.E. Percival – Chief executive officer and chief financial officer.

Commenced 1 July 2008 for a term of 5 years and then thereafter rolling at 12 months periods.

A base salary inclusive of superannuation is $250,000 per annum, reviewed annually. This agreement may be terminated without cause at any time by the Company giving no less than 6 months prior written notice of termination or employee giving notice not less than 4 weeks.

H Hellewell – Exploration manager.

Commenced 14 July 2006 on an indefinite basis to continue until terminated by either parties providing 30 days notice. A base entitlement of $797 per day.

Table 1: Schedule of remuneration of key management personnel, including directors

22 Goldsearch limited

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Short-term Post employment Share based Percentage share-
benefits - benefits - payments - based payments
Salary and fees Superannuation Share options Total - Share options
$ $ $ $ %
Year ended 30 June 2010
Non-executive directors:
J. Landerer, CBE AM 28,132 2,532 - 30,664 -
A.G. Harris 29,000 - - 29,000 -
R.B. Leece, AM RFD 26,605 2,395 - 29,000 -
T.V. Willsteed 29,000 - - 29,000 -
Executive directors:
J.M.E. Percival 202,599 18,234 - 220,833 -
Other key management personnel:
H. Hellewell 76,067 - - 76,067 -
Total 391,403 23,161 - 414,564 -
Year ended 30 June 2009
Non-executive directors:
J. Landerer, CBE AM 36,697 3,303 - 40,000 -
A.G. Harris 36,000 - - 36,000 -
R.B. Leece, AM RFD 33,028 2,972 - 36,000 -
T.V. Willsteed 36,000 - - 36,000 -
Executive directors:
J.M.E. Percival 242,691 21,842 - 264,533 -
Other key management personnel:
H. Hellewell 135,744 - - 135,744 -
Total 520,160 28,117 - 548,277 -
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Annual Report 2010 23

Director’s report (continued)

Table 2: Movement in the number of unquoted options held by key management personnel, including directors, which were granted as remuneration options:

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Options granted Options expired / Net other
Name Opening balance as remuneration lapsed change Closing balance
Year ended 30 June 2010
Non-executive directors
J. Landerer, CBE AM 3,000,000 - (3,000,000) - -
A.G. Harris 2,000,000 - (2,000,000) - -
R.B. Leece, AM RFD 2,000,000 - (2,000,000) - -
T.V. Willsteed 2,000,000 - (2,000,000) - -
Executive directors
J.M.E. Percival 3,000,000 - (3,000,000) - -
Key management personnel
H. Hellewell - - - - -
Total 12,400,000 - (12,400,000) - -
Year ended 30 June 2009
Non-executive directors
J. Landerer, CBE AM 3,000,000 - - - 3,000,000(1)
A.G. Harris 2,000,000 - - - 2,000,000(1)
R.B. Leece, AM RFD 2,000,000 - - - 2,000,000(1)
T.V. Willsteed 2,000,000 - - - 2,000,000(1)
Executive directors
J.M.E. Percival 3,000,000 - - - 3,000,000(1)
Key management personnel
H. Hellewell 400,000 - (400,000) - -
Total 12,400,000 - (400,000) - 12,000,000(1)
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Note 1 Following an automatic adjustment arising from the Company’s pro-rata bonus issue of quoted options in June 2008, and under the term and conditions of the EDSOP, each of these options entitles the holder to be allotted 1.25 ordinary fully paid shares for each option exercised.

Environmental regulation

The Company’s operations are subject to general environmental regulation under the laws of the states and territories of Australia in which it operates. In addition, the various exploration licences held by the Company impose environmental obligations on it in relation to site remediation following sampling and drilling programs. The board is aware of these requirements and management has been instructed to ensure that they are complied with. The directors are not aware of any breaches of these environmental regulations and licence obligations during the year.

Proceedings on behalf of the Company

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 year.

24 Goldsearch limited

Directors’ benefits

Since the end of the previous financial year no director has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as shown in the annual accounts of the Company, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related entity with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, other than:

• Mr J. Landerer, CBE AM receives a benefit from fees paid for legal services provided by the Company’s solicitors, Landerer & Company, of which he is the senior partner. Fees paid for these services during the year totalled $5,958 (2009: $2,877) and were charged at normal commercial rates.

• The Company employs Ms J Gregan, spouse of Mr J Percival on a casual basis. Ms Gregan’s employment agreement is in accordance with normal market terms and conditions.

Signed in accordance with a resolution of the board of directors.

J. Landerer, CBE AM

Chairman of directors

Sydney,

14 September 2010

Annual Report 2010 25

Auditor’s independence declaration

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26 Goldsearch limited

Statement of comprehensive income

for the financial year ended 30 June 2010

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2010 2009
Note $ $
Continuing operations
Other revenue 2 2,083,867 148,526
Capitalised exploration expenses written off (29,978) (362,887)
Salary costs (including directors’ fees) (178,232) (208,535)
Professional and legal fees (194,327) (196,731)
-
Impairment to fair value (145,000)
Share registry expenses (50,865) (67,103)
Operating lease expenses (leases) (62,306) (60,322)
Depreciation and amortisation (3,482) (5,932)
Other expenses (162,712) (165,710)
Profit/(loss) before income tax expense 3 1,401,965 (1,063,694)
Income tax expense 4 - -
Profit/(loss) from continuing operations 1,401,965 (1,063,694)
Other comprehensive income
Net gain/(loss) on revaluation of investments 96,447 90,500
Profit/(loss) attributable to members 1,498,412 (973,194)
Total comprehensive profit/(loss) attributable to members 1,498,412 (973,194)
Profit/(loss) per share attributable to the ordinary equity holders of the company
Basic profit/(loss) per share - cents 24 0.38 (0.29)
Diluted profit/(loss) per share - cents 24 0.34 (0.29)
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The accompanying notes form part of these financial statements

Annual Report 2010 27

Statement of financial position

as at 30 June 2010

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2010 2009
Note $ $
Current assets
Cash and cash equivalents 23(a) 255,429 420,383
Trade and other receivables 6 42,565 82,566
Other assets 7 46,863 60,823
Total current assets 344,857 563,772
Non-current assets
Other financial assets 9 2,696,185 2,081,385
Property, plant and equipment 8 87,713 81,713
Exploration and investment expenditure 10 5,027,855 3,915,738
Total non-current assets 7,811,753 6,078,836
Total assets 8,156,610 6,642,608
Current liabilities
Trade and other payables 14 59,252 58,953
Provisions 15 64,683 50,892
Total current liabilities 123,935 109,845
Total liabilities 123,935 109,845
Net assets 8,032,675 6,532,763
Equity
Issued capital 16 29,749,593 29,748,093
Reserves 17 913,816 1,385,197
Accumulated losses 5 (22,630,734) (24,600,527)
Total equity 8,032,675 6,532,763
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The accompanying notes form part of these financial statements

28 Goldsearch limited

Statement of changes in equity

for the financial year ended 30 June 2010

Issued			Accumulated
capital		Reserves	losses	Total
	Revaluation
Ordinary	of available–	Share-based
shares	for-sale assets	payments
Note $	$	$	$	$
Balance at 1 July 2008 29,734,011 Shares issued during the period 16(a) 14,082 Share options expense 18 - Total comprehensive loss for the period 5, 9 -	726,869 - - 90,500	564,028 - 3,800 -	(23,536,833) - - (1,063,694)	7,488,075 14,082 3,800 (973,194)
Sub-total 29,748,093 Dividends paid or provided for -	817,369 -	567,828 -	(24,600,527) -	6,532,763 -
Balance at 30 June 2009 29,748,093	817,369	567,828	(24,600,527)	6,532,763
Balance at 1 July 2009 29,748,093 Lapsed share options 18 - Shares issued during the period 16(a) 1,500 Total comprehensive proft for the period 5, 9 -	817,369 - - 96,447	567,828 (567,828) - -	(24,600,527) 567,828 - 1,401,965	6,532,763 - 1,500 1,498,412
Sub-total 29,749,593 Dividends paid or provided for -	913,816 -	- -	(22,630,734) -	8,032,675 -
Balance at 30 June 2010 29,749,593	913,816	-	(22,630,734)	8,032,675

The accompanying notes form part of these financial statements

Annual Report 2010 29

Statement of cash flows

for the financial year ended 30 June 2010

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2010 2009
Note $ $
Cash flows from operating activities:
Payments to suppliers and employees (516,053) (507,476)
Payments to related parties (117,003) (148,774)
Dividends received 10,000 24,500
Interest received 8,243 90,953
Other Income 51,818 -
Net cash used in operating activities 23(b) (562,995) (540,797)
Cash flows from investing activities:
Payments for exploration activities (880,493) (1,418,777)
Payments to related parties for exploration activities (235,333) (282,533)
Purchase of available-for-sale investment (2,097,215) -
Proceeds from sale of available-for-sale investment 3,638,070 -
Payments for property, plant and equipment (28,488) (84,570)
Net cash provided by/(used in) investing activities 396,541 (1,785,880)
Cash flows from financing activities:
Proceeds from issue of shares 1,500 3,082
-
Payments for share issue costs (18,020)
Net cash provided by/(used in) financing activities 1,500 (14,938)
Net decrease in cash and cash equivalents held (164,954) (2,341,615)
Cash and cash equivalents at beginning of year 420,383 2,761,998
Cash and cash equivalents at end of year 23(a) 255,429 420,383
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The accompanying notes form part of these financial statements

30 Goldsearch limited

Notes to the financial statements for the financial year ended 30 June 2010

1. Statement of accounting policies

(a) General

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

The financial report covers the consolidated entity (referred to hereafter as the “Group”) consisting of Goldsearch Limited (the “Company” or “Goldsearch”) as an individual entity and the entities it controlled at the end of, or during the year ended 30 June 2010. Goldsearch is a listed public company, incorporated and domiciled in Australia. The financial report was authorised for issue by the directors on 14 September 2010.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated.

Reporting basis and conventions

These financial statements have been prepared on an accruals basis under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value.

Early adoption of standard

The Company has elected to early adopt all Australian Accounting Standards and Australian Accounting Interpretations and other authoritative pronouncement of the Australian Accounting Standards Board with an application date later than 30 June 2010.

Critical accounting estimates and judgements

The preparation of a financial report in conformity with Australian Accounting Standards requires management to make estimates, judgements and assumptions 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. Actual results may differ from the estimates.

i) Share based payments

The Company valued share options by reference to the fair value of the equity instruments at the grant date. The fair value is determined using the Black Scholes method which requires significant estimates and judgements over the inputs in respect to the volatility being 114% (market volatility of the underlying security) and the risk free rate of 5.85% (RBA government bond rate). Refer to note 18.

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 the end of the reporting period at $5,027,855.

iii) Fair value of financial assets

The Company records the fair value of financial assets using the market value of the investments at reporting date. While this represents the best estimate of the fair value as at the reporting date, the current market uncertainly means that, if the financial assets are sold in the future, the price achieved may be higher or lower than the most recent valuation, and higher or lower than the fair value recorded in the financial statements.

(b) Consolidation

The accounts are not consolidated as the directors have decided that such application is of no material consequence as the subsidiary companies have no activities other than as holders of exploration rights on certain tenements.

Separate consolidated accounts of the consolidated entity formed by the Company and these wholly owned subsidiaries (refer to Note 27) have not been prepared on the grounds of immateriality.

Annual Report 2010 31

(continued) Notes to the financial statements for the financial year ended 30 June 2010

1. Statement of accounting policies (continued)

(c) Comparative information

Comparative figures are, where appropriate, reclassified so as to be comparable with the figures presented for the financial year.

(d) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(e) Income tax

The charge for current income tax expense is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using the tax rates that have been enacted or are substantially enacted by the reporting date.

Deferred tax is accounted for using the balance sheet method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is charged to the statement of comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(f) Property, plant and equipment

Plant and equipment

Plant and equipment is measured on the cost basis less accumulated depreciation and impairment losses.

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

Depreciation

All fixed assets are depreciated over their estimated useful lives to the Company. Mining plant and equipment is depreciated in this manner over the estimated life of the relevant mine with due regard to each item’s physical life limitations.

The depreciation rates used for each class of depreciable assets are:

Class of fixed asset Depreciation rate Plant and equipment 7.5 – 40% diminishing value

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

32 Goldsearch limited

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income.

(g) Exploration expenditure and mineral leases

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward if the rights to the area of interest are current and to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Accumulated costs in relation to an abandoned area are written off in full against the result in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs will be determined using estimates of future costs, current legal requirements and technology on a discounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(h) Accounts payable

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. Due to their short-term nature they are measured at amortised cost and not discounted. These amounts are unsecured and are usually paid within 30 days of recognition.

(i) Receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the affective interest method, less any provision for impairment.

(j) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

(k) Earnings per share

i) Basic earnings per share:

Basic earnings per share is determined by dividing the operating profit/(loss) after income tax excluding any cost of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year.

ii) Diluted earnings per share:

Diluted earnings per share adjusts the figures used in determining earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial year.

(l) Restoration, rehabilitation and environmental expenditure

Restoration, rehabilitation and environmental expenditure to be incurred during the production phase of operations is accrued when the need for such expenditure is established, and then written off as part of the costs of production of the mine property concerned. Significant restoration, rehabilitation and environmental expenditure to be incurred subsequent to the cessation of production at each mine property is accrued, in proportion to production, when its extent can be reasonably estimated.

Annual Report 2010 33

(continued) Notes to the financial statements for the financial year ended 30 June 2010

1. Statement of accounting policies (continued)

(m) Employee benefits

i) Wages and salaries and annual leave:

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date represent present obligations in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the leave is taken.

ii) Long service leave:

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

iii) Retirement benefit obligations

Contributions to defined contribution funds are recognised as an expense as they become payable.

(n) Business undertakings – joint ventures

The Company has certain exploration activities conducted through joint venture operations with other parties. The Company’s interest in these joint ventures is shown in the statement of financial position under the appropriate heading. Details of the interests in the joint venture assets and liabilities are set out in Notes 11 and 12.

(o) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the statement of comprehensive income for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(p) Share-based payments

The cost to the Company of share options granted to directors and executive officers is included at fair value as part of the directors’ and executive officers’ aggregate remuneration in the financial year the options are granted. The fair value of the share option is calculated using the Black Scholes option pricing model, which takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The fair value determined at the grant date of the equity settled share based payment is expensed on a straight line basis over the vesting period.

(q) Revenue

Realised gains and losses on sale are recognised as income or expense respectively in the statement of comprehensive income and are calculated as the difference between consideration on sale and the original cost.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established.

Joint venture income is recognised at the fair value of the consideration received or receivable when the entity obtains control of the revenue.

State grant income is recognised where there is reasonable assurance that the grant will be received and all grant conditions will be met. All revenue is stated net of the amount of goods and services tax.

(r) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

34 Goldsearch limited

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(s) Financial instruments

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

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a financial asset if the possibility exists, it will be sold in the short term and the asset is subject to frequent changes in fair value. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting date. The Company held no such financial assets at reporting date.

Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company management has the positive intention and ability to hold to maturity. The Company held no such financial assets at reporting date.

Available-for-sale financial assets

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

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

Subsequent measurement

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value.

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

Realised and unrealised gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are included in the statement of comprehensive income in the period in which they arise.

Unrealised gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the statement of comprehensive income as gains and losses from investment securities. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques.

These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

Annual Report 2010 35

(continued) Notes to the financial statements for the financial year ended 30 June 2010

1. Statement of accounting policies (continued)

(s) Financial instruments

Impairment of financial assets

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

(t) Adoption of new and revised accounting standards

AASB 8: Operating Segments

In February 2007 the Australian Accounting Standards Board issued AASB 8 which replaced AASB 114: Segment Reporting. As a result, some of the required operating segment disclosures have changed with the addition of a possible impact on the impairment testing of goodwill allocated to the cash generating units (CGUs) of the entity. Below is an overview of the key changes and the impact on the Company’s financial statements.

Measurement impact

Identification and measurement of segments – AASB 8 requires the ‘management approach’ to the identification measurement and disclosure of operating segments. The ‘management approach’ requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments. Under AASB 114, segments were identified by business and geographical areas, and only segments deriving revenue from external sources were considered.

Under AASB 8, operating segments are determined based on management reports using the ‘management approach’, whereas under AASB 114 financial results of such segments were recognised and measured in accordance with Australian Accounting Standards. This has resulted in changes to the presentation of segment results, with inter-segment sales and expenses such as depreciation and impairment now being reported for each segment rather than in aggregate for total group operations, as this is how they are reviewed by the chief operating decision maker.

AASB 101: Presentation of Financial Statements

In September 2007 the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the Company’s financial statements.

Disclosure impact

Terminology changes – The revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements.

Reporting changes in equity – The revised AASB 101 requires all changes in equity arising from transactions with owners, in their capacity as owners, to be presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of changes in equity, with non-owner changes in equity presented in the statement of comprehensive income. The previous version of AASB 101 required that owner changes in equity and other comprehensive income be presented in the statement of changes in equity.

Statement of comprehensive income – The revised AASB 101 requires all income and expenses to be presented in either one statement, the statement of comprehensive income, or two statements, a separate income statement and a statement of comprehensive income. The previous version of AASB 101 required only the presentation of a single income statement.

The Company’s financial statements now contain a statement of comprehensive income.

Other comprehensive income – The revised version of AASB 101 introduces the concept of ‘other comprehensive income’ which comprises of income and expenses that are not recognised in profit or loss as required by other Australian Accounting Standards.

36 Goldsearch limited

Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities are required to disclose the income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.

2. Revenue and other income

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2010 2009
$ $
Other revenue from operating activities
Operating activities
- Interest received 4,658 82,208
- Dividend income 10,000 24,500
- Sales of tenement interest 10,000 -
- Drilling grant - 41,818
- Net gain on sale of investments 2,059,209 -
2,083,867 148,526
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3. Profit/(loss) for the year

Profit/(loss) before income tax has been determined after:

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Depreciation of plant and equipment:
- Plant and equipment 3,482 5,932
Rental expense on operating leases 45,040 44,049
Capitalised exploration expenses written off 29,978 362,887
Impairment – fair value listed investment - 145,000
Movements in provisions – employee benefits 1,473 (2,370)
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4. Income tax

The prima facie tax payable on profit/(loss) is reconciled to the income tax expense as follows:

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Prime facie tax payable on profit/ (loss) before income tax at 30% (2009: 30%) 420,590 (319,108)
Add: tax effect of:
- Non-allowable items (30,369) 139,234
- Net of current year tax losses not recognised and deductible items
(337,013) 179,874
(exploration expenditure and others)
- Net of deferred tax losses not recognised and brought to accounts 53,208 -
- -
Income tax expense/(benefit)
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Subject to the provisions of the Income Tax Assessment Act, if the Company derives assessable income it will be able to utilise carryforward losses. At 30 June 2010 the Company has estimated carry-forward tax losses, after adjusting for temporary differences, of approximately $18,464,946 (2009: $18,278,557) which amounts to an income tax benefit of $5,539,484 (2009: $5,483,567). The Company has no estimated carry-forward capital loss (2009: $Nil).

Certain losses which have been incurred in the course of mining activities are only available for offset against future mining income. Due to the manner and nature of activities giving rise to these carry-forward tax losses, a detailed analysis would be required should the

Annual Report 2010 37

(continued) Notes to the financial statements for the financial year ended 30 June 2010

Company return to profits.

4. Income tax (continued)

The net deferred tax asset will only be obtained if:

• (a) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss to be realised;

• (b) the Company continues to comply with the conditions for deductibility imposed by law; and

• (c) no changes in tax legislation adversely affect the Company in realising the benefit from the deduction of the loss.

Consequently, no deferred tax asset has been recognised.

5. Accumulated losses

5. Accumulated losses
2010	2009
$	$
Accumulated losses at beginning of year (24,600,527) Net proft/(loss) attributable to members of Goldsearch Limited 1,401,965 Lapsed share-based option expense 567,828	(23,536,833) (1,063,694) -
Accumulated losses at end of year (22,630,734)	(24,600,527)

6. Current assets – trade and other receivables

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Other debtors - 56,654
GST receivable 42,565 25,912
42,565 82,566
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The above assets are not subject to any accrued interest and are not subject to any impairment on any past due amount. These amounts are receivable in the ordinary course of business. The full amounts are expected to be received within 30 days, and not past due.

7. Current assets – other assets

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Rental bond - held to maturity 18,300 18,300
Prepayments 28,563 42,523
46,863 60,823
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38 Goldsearch limited

8. Non-current assets - property, plant and equipment

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2010 2009
$ $
Equipment at cost 60,790 63,794
Accumulated depreciation (50,731) (52,582)
10,059 11,212
Motor vehicle at cost 61,300 61,300
Accumulated depreciation (61,300) (61,300)
- -
Exploration building and equipment at cost 109,409 82,422
Accumulated depreciation (31,755) (11,921)
77,654 70,501
Total property, plant and equipment 87,713 81,713
Reconciliation of property, plant and equipment
Equipment
Carrying amount at beginning of year 11,212 15,758
Additions 3,081 2,147
Depreciation (4,234) (6,693)
Carrying amount at end of year 10,059 11,212
Exploration building and equipment
Carrying amount at beginning of year 70,501 -
Additions 26,987 82,422
Depreciation (19,834) (11,921)
Carrying amount at end of year 77,654 70,501
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9. Non-current assets - other financial assets

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Shares in controlled entities at cost (a) (Note 27) 885 885
Unlisted options in listed company – at fair value (i) - 127,500
Shares in listed companies - at fair value (i) 2,636,500 1,953,000
Shares in unlisted companies at cost (ii) 58,801 1
Provision for impairment (ii) (1) (1)
2,696,185 2,081,385
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Annual Report 2010 39

(continued) Notes to the financial statements for the financial year ended 30 June 2010

9. Non-current assets - other financial assets (continued)

(a) Shares in controlled entities are valued at cost as fair value is unable to be determined.

9. Non-current assets - other fnancial assets(continued) (a) Shares in controlled entities are valued at cost as fair value is unable to be determined.
2010	2009
$	$
Reconciliation of other fnancial assets Carrying amount at beginning of year 2,081,385 Additions at cost (i) (ii) 2,097,215 Value of investment sold (1,578,862) Revaluation to fair value 96,447	2,135,885 - - (54,500)
Carrying amount at end of year 2,696,185	2,081,385

• (i) Listed investments are recorded at fair value which consist of the following material investments:

Minority interest in Independence Group NL (IGO) shares

As at 30 June 2010 the Company held 100,000 IGO shares (2009: 350,000) with a market value at reporting date of $472,000 (2009: $1,620,500). The movement in the fair value of this investment is recorded in the ‘available-for-sale investments revaluation reserve’ (see also Note 30).

Minority interest in Morning Star Gold NL (MCO) shares.

As at 30 June 2010 the Company held 5,550,000 MCO shares (2009: Nil) with a market value of $2,164,500 (2009: $Nil). The movement in the fair value of this investment is recorded in the ‘available-for-sale investments revaluation reserve’ (see also Note 30).

Minority interest in Rex Minerals Limited (RXM) shares.

As at 30 June 2010 the Company held Nil RXM shares (2009: 500,000) with a market value of $Nil (2009: $277,500) for the fully paid ordinary shares and $Nil (2009: $127,500) for the 500,000 unlisted options that had an exercise price of 30 cents per option on or before 30 June 2011.

Minority interest in Queensland Mining Corporation Limited (QMN) shares.

As at 30 June 2010 the Company held Nil QMN shares (2009: 1,000,000) with a market value of $Nil (2009: $55,000).

• (ii) Unlisted investments and provisions:

Minority interest in Capix Pty Ltd shares.

The Company made a provision for impairment on its investment in this company as of 30 June 2002 and the directors have continued to provide against this investment since that date.

Interest in Musgrave Minerals Ltd shares.

As at 30 June 2010 the Company held 1,176,000 ordinary shares (2009: Nil) with a cost value of $58,800 (2009: $Nil). Refer to Note 11(a).

There would be no material capital gains tax payable if these listed assets were sold at their market value at reporting date.

10. Non-current assets – exploration and investment expenditure

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Mining expenditure (pre-production)
Exploration and evaluation expenditure carried forward in respect of mining areas of interest:
Balance at beginning of year 3,915,738 2,758,141
Exploration expenditure, at cost capitalised during the year 1,142,095 1,520,484
5,057,833 4,278,625
Capitalised exploration expenditure, at cost written off during the year (29,978) (362,887)
Balance at end of year 5,027,855 3,915,738
Depreciation included in exploration expenditure 20,579 12,673
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40 Goldsearch limited

Mineral exploration is to be amortised when production commences, or written off to the statement of comprehensive income. The carrying values do not purport to be the amounts receivable by the Company in the event the interests in the mining leases were farmed out or sold, with the recovery of this capitalised exploration expenditure dependent upon future successful mining or realisation of this asset.

11. Business undertakings – joint ventures

a) Independence Group NL/ BHP Billiton Minerals Ltd East Musgrave project joint venture and Musgrave Minerals Limited vendor agreement

In February 2007, BHP Billiton Minerals Ltd (BHPB) farmed into the East Musgrave project joint venture. Current equity in the joint venture is Independence Group NL (IGO) 51%, Goldsearch Limited 49%. Under the terms of the new joint venture agreement, BHPB can earn 65% interest in the East Musgrave project by spending $25 million or by delivering a bankable feasibility study within 10 years. Upon BHPB earning its interest, equity in the East Musgrave project will be BHPB 65%, IGO 17.85% and Goldsearch 17.15%.

The exploration licences covered by the joint venture agreement are EL 3954 and EL 3955. Current exploration licence applications covered by the joint venture agreement are South Australian ELAs 35, 260, 262, 336-342 and 534.

The total annual expenditure commitment for the above exploration licences is $265,000 and the total expenditure commitments for the above exploration licence applications (should they be granted) amount to $1,690,254.

On 27 July 2009 BHPB advised of its withdrawal from the joint venture. Therefore the ownership of all exploration licences and exploration licence applications has reverted to Independence Group NL 51% and Goldsearch Limited 49%.

In April 2010 Goldsearch and Independence Group signed a Heads of Agreement to vend their interests in the Musgrave tenements into Musgrave Minerals Limited. Musgrave Minerals Limited was formed with the aim of completing an initial public offering (IPO) and listing on the Australian Securities Exchange (ASX). Goldsearch received shares in Musgrave Minerals Limited in return for its interest in the tenements and also the right to subscribe for further shares in the company. These shares were issued to raise “seed” capital to conduct initial field programs and fund costs associated with the IPO and ASX listing. If Musgrave Minerals does not successfully list on the ASX prior to 30 April 2011 then any of the parties may terminate the Heads of Agreement and all interests in the tenements revert back to the original ownership.

b) Central West / Mary Kathleen joint venture

The Company previously entered into a heads of agreement with Central West Gold NL (CWG) in relation to a joint venture to explore the uranium, base metal and gold potential of EPMs 14019, 14022 and 15257 (Mary Kathleen).

On 10 March 2009 Goldsearch advised CWG that it had met its obligations to earn a 75% interest in the project and that CWG would need to meet a cash call to retain its 25% interest or dilute. CWG elected to dilute its interest and, based on the expenditure committed to that date, its relevant interest dropped below 5% and it was therefore deemed to have withdrawn from the project giving Goldsearch a 100% interest.

All tenements are currently granted and the total annual expenditure commitment is $583,000.

Signed documentation to effect the transfer of a 100% interest to Goldsearch is currently with the Queensland Department of Mines and Energy.

In August 2009 Goldsearch entered into a farm-in and joint venture agreement with China Yunnan Copper Australia Limited (CYU), whereby CYU can earn a minimum interest of 49% in all tenements by spending $750,000 and up to a 70% interest by spending $1.5 million over three years and issuing Goldsearch 3,000,000 options to purchase ordinary shares in CYU at 40 cents per share.

c) Queensland Mining Corporation joint venture

Goldsearch has entered into a joint venture agreement with North Queensland Mines Pty Ltd, now Queensland Mining Corporation (QMN) on exploration permits EPM 13336 and EPM 15718 whereby QMN can earn 70% and 75% respectively by spending $750,000 over the first two years to 31 May 2008. Under the terms of the joint venture Goldsearch is also entitled to be issued with options as follows:

• If at any time prior to 30 June 2012 QMN establishes a proven JORC resource equal to two million tonnes of ore with an equivalent grade of 2% copper then, QMN will issue Goldsearch one million options exercisable at 50 cents each for two years following the date of their issue.

Annual Report 2010 41

(continued) Notes to the financial statements for the financial year ended 30 June 2010

11. Business undertakings – joint ventures (continued)

c) Queensland Mining Corporation joint venture (continued)

• Furthermore, if QMN establishes a proven JORC resource equal to five million tonnes of ore with an equivalent grade of 2% copper then, QMN will issue Goldsearch with a further two million options exercisable at 50 cents each for two years following the date of their issue.

Goldsearch at all times retains a 25% interest in the tenements.

QMC has advised that it has spent in excess of $750,000 under the terms of the joint venture agreement prior to 31 May 2008 and has therefore earned its relevant interest.

d) TM Resources AB joint venture

In May 2008 Goldsearch signed an option agreement with TM Resources AB, a Swedish company wholly owned by Tumi Resources Limited (Tumi), a company based in Toronto, Canada. Under the terms of the option agreement Goldsearch may earn up to 70% interest in the Jugansbo nr1 (2006:173), Sala nr4 (2005:274), Kobergs nr1 (2006:73) and Hällefors nr1 (2005:292) mineral licences. The initial minimum commitment by Goldsearch is to fund a SkyTEM airborne electromagnetic and magnetic geophysical survey. That survey has been completed over the licence areas.

If Goldsearch elects to proceed based on the results of the SkyTEM it must fund cumulative expenses of:

• 100,000 Euros (including the EM Survey) within year 1;

• 300,000 Euros in year 2;

• and 1,000,000 Euros in year 3 to earn the 70% interest.

In February 2009 Goldsearch handed back the Kobergs nr1 licence to Tumi. The remaining three licences remain in the agreement. Goldsearch met its first year commitment under the terms of the agreement.

Subsequent to the reporting date Tumi Resources agreed to waive the minimum second year expenditure commitment, delaying this expenditure commitment by one year, subject to proposed geophysical surveys being completed prior to the end of 2010. The agreed budget for these surveys is $80,000.

12. Exploration tenements

Expenditure commitments

Minimum expenditure requirements to retain current rights of tenure to granted tenements for the year ending 30 June 2011, and the parties responsible for funding that expenditure, are as follows:-

• EL 3954 South Australia • EL 3855 South Australia • EPM 13336 Queensland • EPM 15718 Queensland • EPM 14019 Queensland • EPM 14022 Queensland • EPM 15257 Queensland • EL 4843 Victoria • EL 4976 Victoria • EL 5046 Victoria

$ 50,000 to be funded 100% by Musgrave Minerals Limited (1) $ 215,000 to be funded 100% by Musgrave Minerals Limited (1) $300,000 to be funded 100% by Queensland Mining Corporation $ 5,000 to be funded 100% by Queensland Mining Corporation $ 263,000 to be funded 100% by China Yunnan Copper $ 260,000 to be funded 100% by China Yunnan Copper $ 30,000 to be funded 100% by China Yunnan Copper $ 61,800 to be funded 100% by Goldsearch $ 31,200 to be funded 100% by Goldsearch $ 50,000 to be funded 100% by Goldsearch $1,266,000

Note 1: Under the Musgrave Minerals heads of agreement, the rights of the tenements are to be transferred to the newly incorporated entity and each party under the agreement must provide seed capital to fund the current exploration program until such point as the new company completes an IPO and lists on the Australian Securities Exchange, refer to Note 9(ii). If none of the above conditions are met, or

42 Goldsearch limited

if any party terminates the agreement, the parties will retain their previous tenement interests and will have to provide resources and fund the respective minimum expenditure commitments as before, namely 51% by IGO and 49% by Goldsearch.

The Company has also made application for further exploration tenements. Whilst no formal expenditure commitment exists until licences are granted and access agreements are in place, should all of these applications be granted, an additional minimum annual expenditure requirement of $1,925,254 would arise. Of this additional minimum annual expenditure requirement $1,690,254 would be funded by the joint venture arrangements set out in Note 11 with the Company being obliged to fund the remainder.

The above obligations, relating to both granted tenements and applications, are not provided for in the financial statements and are payable as and when they fall due.

13. Commitments for expenditure

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2010 2009
$ $
Operating lease commitments:
Non-cancellable lease contracted for but not capitalised in the accounts:
Rental of premises -
- not later than 1 year - 45,040
- -
- later than 1 year and not later than 5 years
- 45,040
Exploration expenditure commitments:
In order to maintain current rights of tenure to granted exploration tenements, the Company is required to
perform minimum exploration work to meet the minimum expenditure requirements specified by various State
governments. These obligations are subject to renegotiation when application for a mining lease is made and
at other times. These obligations are not provided for in the financial statements and are payable:
- not later than 1 year 1,266,000 1,317,000
- later than 1 year and not later than 5 years 92,500 540,500
1,358,500 1,857,500
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As detailed in Notes 11 and 12 these exploration expenditure commitments are

14. Current liabilities – trade and other payables

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Trade creditors 49,968 52,183
Sundry creditors and accruals 9,284 6,770
59,252 58,953
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The above amounts all relate to normal unsecured creditors incurred in the normal course of the Company’s business operations and are within the credit terms of each relevant supplier or service provider.

15. Current liabilities – provisions

Employee benefits 64,683 50,892

Annual Report 2010 43

(continued) Notes to the financial statements for the financial year ended 30 June 2010

16. Issued capital

(a) Issued shares:

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2010 2009
$ $
367,749,517 ordinary fully paid shares at beginning of year (2009: 367,218,696) 27,003,019 26,988,937
Issued during the year:
15,000 ordinary shares issued on the exercise of quoted options at a price of 10 cents each 1,500 -
30,821 ordinary shares issued on the exercise of quoted options at a price of 10 cents each - 3,082
500,000 ordinary shares issued as part of the purchase consideration for EL 5046, the shares were - 11,000
issued at a price of 2.2 cents each
367,764,517 ordinary fully paid shares at end of year (2009: 367,749,517) 27,004,519 27,003,019
(b) Issued options:
Issue price of options issued in prior years and which have expired 2,745,074 2,745,074
At reporting date 29,749,593 29,748,093
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(c) Movement in issued shares during the year

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Date Details Number of shares Number of shares
1 July opening balance 367,749,517 367,218,696
July to August 2010 ordinary shares issued on exercise of quoted options 15,000 -
July to August 2008 ordinary shares issued on exercise of quoted options - 30,821
5 February 2009 ordinary shares issued as part of the purchase consideration for EL 5046 - 500,000
30 June closing balance 367,764,517 367,749,517
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Holders of ordinary shares are entitled to participate in dividends when declared and are entitled to one vote per share, either in person or by proxy, at shareholder meetings. In the event of winding up the Company, ordinary shareholders are ranked after all other creditors and are entitled to any proceeds of liquidation in proportion to the number of and amounts paid on the shares held.

(d) Movement in issued share options during the year:

Total options granted but not exercised as at 30 June 2010 are as follows:

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Date Details Exercise price Expiry date Number
Quoted options (f)
1 July 2009 opening balance Weighted average exercise price 10 cents 31 October 2009 90,432,809
July to August 2009 options exercised 10 cents 31 October 2009 (15,000)
31 October 2009 options lapsed 10 cents 31 October 2009 (90,417,809)
30 June 2010 closing balance N/A N/A -
Unquoted options (f)
1 July 2009 opening balance Weighted average exercise price 6.5 cents 31 January 2010 20,000,000
1 January 2010 options lapsed Weighted average exercise price 6.5 cents 31 January 2010 (20,000,000)
30 June 2010 closing balance N/A N/A -
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44 Goldsearch limited

(e) Uncalled capital:

No calls are outstanding at year end. All issued shares are fully paid.

(f) Terms and conditions of quoted and unquoted options:

Quoted options:

All the current quoted options entitle the holders to subscribe for one fully paid share in the Company. The conditions attached at the time of the issue of each of the options specify the exercise price and the expiry date.

Unquoted options:

The expired 16,000,000 unquoted options entitled the holder to subscribe for 1.25 fully paid shares in the Company for each option exercised. The conditions attached at the time of the issue of each of the options specify the exercise price (which has been clarified as a price per share subscribed), the vesting period and the expiry date.

(g) Capital management:

Management controls the capital of the Company in order to maintain a reasonable debt to equity ratio, provide the shareholders with adequate returns and ensure that the Company can fund its operations and continue as a going concern.

The Company currently has no debt funding available and capital includes ordinary share capital, and the financial liabilities are supported by financial assets.

Management effectively manages the Company capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of share issues.

17. Reserves

2010	2009
$	$
Available-for-sale investments revaluation reserve. Balance at beginning of year 817,369 Unrealised gain to fair value 96,447 Adjustment on sale of investment -	726,869 90,500 -
Balance at end of year 913,816	817,369

Changes in the fair value of investments classified as available-for-sale financial assets are taken to the available-for-sale investments revaluation reserve. Amounts are recognised in profit and loss when the associated assets are sold or impaired.

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Share-based payment reserve.
Balance at beginning of year 567,828 564,028
-
Transfer to accumulated loss on options lapsing (567,828)
Expensing of options issued - 3,800
Balance at end of year - 567,828
The fair value of equity settled share-based payments to consultants and directors or their associates are recognised in the statement
of comprehensive income on a straight line method over their vesting periods (refer to Note 18).
Total reserves 913,816 1,385,197
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Annual Report 2010 45

(continued) Notes to the financial statements for the financial year ended 30 June 2010

18. Share-based payments

The following share-based payment arrangements existed during the 30 June 2010 financial year:

On 7 December 2006, 16,000,000 share options were granted to directors and consultants or their associates as approved by shareholders at the annual general meeting held on 30 November 2006. The first 8,000,000 of these options vested on 1 February 2007 and were exercisable at 5.5 cents per share at any time until their expiry on 31 January 2010. The other 8,000,000 options vested on 1 February 2008 and were exercisable at 7.5 cents per share at any time until their expiry on 31 January 2010. The aggregate number of shares which could be subscribed for by the holders of these options (the underlying securities) was automatically increased from 16,000,000 shares to 20,000,000 shares as a result of the Company’s bonus option issue in June 2008. At 31 January 2010 none of the options were exercised and accordingly, under the terms of their issue, all of the options lapsed on that date.

The options held no voting or dividend rights and were not transferable.

The following share-based payment arrangements were in existence during the period:

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Options series Number Grant date Expiry date Exercise price $ Fair value at grant date (cents)
(1) Issued 7 December 2006 # 8,000,000 07/12/06 31/01/10 0.055 3.4
(2) Issued 7 December 2006 # 8,000,000 07/12/06 31/01/10 0.075 3.1
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# each of these options is an option to subscribe for 1.25 shares – see Note 16(d)

The weighted average fair value of the share options granted during the financial year is Nil (2009: 0.95 cents). Options were priced using the Black Scholes option pricing model. Expected volatility is based on the historical share price volatility.

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Inputs into the model Options series (1) Options series (2)
Grant date share price cents 4.9 4.9
Exercise price cents 5.5 7.5
Expected volatility % 114 114
Option life months 48 48
Dividend yield % 0 0
Risk-free interest rate % 5.85 5.85
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The following reconciles the outstanding share options on issue at the beginning and end of the financial year:

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2010 2009
Number of options Weighted average Weighted average
Number of options
(underlying securities) exercise price $ exercise price $
Balance at beginning of year 20,000,000 0.065 20,400,000 0.063
Granted during the year - - 400,000 0.075
Lapsed during the year (20,000,000) 0.065 (800,000) 0.088
Balance at end of year - N/A 20,000,000 0.065
Exercisable at end of year - N/A 20,000,000 0.065
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(i) Exercised

No share options granted as remuneration were exercised during the year (2009: Nil).

(ii) Recognition of share-based payments expense

The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 2 ‘Sharebased Payment’. The standard requires the value of the options to be determined at grant date and to be recognised as an expense in the statement of comprehensive income over the vesting period. Consequently a share option expense of $3,800 (2009: $3,800) was capitalised as part of the purchase consideration of the acquisition of exploration licence EL 5046 Mikes Bluff.

46 Goldsearch limited

19. Remuneration of auditors

19. Remuneration of auditors
2010	2009
$	$
Amounts received or due and receivable by the auditors for: - auditing the accounts 49,000 - other services -	45,500 -
49,000	45,500

20. Economic dependency

The Company's principal activities are mineral exploration and investment. Other than interest derived from funds on deposit and dividends and capital growth from its investments, the Company does not derive income from any trading activity and is dependent upon the support of shareholders and the market to finance its on-going exploration program.

21. Contingent liabilities

The Company operations are subject to significant environmental regulation under the Laws of the Commonwealth and States in Australia. Presently, rehabilitation bonds for a value of $40,000 (2009: $40,000) have been lodged over certain leases held by the Company in favour of the Department of Industry and Resources over certain tenements in various States. It is anticipated that these bonds will not be called on as the Company maintains a strict policy of appropriate rehabilitation over its exploration sites. The Company’s activities involve low level disturbance associated with its exploration drilling programs, as it is not presently involved in any mining activities.

Other than the rehabilitation bond lodged with the Commonwealth Bank no other financial assets of the Company have been pledged as collateral or security for any of the Company’s liabilities.

Otherwise the directors are not aware of any potential liabilities or claims against the Company as at the date to which these financial statements are made up.

22. Related party transactions

The names of persons who were directors of the Company at any time during the year and to the date of these financial statements are:

J. Landerer, CBE AM

J.M.E. Percival

A.G. Harris R.B. Leece, AM RFD

T.V. Willsteed

Transactions between related parties are on normal commercial terms and conditions unless otherwise stated. Complete details of the remuneration of directors and key management personnel is set out in the Remuneration Report which forms part of the accompanying Directors’ Report.

The totals of remuneration paid to key management personnel of the Company during the year are as follows:

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Short–term employee benefits 391,403 520,160
Post-employment benefits 23,161 28,117
414,564 548,277
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Details of shares and options held by key management personnel are included in the Remuneration Report set out in the accompanying directors’ report.

Annual Report 2010 47

(continued) Notes to the financial statements for the financial year ended 30 June 2010

22. Related party transactions (continued)

(a) Key management personnel related entity transactions

Mr J. Landerer, CBE AM is the senior partner of Landerer & Company. Landerer & Company act as solicitors to the Company. Charges for services provided during the year amounted to $5,958(2009: $2,877).

The Company employs Ms J Gregan, spouse of Mr J.M.E. Percival. Ms Gregan’s employment agreement is in accordance with normal market terms and conditions.

Key management personnel and their related entities hold directly, indirectly or beneficially as at the reporting date the following interests in the Company:

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Ordinary shares Quoted share options Unquoted share options
Directors Direct Indirect Direct Indirect Direct Indirect
J. Landerer, CBE AM 5,725,872 4,243,129 - - - -
A.G. Harris 220,000 - - - - -
R.B. Leece, AM RFD - 11,996,465 - - - -
J.M.E. Percival 4,000 5,481,709 - - - -
T.V. Willsteed - 3,308,000 - - - -
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Movements in these holding during the year were as follows:

(i) No share or options were granted/acquired or issued during the period

(ii) The following shares were sold or options were exercised or lapsed during the period

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Ordinary shares Quoted share options Unquoted share options
Direct Indirect Direct Indirect Direct Indirect
J. Landerer, CBE AM - - 1,431,468 1,060,782 - 3,000,000
A.G. Harris - - 55,000 - 2,000,000 -
R.B. Leece, AM RFD - - - 2,999,115 - 2,000,000
J.M.E. Percival - - 1,000 1,370,427 - 3,000,000
T.V. Willsteed - - - 827,000 - 2,000,000
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23. Statement of cash flows

(a) Reconciliation of cash:

For the purposes of the statement of cash flows, cash includes:

(i) cash on hand and at bank, cash on deposit, net of outstanding bank overdrafts; and

(ii) investments in money market instruments with 30 days or less to maturity.

Cash as at the end of the year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

Cash at 30 June is shown in the statement of financial position as:

position as follows: Cash at 30 June is shown in the statement of fnancial position as:
2010	2009
$	$
Cash on hand 600 Cash at bank 210,144 Deposits at call 44,685	600 40,372 379,411
255,429	420,383

48 Goldsearch limited

(b) Reconciliation statement:

A reconciliation of “net cash used in operating activities” to “Profit/(loss) after income tax” is as follows:

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2010 2009
$ $
Profit/(loss) after income tax 1,401,965 (1,063,694)
Add/(less)
Depreciation 3,482 5,932
Write-off of capitalised exploration expenditure 29,978 362,887
Impairment to fair value - 145,000
-
Net gain on disposal of investments (2,059,209)
Changes in assets and liabilities :
(Increase)/decrease in receivables 40,001 56,003
(Increase)/decrease in prepayments [#] 13,349 (19,353)
Increase/(decrease) in provisions [#] 1,473 (2,370)
Increase/(decrease) in trade creditors [#] 5,966 (25,202)
Net cash used in by operating activities (562,995) (540,797)
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net of exploration expenditure.

The Company does not have any formal loan facilities in place at the date of these financial statements.

(c) Non-cash financing and investing activities

(i) During the year ended 30 June 2009 the Company issued 500,000 fully paid ordinary shares and 400,000 options to acquire fully paid ordinary shares at an exercise price of 7.5 cent per option on or before 30 June 2009 as part of the deferred purchase consideration for the acquisition of exploration licence EL 5046 Mikes Bluff .

24. Earnings per share

The following reflects the income and share data used in the calculations of basic and diluted earnings per share (EPS):

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Basic earnings/(loss) cents per share 0.38 (0.29)
Diluted earnings/(loss) cents per share 0.34 (0.29)
Weighted average number of ordinary shares outstanding
367,762,647 367,328,910
during the year used to calculated basic EPS
Weighted average number of ordinary shares outstanding
409,767,182 367,328,910
during the year used to calculated diluted EPS
Profit/(loss) from continuing operations used to calculated basic EPS and diluted EPS 1,401,965 (1,063,694)
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Options:

As at 30 June 2010 the Company had on issue Nil (2009: 90,463,809) quoted options and Nil (2009: 16,000,000) unquoted options over Nil (2009: 20,000,000) unissued shares. Refer to Note 16 for further details.

25. Segment information

AASB 8 requires operating segments to be identified on the basis of components of the consolidated entity that are regularly reviewed by the chief operating decision makers in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (AASB 114 Segment Reporting) required an entity to identify two set of segments (business and geographical), using a risk and rewards approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, following the adoption of AASB 8, the identification of the consolidated entity’s reporting segments has changed.

Annual Report 2010 49

(continued) Notes to the financial statements for the financial year ended 30 June 2010

25. Segment information (continued)

Description of segments

Management has determined the operating segments based on reports presented to the board for making strategic decisions.

Mineral exploration Sweden

The Company is currently earning a 70% interest in three exploration licences which cover two separate targets which cover an area of approximately 200 square kilometres. Refer to Note 11(e).

Minerals exploration Australia – Victoria

The Company currently holds a 100% interest in the Mount Wellington project, which consists of four exploration licences.

Minerals exploration Australia – Other

All other minerals exploration projects and joint venture projects have been grouped within this segment. The Company currently holds a non-manager role within these joint ventures. . Projects include the Mary Kathleen joint venture (Queensland) and the Musgrave joint venture. (South Australia). Refer to Note 11(a), (b) and (c).

Investments

During the year the Company held equity investments in Morning Star Gold NL (MCO), Independence Group NL (IGO) and Rex Minerals Limited (RXM). Refer to Note 9.

Administration

This segment covers all other unallocated expenditure and income for operating the Company.

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Mineral
exploration Mineral exploration
Sweden Australia Investments Administration Total
Victoria Other
2010
Revenue - - 10,000 2,069,209 4,658 2,083,867
Results - - (19,978) 2,069,209 (647,266) 1,401,965
Assets 234,134 2,370,248 2,504,154 2,696,185 351,889 8,156,610
Liabilities 5,903 3,194 9,807 - 105,031 123,935
Acquisition of non–current assets 64,919 708,774 397,202 2,097,215 630 3,268,740
Depreciation - 20,579 - - 3,482 24,061
Other non-cash expenses - - 42,295 - 1,473 43,768
2009
Revenue - 41,818 - 24,500 82,208 148,526
Results (61,853) 38,199 (297,415) (120,500) (622,125) (1,063,694)
Assets 169,215 1,682,053 2,136,929 2,081,385 573,026 6,642,608
Liabilities 438 12,171 19,164 - 78,072 109,845
Acquisition of non–current assets 202,455 830,669 543,150 - 2,147 1,578,421
Depreciation - 12,673 - - 5,932 18,605
Other non-cash expenses 61,853 3,619 297,415 145,000 - 507,887
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Accounting policies

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and borrowings.

50 Goldsearch limited

26. Franking credits

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2010 2009
$ $
Adjusted franking account balance (tax paid basis) 83,572 79,286
27. Controlled entities
Country of incorporation Percentage owned 2010 Percentage owned 2009
Parent entity:
Goldsearch Limited Australia - -
Controlled entities:
Caytale Pty Limited (i) Australia 100% 100%
Chiljill Pty Limited (i) Australia 100% 100%
Miltonpak Pty Limited (i) Australia 100% 100%
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(i) The above subsidiary companies have no activities other than as holders of exploration rights on certain tenements.

Separate consolidated accounts of the consolidated entity formed by the Company and these wholly owned subsidiaries have not been prepared on the grounds of immateriality.

28. Financial risk management

Financial risk management policies

The Company’s financial instruments consist mainly of current accounts with banks, accounts receivable and payable and investments in listed and unlisted companies.

i. Treasury risk management

Management considers on a regular basis the financial risk exposures and evaluates treasury management strategies in the context of the most recent economic conditions and forecasts.

The overall risk management strategy seeks to meet the Company’s financial targets, whilst minimising potential adverse effects on financial performance.

Management operates under policies approved by the board of directors which approves and reviews risk management policies on a regular basis. These include future cash flow requirements.

ii. Financial risk exposures and management

The main risks the Company is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk, credit risk and price risk.

(a) Market risk

The Company is subject to the normal economic factors including volatility of stock market prices and interest rates, both of which impact upon the availability of equity and debt capital respectively and the ability to realise listed investments if and when required.

(b) Foreign currency risk exposure

At reporting date, the Company was not exposed to any currency exchange risk through primary financial assets or liabilities. However under the heads of agreement for the Tumi joint venture in Sweden as detailed in Note 11 the Company will be exposed to foreign exchange movements between the Euro and Australian dollar should the directors decide to continue to earn a 70% interest in the project by committing to a minimum expenditure of 1 million Euro. The Company will adopt appropriate monitoring tools and evaluate this risk if and when it elects to undertake to contribute to this joint venture.

Annual Report 2010 51

(continued) Notes to the financial statements for the financial year ended 30 June 2010

28. Financial risk management (continued)

(c) Interest rate risk exposure

The Company is exposed to interest rate risk through primary financial assets and financial liabilities. The Company continually monitors interest rates and financial markets for the Company’s cash on deposit and regularly reviews future cash flow requirements. The following table summarises the interest rate risk for the Company, together with the effective weighted average interest rate for each class of financial assets and liabilities.

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Fixed interest maturing in
Floating over 1 to 5 Non- interest
interest rate 1 year or less years bearing Total
Note $ $ $ $ $
2010
Financial assets
Cash 23 210,744 44,685 - - 255,429
Receivables 6 - - - 42,565 42,565
Investments-non-listed securities 9 - - - 59,685 59,685
Investment-listed securities 9 - - - 2,636,500 2,636,500
Total financial assets 210,744 44,685 - 2,738,750 2,994,179
Weighted average interest rate 0.91% 3.96% - - -
Financial liabilities
Trade and sundry creditors 14 - - - 59,252 59,252
Total financial liabilities - - - 59,252 59,252
- - - - -
Weighted average interest rate
Net financial assets 210,744 44,685 - 2,679,498 2,934,927
2009
Financial assets
Cash 23 40,972 379,411 - - 420,383
Receivables 6 - - - 82,566 82,566
Investments-non-listed securities 9 - - - 128,385 128,385
Investment-listed securities 9 - - - 1,953,000 1,953,000
Total financial assets 40,972 379,411 - 2,163,951 2,584,334
Weighted average interest rate 3.69% 6.56% - - -
Financial liabilities
Trade and sundry creditors 14 - - - 58,953 58,953
Total financial liabilities - - - 58,953 58,953
- - - - -
Weighted average interest rate
Net financial assets 40,972 379,411 - 2,104,998 2,525,381
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52 Goldsearch limited

(d) Credit risk exposure

The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets is the carrying amount, net of any provision for impaired receivables, as disclosed in the statement of financial position and notes to the financial statements.

The Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Company.

Receivables due from major debtors are not normally secured by collateral, however the credit worthiness of debtors is monitored.

(e) Liquidity risk

The Company manages liquidity risk by monitoring forecast cash flows to ensure that adequate funding is maintained. The Company’s financial liabilities consist of trade and other payables in the normal course of business and as such are normally due for payment within 30 days of receipt of a valid tax invoice. The Company does not have any liquidity risk associated with any borrowing.

(f) Price risk

The Company is not presently exposed to commodity price risk other than the commercial feasibility of various exploration and evaluation activities is sensitive to the expected pricing of the relevant resource, and the continuing volatility of stock markets which affect the unrealised fair value of the listed investments which are held as ‘available-for-sale financial assets’. The Company currently holds these as long term investment.

The Company continually monitors the financial markets in relation to its holding of listed investments. The Company will only dispose of its investment when it believes that it is in the best interests for shareholders of the Company or when the liquidity of the Company requires it to realise the fair value of one or more of the Company’s listed investments.

iii. Net fair values of financial assets and liabilities

• (i) The net fair values of cash and cash equivalents and non-interest bearing monetary financial assets and liabilities approximate their carrying values as disclosed in the statement of financial position and the notes to the financial statements.

• (ii) Listed investments have been valued at the quoted market bid price at the date of the statement of financial position (level 1). For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment (level 2). (refer to Note 9).

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Level 1 $ Level 2 $ Total $
2010 Financial assets:
Available-for-sale financial assets:
Listed investment 96,446 - 96,446
Unlisted investments - - -
Total 96,446 - 96,446
2009 Financial assets:
Available-for-sale financial assets:
Listed investment 90,500 - 90,500
Unlisted investments - - -
Total 90,500 - 90,500
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iv. Sensitivity analysis

The Company has performed a sensitivity analysis relating to its exposure to price risk at reporting date, as detailed in the following table. The directors are of the opinion that a sensitivity analysis on all other above-mentioned risks will not show any material impacts on the Company’s financial instruments. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in this risk.

Annual Report 2010 53

(continued) Notes to the financial statements for the financial year ended 30 June 2010

28. Financial risk management (continued)

iv. Sensitivity analysis (continued)

Share market price sensitivity analysis

At 30 June 2010, the effect on profit and equity as a result of changes in the market price of listed investments, with all other variables remaining constant would be as follows:

remaining constant would be as follows:
2010	2009
$	$
Change in proft – Increase in share price by 5% - – Decrease in share price by 5% - Change in equity – Increase in share price by 5% 131,825 – Decrease in share price by 5% (131,825)	- - 104,025 (208,050)

29. Rehabilitation costs

No known commitments for rehabilitation costs exist as at the date of preparation of these financial statements. (Refer to Note 21).

30. Events subsequent to reporting date

Since reporting date and to the date of this report the Company has sold 50,000 Independence Group NL ordinary shares, to fund ongoing exploration and evaluation expenses and general working capital.

No other matters or circumstances have arisen since 30 June 2010 that have significantly affected or may significantly affect:

• The Company’s operations in future years;

• The results of those operations in future years; or

• The Company’s state of affairs in future years.

31. Company details

The registered office of the Company is:

C/- Boroughs

• Level 6, 77 Castlereagh street

Sydney NSW 2000

The principal place of business is:

Level 4 20 Loftus Street

Sydney NSW 2000

54 Goldsearch limited

Directors’ declaration

The directors of Goldsearch Limited declare that:

1. The financial statements and associated notes for the financial year ended 30 June 2010:

2. (a) are in accordance with the Corporations Act 2001;

3. (b) comply with Accounting Standards and the Corporations Regulations 2001; and

4. (c) the financial report also complies with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) as disclosed in note 1; and

5. (d) give a true and fair view of the financial position of the Company as at 30 June 2010 and the performance of the Company for the financial year then ended.

6. The chief executive officer/chief financial officer has declared that:

7. (a) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;

8. (b) the financial statements and notes for the financial year comply with Accounting Standards; and

9. (c) the financial statements and notes for the financial year give a true and fair view.

10. In the opinion of the directors there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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

On behalf of the directors

J. Landerer, CBE AM

Chairman of directors

Sydney,

14 September 2010

Annual Report 2010 55

Independent audit report

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Grant Thornton
ACN 13 871 256 387
Level 2
215 Spring Street
Melbourne
Victoria 3000
GPO Box 4984WW
Melbourne
Victoria 3001
T +61 3 8663 6000
F +61 3 8663 6333
E info.vic@au.gt.com
W www.grantthornton.com.au
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Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together
with its subsidiaries and related entities, delivers its services independently in Australia.
Liability limited by a scheme approved under Professional Standards Legislation
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56 Goldsearch limited

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      

 

    

•  

•  

•   

•  



     

Annual Report 2010 57

(continued) Independent audit report



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58 Goldsearch limited

Corporate governance statement

The following statement outlines the principal corporate governance practices and procedures that were in place throughout the financial year and the extent to which they depart from the revised Corporate Governance Principles and Recommendations issued by the ASX Corporate Governance Council in December 2007.

Roles of the board and management

The board is responsible for establishing the strategy and policies of the Company, overseeing its financial position, approving major capital expenditures and exploration programs and expenditures. The board is also responsible for the appointment and supervision of the chief executive and secretary of the Company, and monitoring the corporate conduct of its officers.

The board has delegated responsibility for the day-to-day operations of the Company to the director-operations, Mr J.M.E. Percival and the exploration manager, Mr H. Hellewell. The board has determined that both Mr Percival and Mr Hellewell are appropriately experienced to discharge these responsibilities.

Whilst there is a clear distinction between the respective roles of the board and management, the board is responsible for ensuring that the objectives and activities of management are consistent with the strategies and policies set by the board.

The board meets approximately every six weeks and directors receive comprehensive board papers which include an activity report from management and monthly management accounts. All contractual commitments and payments are approved by the board.

At meetings of the board, the directors deal with various policy and corporate governance matters, including:-

• formulating and reviewing Company strategies and board policies;

• monitoring implementation of Company strategies by management, and ensuring appropriate resources are available to undertake those strategies;

• ensuring appropriate management control and accountability systems are in place;

• reviewing executive performance and remuneration;

• reviewing the composition of the board;

• ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act;

• reviewing published reports and stock exchange announcements to ensure their accuracy and compliance with statutory requirements;

• identification of areas of significant business risk and the management of those risks; and

• the establishment and maintenance of appropriate ethical standards for the Company, its directors and executives.

Structure of the board of directors

The directors of the Company in office at the date of this statement are:

Mr J. Landerer, CBE AM (non-executive chairman) Mr J.M.E. Percival (executive director-operations)

Mr A.G. Harris (non-executive director)

Mr R.B. Leece, AM RFD (non-executive director)

Mr T.V. Willsteed (non-executive director)

The skills and experience of each director is set out in the accompanying directors’ report.

As noted above, four of the five directors are non-executive, including the chairman, and the roles of chairman and chief executive are not exercised by the same individual.

The board has considered the independence of each of the directors and has determined that all four non-executive directors, including the chairman, are independent. In doing so they considered the level of fees paid to the Company’s solicitors Landerer & Company, of which the chairman is a principal, and formed the view that the level of fees paid are not material for the purposes of influencing the independence of the chairman.

The composition of the board is determined by all directors using the following principles which accord with the ASX Corporate Governance Principles and Recommendations:

• A majority of the board should be independent directors;

• The chairman should be an independent director; and

• The roles of chairman and chief executive should not be exercised by the same individual;

• The board should comprise a majority of non-executive independent directors.

Because of the relatively small size of the Company and its operations, the board does not consider it appropriate, at this time, to form a separate committee to deal with nomination of directors.

Annual Report 2010 59

(continued) Corporate governance statement

When a vacancy exists on the board or where it is considered that a director with particular skills or experience is required, the board selects a panel of candidates with the appropriate expertise and experience from which the most suitable candidate is appointed on merit.

Individual directors are able to seek independent professional advice, at the Company’s expense, on matters relevant to their role as a director. This is subject to the prior approval of the chairman, which may not be unreasonably withheld, and the other directors being given a copy of such advice.

Non-executive directors are appointed for an indefinite term subject to the constitution of the Company which provides for regular retirement by rotation and provides that no director (except a managing director) shall hold office for more than three years, or until the third annual general meeting following the director’s appointment without submitting himself for re-election. The dates on which each director was appointed and last re-elected are as follows:

each director was appointed and	last re-elected are as follows:
Director	Appointed	Last re-elected
Mr J. Landerer, CBE AM	11 October 1995	30 November 2009
Mr J.M.E. Percival	11 October 1995	30 November 2006 #
Mr A.G. Harris	11 October 1995	20 November 2008 #
Mr R.B. Leece, AM RFD	7 August 2002	20 November 2008 #
Mr T.V. Willsteed	20 July 2004	30 November 2009

Messrs Harris and Leece are standing for re-election at the 2010 annual general meeting. The ‘retirement by rotation’ provisions do not apply to Mr Percival whilst he is a managing director.

In the event that a potential conflict of interest may arise, involved directors withdraw from deliberations concerning the matter.

Code of conduct

Board members, executive management and Company officers are made aware of the requirements to follow corporate policies and procedures, to obey the law and to maintain appropriate standards of honesty and integrity at all times. In this regard the directors have adopted a code of conduct for directors, senior executives and employees. The code of conduct covers ethical operations, compliance with laws, dealings with customers and public officials, conflicts of interest, confidential and proprietary information and insider trading. A copy of the code is available on the Company web site under the corporate governance section.

Share trading policy

The Company’s code of conduct provides that no director, senior executive or employee shall purchase or sell Company securities, or securities of a company in a "special relationship" with the Company, while in possession of material information concerning the Company or such a company that has not previously been generally disclosed to the investing public for at least two business days. Nor shall an employee inform any individual or entity of any such material information, except in the necessary course of business.

Employees are encouraged to invest in the Company’s securities, but must avoid trading when in possession of confidential material information which, if generally available, would reasonably be expected to either have an effect on the market price or value of those securities or affect an investor's decision as to whether to buy, sell or hold securities in the Company.

Directors are required to give prior notice to the chairman of any dealings in Company securities by themselves or their associates and to provide particulars of any transactions immediately following execution. The secretary is to make the requisite notifications to ASX within 2 days of each such transaction.

Financial reporting and audit committee

Mr J.M.E. Percival, director-operations, is required to confirm to the board that, for each financial reporting period, the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.

The board has established a separate, formally constituted, audit committee which reviews the published accounts of the Company as well as the external auditing arrangements and the adequacy, quality and effectiveness thereof. The committee consists of all four non-executive directors together with external consultant and chartered accountant Mr J.D. Leece, OAM. Executive director Mr J M E Percival attends committee meetings by invitation. Mr T V Willsteed is chairman of the committee. The committee meets at least twice a year. Particulars of committee meetings held during the year ended 30 June 2010 and the attendance of each committee member is set out in the accompanying directors’ report.

The committee has a formal charter, a copy of which is available on the Company web site under the corporate governance section.

Continuous disclosure

All directors and senior executives have been made aware of the continuous disclosure requirements of the ASX Listing Rules and have been provided with a copy of the relevant rules and guidance notes. Continuous disclosure is included on the agenda for all formal

60 Goldsearch limited

meetings of the directors. Directors and senior executives are made aware of the constraints applicable to private briefings and broker and analyst presentations.

The directors have allocated responsibility to the ‘director-operations’ and the ‘company secretary’ to alert the board to any operational or regulatory matters respectively which they consider may require disclosure to the market under the continuous disclosure requirements of the ASX Listing Rules. The directors then consider and approve the form of any such announcement.

All Company announcements require the approval of the board with provision for available directors, including the chairman, to approve urgent announcements. The company secretary is responsible for communication with ASX. The chairman is responsible for all media contact and comment.

The annual report contains a review of operations.

Shareholder communication

The Company communicates with its shareholders through ASX announcements, quarterly reports, the half-year report, the annual report and the annual general meeting. Copies of all such ASX announcements and reports are posted on the Company web site. Shareholders are encouraged to provide an email address to receive electronic copies of all announcements and reports.

The independent auditor attends the annual general meeting to respond to questions from shareholders on the conduct of the audit and the preparation and content of the audit report.

Risk management

The board has accepted the role of identification, assessment, monitoring and managing the significant areas of risk applicable to the Company and its operations. It has not established a separate committee to deal with these matters as the directors consider the size of the Company and its operations does not warrant a separate committee at this time. The board considers the matter of risk management on a six monthly basis at its regular meetings. The directors have identified the significant areas of risk applicable to the Company and its operations and non-executive director Mr A.G. Harris has been allocated responsibility for preparation of a six monthly report to the board on the matter.

Performance evaluation of directors and executives

A performance evaluation of the board took place in the previous year but no review took place during the year ended 30 June 2010.

The board and the ‘director-operations’ undertake a review of the performance of senior executives and employees on an annual basis.

Remuneration of directors and executives

Because of the relatively small size of the Company and its operations, the board does not consider it appropriate, at this time, to form a separate committee to deal with executive remuneration. The board as a whole establishes and reviews annually the remuneration of the executive directors, senior executives and employees.

In accordance with the constitution of the Company, shareholders determine the maximum aggregate annual remuneration of the directors, (the current maximum aggregate annual remuneration which was approved by shareholders at the 2007 annual general meeting is $250,000). The directors determine the allocation of all or part of the approved maximum aggregate remuneration between the non-executive directors. The current determination is to pay annual directors fees of $36,000 to non-executive directors and $40,000 to the chairman. With the current board structure, this is an aggregate of $148,000 per annum compared with the shareholder approved maximum of $250,000.

The cash remuneration of the directors is from time to time supplemented by incentive options issued under the Company’s Employee and Directors Share Option Plan. Specific shareholder approval is required before options are issued to directors under this Plan.

A summary of the Company’s remuneration policies and practices, together with particulars of remuneration of the directors and key management personnel during the year ended 30 June 2010, is set out in the remuneration report section of the directors report and in the notes to the financial statements. Particulars of options issued to directors under the Employee and Directors Share Option Plan are set out in the remuneration report and in the notes to the financial statements. There were no such options on issue at 30 June 2010 with the previously issued options having expired on 31 January 2010.

There are no schemes or provisions for retirement benefits for non-executive directors other than statutory benefits and accumulated superannuation.

Recognition of legitimate interests of stakeholders

As detailed above, the Company has adopted a code of conduct which ‘inter alia’ deals with compliance with legal and other obligations to legitimate stakeholders. The full code of conduct is available on the Company web site under the corporate governance section.

Annual Report 2010 61

ASX information

Statement of quoted securities as at 1 October 2010

• there are 2,621 shareholders holding a total of 367,764,517 ordinary fully paid shares.

• the 20 largest shareholders between them hold 47.94% of the total shares on issue.

• voting rights are that on a show of hands each member present in person or by proxy or attorney or representative shall have one vote and upon a poll every member so present shall have one vote for every fully paid share held and for each partly paid share held shall have a fraction of a vote pro-rata to the amount paid up on each partly paid share relative to its issue price.

• there are no quoted options currently on issue. The previous quoted options expired on 31 October 2009.

Distribution of quoted shares as at 1 October 2010

	Shares
Range	Number of holders
1 1,001 5,001 10,001 100,001	- 1,000 60 - 5,000 441 - 10,000 480 - 100,000 1,267 - and over 377
Total holders 2,625

There were 1,232 shareholders whose total holding had a market value of less than $500 at 1 October 2010.

Substantial shareholdings as at 1 October 2010

The following shareholders have notified the Company that pursuant to the provisions of section 671B of the Corporations Act 2001 they are substantial shareholders.

Substantial shareholder	Total relevant interest notifed	% of total voting rights
D R Watson Jayare Nominees Pty Limited	21,067,990 ordinary shares 20,697,635 ordinary shares	5.729 5.628

Directors' shareholdings

As at 1 October 2010 directors of the Company held a relevant interest in the following securities on issue by the Company.

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Director Ordinary shares
J. Landerer, CBE AM 9,969,001
A.G. Harris 220,000
R.B. Leece, AM RFD 11,996,465
J.M.E. Percival 7,485,709
T.V. Willsteed 3,308,000
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62 Goldsearch limited

On-market buy-backs

There is no on-market buy back currently in place.

Restricted securities

There are no restricted securities on issue by the Company.

Top 20 holders of ordinary shares at 1 October 2010

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Shareholder name Number of shares held % of total
Forbar Custodians Limited 38,151,144 10.374
J P Morgan Nominees Australia Ltd 26,049,104 7.083
Jayare Nominees Pty Limited 20,697,635 5.628
J P Morgan Nominees Australia Ltd (CI a/c) 15,641,000 4.253
Belmark Investments Pty Limited 12,000,000 3.263
Drexwill Pty Limited 10,249,115 2.787
Karari Australia Pty Limited 8,000,000 2.175
Mr John Landerer 5,725,872 1.557
Mr John Percival and Ms Josephine Gregan 4,976,709 1.353
Mr Daniel Ronald Watson 4,795,000 1.304
CH Administration Pty Limited & Mr D R Watson 4,272,990 1.162
EG Enterprises Pty Limited 3,924,000 1.067
Gerendasi Holdings Pty Limited 3,746,254 1.019
Patermat Pty Limited 3,308,000 0.899
HSBC Custody Nominees (Australia) Limited 2,877,431 0.782
Hipete Pty Limited 2,631,908 0.716
Clear Star Holdings Pty Limited 2,611,173 0.710
Ms Barbara Kinney 2,500,000 0.680
Tesla Nominees Pty Limited 2,150,000 0.584
Mr Rodney John Clive Jensen 2,000,000 0.544
Total held by top 20 shareholders 176,307,335 47.940
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Annual Report 2010 63

Corporate directory

The Company's shares are quoted on the official list of the Australian Securities Exchange Limited. Home exchange is Melbourne. ASX code is ‘GSE’.

Directors

John Landerer, CBE AM (non-executive chairman)

John Morgan Edwin Percival (executive director - operations) Albert George Harris (non-executive director) Robert Burgess Leece, AM RFD (non-executive director) Terence Vincent Willsteed (non-executive director)

Secretary

Paul Stewart Hewson

Exploration manager

Heath Hellewell

Registered office

Share register managed by

Registries Limited

Level 7, 207 Kent Street, Sydney NSW 2000

Telephone: 1300 737 760 (within Australia) +61 2 9290 9600 (outside Australia) Facsimile: +61 2 9279 0664 Email: registries@registries.com.au Web address: www.registries.com.au

Auditors

Grant Thornton, Chartered Accountants Level 2, 215 Spring Street, Melbourne, Vic. 3000

Solicitors

Landerer & Company, Solicitors and Attorneys Level 31, 133 Castlereagh Street, Sydney, NSW 2000

Bankers

Commonwealth Bank of Australia Limited

c/- Boroughs Level 6, 77 Castlereagh Street, Sydney, NSW 2000 Telephone: +61 2 9930 7700 Facsimile: +61 2 9930 7777

Principal office

Level 4, 20 Loftus Street, Sydney, NSW 2000 Telephone: +61 2 9241 5999, Facsimile: +61 2 9241 5599 Email: gold@goldsearch.com.au Web address: www.goldsearch.com.au

64 Goldsearch limited

Review of operations - maps

North West corner South Australia

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Figure 1. Tenement map of Musgrave Minerals Limited.

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Figure 3. Mount Wellington project simplified geology and location of main prospects

Figure 2. Mary Kathleen JV: EPM 14019 - Section A-A' looking north-northeast highlighting the broad copper mineralisation intersected in MDR001 and MDR002.

Limited

ABN 73 006 645 754 Level 4, 20 Loftus Street Sydney NSW 2000, Australia P +61 2 9241 5999 F +61 2 9241 5599 gold@goldsearch.com.au www.goldsearch.com.au