Annual Financial Report

Wolf Minerals Limited

(ABN: 11 121 831 472)

and Controlled Entities

Annual Report

CONTENTS

CORPORATE DIRECTORY

CHAIRMAN'S LETTER

DIRECTORS' REPORT

AUDITOR'S INDEPENDENCE DECLARATION

DIRECTORS' DECLARATION

INDEPENDENT AUDITOR'S REPORT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASHFLOWS

NOTES TO THE FINANCIAL STATEMENTS

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

CORPORATE GOVERNANCE

Corporate Directory

NON EXECUTIVE CHAIRMAN

John Hopkins

EXECUTIVE MANAGING DIRECTOR

Humphrey Hale

NON EXECUTIVE DIRECTORS

Jonathan Downes

Adrian Byass

Jim Williams

Don Newport

Chris Corbett

CHIEF FINANCIAL OFFICER

COMPANY SECRETARY

Richard Lucas

PRINCIPAL & REGISTERED OFFICE

Level 3, 22 Railway Road

SUBIACO WA 6008

AUDITORS

PKF Mack & Co

Level 2, 35 Havelock Street

WEST PERTH WA 6005

LAWYERS

Steinpreis Paganin

Level 4, 16 Milligan Street

PERTH WA 6000

SHARE REGISTRAR

Security Transfer Registrars Pty Ltd

770 Canning Hwy

APPLECROSS WA 6153

UK DEPOSITORY

Computershare Investor Services PLC

The Pavilions, Bridgwater Road

Bristol BS99 6ZZ

STOCK EXCHANGE LISTINGS

Australian Securities Exchange

(Home Exchange: Perth, Western Australia)

Code: WLF

Alternative Investment Market

London Stock Exchange

Code: WLFE

BANKERS

National Australia Bank

50 St Georges Terrace

PERTH WA 6000

WEBSITE

www.wolfminerals.com.au

Chairman's Letter

Dear Shareholder

I would like to thank you for your continuing support of our Company. The company has progressed the Hemerdon project on a number of fronts since publishing the Definitive Feasibility Study (DFS) in May last year. This is demonstrated by the completion of the link road on site which represents breaking the ground on the project.

In November last year, Wolf listed on the AIM market of the London Stock Exchange and has had strong market support ever since. We welcome over 150 new shareholders into the company from the UK who have accumulated over 10% of the shares in the Company.

Wolf has a first mover advantage in the tungsten space and continues to maintain an aggressive timetable to production at Hemerdon. The Company is working hard to achieve an enviable debt to equity ratio with the banks to fund the project and minimise dilution to shareholders.

The Hemerdon project has very robust economics, with one of the lowest forecast operating costs in the western world and remains the closest new tungsten project to production. This places Wolf in a strong position to compete with Chinese producers. The world tungsten market has softened this year along with most other commodities; however the tungsten price is still at a level that is significantly higher than our base case DFS number which confirms the strength of the project.

The Company's long term strategic goal is to remaining open to further opportunities in the strategic metals market.

We are very excited about the year ahead as we move to complete the financing of the project and build the mine.

Yours sincerely

John Hopkins

Non Executive Chairman

Directors' Report

Your Directors present their report on the Company and its controlled entities for the financial year ended 30 June 2012.

Directors

The names of Directors in office at any time during or since the end of the year are:

John Hopkins Non Executive Chairman

Humphrey Hale Executive Managing Director

Jonathan Downes Non Executive Director

Adrian Byass Non Executive Director

Jim Williams Non Executive Director

Don Newport Non Executive Director

Chris Corbett Non Executive Director

The Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Principal activities

The principal activities of the consolidated group during the financial year were mineral exploration and development.

There were no significant changes in the nature of the consolidated group's principal activities during the financial year.

Operating results

The consolidated loss of the consolidated group after providing for income tax and eliminating minority equity interests amounted to $5,425,552 (2011: $1,053,793).

Dividends paid or recommended

The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report.

Review of Operations

Executive Summary

During the year the Company has been focused on advancing the development of the Hemerdon Project and maintaining its first mover advantage compared to other tungsten projects, having successfully completed the Definitive Feasibility Study in May 2011.

The Company obtained a credit approved offer of £55 million of senior debt. Wolf followed this up with the signing of a Heads of Terms agreement with offtakers that provided the commercial terms of a five year offtake and an additional £20 million of project funding. Following the year end the Company announced that it had mandated its syndicate of banks to seek revised credit approval to provide senior debt finance facilities totalling GBP75 million (AU$114 million) to fund the commercial development of the Hemerdon project removing the need for the £20 million of funding from offtakers.

Corporate activities included the dual listing of the company on the AIM market of the London Stock Exchange. This has been very positive for the company as Wolf has been introduced to a new market and has broadened its shareholder base with approximately 10% of the issued share capital of the Company now held in the UK.

In parallel with the financing of the project the Company tendered the construction of the plant and infrastructure on site as an EPC contract to internationally renowned bidders. Management is in the process of adjudicating tenders. In addition, Wolf passed another milestone when the Company completed construction of the link road on 27 July 2012.

DIRECTORS' REPORT (CONTINUED)

Review of Operations (continued)

A summary of the key activities during the year include:

·; Development capital facility for A$6 million secured

·; Engagement of UK Operations Manager

·; British Geological Survey lists tungsten as 4th most critical mineral

·; Credit approval for £55 million project finance

·; Successful listing and trading on AIM

·; Construction completed on the Hemerdon link road

·; UK Government support from UK Minister of State for Trade and Investment

·; Wolf signs offtake Heads of Terms and £20 million project funding

·; Wolf completes A$5 million placement to senior shareholders

·; Wolf bids Plant & Infrastructure EPC Contract

Development capital facility

In August 2011 the Company accepted an offer from Resource Capital Fund V L.P. ("RCF") to provide a secured development capital facility of $6 Million with a term of 12 months from first draw-down, which occurred in January 2012.

This facility provides Wolf with flexibility through progressive draw down of funds and minimises dilution to existing shareholders. It is anticipated the facility will be repaid from the balance of project funding.

Shareholder approval was granted to accept this facility at an EGM held on 5 October 2011.

Engagement of UK Operations Manager

Wolf engaged Jeffrey Harrison as UK Operations Manager for Wolf Minerals. Jeff is a Mining Engineer with over 20 years of experience in senior management roles with a strong understanding of open pit mining and the mining environment in the South West of England.

Jeff has significant experience in large scale open pit operations around the world. Prior to his move back to the UK, Jeff was General Manager at Queensland Magnesia in Australia and prior to this Jeff was Operations Manager for Imerys in the South West of England. Imerys is an international company that operates multiple open cut mines in the South west of England.

Jeff graduated from Nottingham University with a BSc in Mining Geology which he followed up with an MSc in Engineering Rock Mechanics at the Royal School of Mines in London.

Jeff is a member of The Australian Institute of Quarrying and a Fellow of the Australasian Institute of Mining and Metallurgy.

British Geological Survey publishes risk list - tungsten 4th most critical

The risk list gives a quick indication of the relative risk in 2011 to the supply of the chemical elements or element groups which we need to maintain our economy and lifestyle. The position of an element on this list is determined by a number of factors which might impact on supply. These include the abundance of elements in the Earth's crust, the location of current production and reserves, and the political stability of those locations.

The risk list highlights a group of elements where global production is concentrated in a few countries. The restricted supply base combined with the relatively low political stability ratings for some major producing countries significantly increase risk to supply. The list highlights economically important metals which are at risk of supply disruption including rare earths, platinum group metals, niobium and tungsten.

DIRECTORS' REPORT (CONTINUED)

Review of Operations (continued)

Credit approval for £55 million project finance

In December 2011, the Company mandated UniCredit Bank AG (UniCredit Corporate & Investment Banking), ING Bank N.V. and Caterpillar Financial SARL to provide senior debt finance facilities totalling £55 million (AU$81.58 million) to fund the commercial development of the Hemerdon Project.

On 5 March 2012, Wolf announced it had received credit approval for £55 million in senior debt finance facilities to fund the commercial development of its Hemerdon Tungsten and Tin project.

The funding will support the planned construction of the Hemerdon project, based on the completed Definitive Feasibility Study.

UniCredit Bank AG, ING Bank N.V. and Caterpillar Financial SARL are recognised global leaders in mining project finance. They were appointed following the completion of a competitive process facilitated by Optimum Capital Pty Ltd, which incorporated a technical due diligence review undertaken on behalf of the financiers by Micon International and a further independent marketing study by Roskill Consulting Group.

On 3 September 2012 the Company announced that it had ceased negotiations in relation to the original £55 million facility and had mandated its syndicate of banks to seek revised credit approval to provide senior debt finance facilities totalling £75 million (AU$114 million) to fund the commercial development of the Hemerdon project removing the need for the £20 million of subordinated debt from offtakers.

Successful listing and commencement of trading on AIM

Wolf completed its successful listing on the AIM market of the London Stock Exchange on 30 November 2011. The Company's shares commenced trading on AIM on the same day.

Wolf trades on AIM under the ticker WLFE.

The Company's AIM listing was a compliance listing, whereby its entire existing ordinary share capital was listed on AIM. There was no capital raising associated with the listing. Evolution Securities Limited acted as the Company's Nominated Adviser and Broker. Evolution was subsequently acquired by Investec in late 2011.

AIM is the London Stock Exchange's international market for smaller emerging companies. It is the most successful growth market in the world, and since its launch in 1995, more than 3,000 companies from around the world have listed on AIM.

Given the advanced stage nature of Wolf's core Hemerdon Project and its UK location, the Company viewed the AIM listing as a natural fit for Wolf and a logical next-step in its development.

The AIM listing is designed to provide a direct mechanism for UK investors to share in Wolf's growth, and the Company is benefiting from having direct access to the London capital market.

Construction completed on the Hemerdon link road

In December 2011 all relevant planning permissions had been granted for the Hemerdon link road and the Company appointed Bardon Contracting, an Aggregate Industries UK Ltd. business, to construct the 600 metre link road between Lee Moor Road and West Park Hill in Plympton. This is an important milestone for Wolf as it will place the Company in a position to break ground on the Hemerdon project in the near future.

Bardon was selected following a competitive tender process and have already completed work on the detailed design of the two bridges required.

Construction began on the link road in February 2012 and was completed on 27 July 2012.

As specified in the conditions of the main mine permit, the public link road has been constructed to remove a long term constriction in the transport network prior to developing the mine. It is intended that the new road will benefit other local extractive operations and create a long term piece of infrastructure to support safe and efficient transportation in the local area.

DIRECTORS' REPORT (CONTINUED)

Review of Operations (continued)

UK Government support from UK Minister of State for Trade and Investment

Wolf received formal UK Government support for the development of the Hemerdon project. The support came directly from the UK Minister of State for Trade, Lord Green of Hurstpierpoint, and represented a significant acknowledgement of the importance of the Hemerdon project to the local community and to the UK and wider EU.

The Minister wrote to Wolf to offer his support to the Company following the successful completion of planning consents for the development of the Hemerdon project. Lord Green said that he hoped the Company would be able to proceed quickly with the development of the project.

In offering his support to Wolf, Lord Green said: "This is an important project for a number of reasons; to the local community in terms of jobs and wealth creation and to the UK and wider EU in securing supplies of tungsten. I am aware that tungsten ranks highly in both the British Geological Society and EU's critical raw materials lists and that it has unique properties that are impossible to replace in certain specialised industrial applications."

Wolf signs offtake Heads of Terms and £20 million project funding

In April 2012, the Company signed a non-binding Heads of Terms (Heads) for tungsten offtake from the Hemerdon project plus a £20 million loan facility with Wolfram Bergbau und Hutten AG, Austria (WBH) and Global Tungsten & Powders Corp, Pennsylvania, USA (GTP).

The offtake agreements cover 80% of Hemerdon's expected average annual tungsten concentrate output for a minimum of 5 years (extendable under mutual consent) and are part of a joint effort between WBH and GTP to support the development of the Hemerdon project as a major new tungsten mine.

Subject to technical and legal due-diligence and relevant corporate approvals, WBH and GTP had also agreed to provide a £20 million loan facility to Wolf as part of the project funding package. This is in addition to the senior debt facility of £55 million announced on 5 March 2012. However, it is now expected that this debt funding will not be required as the senior debt facility is expected to be increased to £75 million.

Under the Heads, Wolf is expected to supply a 65% tungsten trioxide, wolframite concentrate based on standard commercial terms. The Hemerdon mine is expected to produce an average of 345,000 metric tonne units of tungsten trioxide in concentrates per annum, and 450 tonnes of tin.

Wolf completes A$5 million placement to senior shareholders

In May 2012 the Company raised A$5 million through a placement to two of its major shareholders, Resource Capital Fund V LP (RCF) and Traxys Projects LP (Traxys). The placement was for a total of 18,518,519 ordinary shares at a price of 27 cents (17p) per share. RCF subscribed for 16,666,667 ordinary shares and Traxys subscribed for 1,851,852 ordinary shares.

The placement funds provide additional working capital for the Company as it continues to finalise its financing arrangements for the Hemerdon Project and will help ensure that Wolf maintains its development schedule at the project and covers costs associated with construction of the Hemerdon link road.

The Company issued 4,351,852 shares under its existing 15% authority to allot shares for A$1,175,000 and the remaining shares were subject to shareholder approval, which was obtained at a General Meeting held on 16 July 2012.

Wolf bids Plant & Infrastructure EPC Contract

Following a pre-qualification process, tender documents have been issued to international engineering contractors to competitively bid for the EPC contract to design, construct, and commission the new processing plant and associated infrastructure at the Hemerdon project.

The Company advises that tenders have been received and that the company is continuing to evaluate the bids.

DIRECTORS' REPORT (CONTINUED)

Review of Operations (continued)

Financial position

The net assets of the consolidated group have decreased from A$10,165,556 in 2011 to A$7,426,710 in 2012. This is primarily as a result of the expenditure for the year on the dual listing on AIM and the construction of the link road. These costs were primarily funded through the A$6,000,000 development loan facility from RCF.

As a result of securing the development loan facility the group's working capital, being current assets less current liabilities, has decreased from A$2,816,224 in 2011 to A$(5,351,206) in 2012. The group announced on 20 July 2012 that it had completed the additional A$3,825,000 placement to RCF to improve the working capital position and allow it to continue its current activities. As at the end of August 2012 the Company had cash of A$3.4 million.

The Directors believe the group is in a stable financial position.

Significant changes in state of affairs

There were no significant changes in the state of affairs of the parent entity during the financial year:

Future developments

The Company will continue its mineral exploration activity at and around its exploration projects with the object of identifying commercial resources.

After balance date events

On 20 July 2012 the Company announced the completion of the A$5,000,000 placement to RCF and Traxys following shareholder approval at a meeting on 16 July 2012. An additional 14,166,667 shares were issued to RCF for A$3,825,000. The funds provide additional working capital for the Company as it continues to complete the financing arrangements for the project.

On 20 July 2012 the Company announced the issue of 515,824 shares and 747,968 options to RCF in satisfaction of interest and utilisation fees respectively on the development loan facility for the quarter ended 30 June 2012.

On 31 July 2012 the Company announced the construction of the link road had been completed and the road had been officially opened on 27 July 2012.

On 3 September 2012 the Company announced UniCredit Bank AG (UniCredit Corporate & Investment Banking), ING Bank N.V. and Caterpillar Financial SARL had been mandated to seek revised credit approval for an increase in senior debt finance facilities from £55 million to £75 million to fund the commercial development of the Hemerdon Project and replace the proposed subordinated facilities expected to be provided by Wolf's offtake partners. The increase in senior debt facilities provides a simplified finance structure for the project and will enable the Company to finalise the offtake agreements without the need for subordinated debt facilities. The revised credit approval is expected to be completed by mid-October 2012.

No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

Environmental issues

The Company is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work.

DIRECTORS' REPORT (CONTINUED)

INFORMATION ON DIRECTORS

DIRECTORS' REPORT (CONTINUED)

INFORMATION ON DIRECTORS (continued)

DIRECTORS' REPORT (CONTINUED)

INFORMATION ON DIRECTORS (continued)

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED

Names and positions held of consolidated and parent entity key management personnel in office at any time during the financial year are:

This report details the nature and amount of remuneration for each key management person of Wolf Minerals Limited, and for the executives receiving the highest remuneration.

Remuneration policy

The remuneration policy of Wolf Minerals Limited has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group's financial results. The board of Wolf Minerals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the consolidated group, as well as create goal congruence between directors, executives and shareholders.

The board's policy for determining the nature and amount of remuneration for key management personnel of the consolidated group is as follows:

- The remuneration policy, setting the terms and conditions for the key management personnel, was developed by the board.

- All key management personnel receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives.

- The board reviews key management personnel packages annually by reference to the consolidated group's performance, executive performance and comparable information from industry sectors.

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (continued)

The performance of key management personnel is measured against criteria agreed bi-annually with each executive and is based predominantly on the forecast growth of the consolidated group's profits and shareholders' value. All bonuses and incentives must be linked to predetermined performance criteria. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.

Key management personnel are also entitled to participate in the employee share, option and performance rights arrangements.

The key management personnel receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to key management personnel is valued at the cost to the Company and expensed. Shares given to key management personnel are valued as the difference between the market price of those shares and the amount paid by the key management personnel. Options and performance rights are valued using the Black-Scholes methodology.

The board policy is to remunerate Non Executive Directors at market rates for time, commitment and responsibilities. The board determines payments to the Non Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non Executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for Non Executive Directors are not linked to the performance of the consolidated group. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and are able to participate in the employee option plan.

Performance-based remuneration

The Company is an exploration entity and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, Directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. The board does not endorse the use of bonus payments for Directors and senior executives at this point in time. Performance incentives will be issued in the event that the entity moves from an exploration to a producing entity, and key performance indicators such as growth and profits will be used as measurements for assessing board performance.

Company performance, shareholder wealth and Director and executive remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives by the issue of options and performance rights to the majority of Directors and executives to encourage the alignment of personal and shareholder interests.

Key management personnel remuneration policy

The board's policy for determining the nature and amount of remuneration of key management for the group is as follows:

The remuneration structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future. The employment conditions of the Managing Director, Humphrey Hale and other key management personnel are formalised in contracts of employment. All key management personnel are permanent employees of Wolf Minerals Limited.

The standard employment contract states a three-month resignation period for key management personnel. The Company may terminate an employment contract without cause by providing one to three months' written notice or making payment in lieu of notice, based on the individual's salary component.

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (continued)

(a) Key management personnel remuneration

Performance income as a proportion of total income

No bonuses were paid to executives or Non Executive Directors during the period.

Independent remuneration review

In June 2011, the board established a Remuneration Committee to review the remuneration of Directors and key management personnel, having regard to the Company's stage of development, remuneration in the industry and performance.

In August 2011, the Remuneration Committee, in consultation with independent remuneration consultants the Hay Group, provided recommendations to the board for a mix of fixed pay and short and long-term incentives, as appropriate and in line with the market, effective from 1 July 2011. Any change in the aggregate remuneration of Directors is subject to shareholder approval. The Remuneration Committee also recommended the establishment of a Performance Rights Plan to retain and incentivise key management personnel, as they are less dilutive, provide a clearer retention mechanism and simplified tax treatment. The Performance Rights Plan was approved by shareholders at the Annual General Meeting on 4 November 2011.

(b) Options and performance rights issued as part of remuneration for the year ended 30 June 2012

Options are issued to directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to key management personnel to increase goal congruence between executives, directors and shareholders.

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (continued)

Performance rights are issued to directors and executives as part of their remuneration. The rights are issued based on performance criteria to increase goal congruence between executives, directors and shareholders.

In relation to performance rights, there is no exercise price, only performance hurdles which upon satisfaction result in vesting to the employee. Subsequently, upon exercise of the rights by the employee, shares are issued for no consideration.

The performance rights issued during the year had the following vesting conditions:

(i) the processing plant at the Hemerdon Project is operating at design capacity within thirty (30) months following completion of the full project finance in relation to the Hemerdon Project; and

(ii) the employee remains employed by the Company until three (3) months after the completion of (i) above.

For the year ended 30 June 2011 no options or performance rights were issued to key management personnel.

No performance rights were vested during the year.

For the year ended 30 June 2011 no compensation options or performance rights were granted or vested during the financial period.

(c) Shares issued on exercise of compensation options

There were 1,700,000 options exercised during the year that were granted as compensation options.

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (continued)

(d) Shareholdings

Number of shares held by key management personnel

\* The Net Change Other reflected above includes shares issued during the prior year, being the 1.7 for 1 split on 23 September 2010.

DIRECTORS' REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (continued)

(e) Options and rights holdings

\* The Net Change Other reflected above includes those options that have been cancelled as well as options issued during the prior year. The options issued during the prior year include the 1.7 for 1 split on 23 September 2010 and the 1 for 5 bonus option issue on 15 October 2010.

DIRECTORS' REPORT (CONTINUED)

Meetings of Directors

During the financial year, 22 meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows:

Indemnifying officers

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

The Company has paid premiums to insure each of the following directors 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 of the Company, other than conduct involving a willful breach of duty in relation to the Company. The amount of the premium was approximately $1,481 for each Director.

- Humphrey Hale

- John Hopkins

- Jonathan Downes

- Adrian Byass

- Chris Corbett

- Ian Bruce

- Jim Williams

- Don Newport

DIRECTORS' REPORT (CONTINUED)

Options

At the date of this report, the unissued ordinary shares of Wolf Minerals Limited under option are as follows:

During the year, 1,700,000 ordinary shares of Wolf Minerals Limited were issued on the exercise of options granted under the Wolf Minerals Limited Employee Option Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on behalf of 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.

Non-audit services

The board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

- all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

- the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The remuneration for non-audit services paid to the external auditors during the year ended 30 June 2012 is $6,400. This remuneration related to the preparation and lodgement of the annual income tax return and assistance with the admission requirements for the dual listing on AIM.

Auditor's Independence Declaration

The lead auditor's independence declaration for the year ended 30 June 2012 has been received and can be found on page 19 of the Directors' report.

Signed in accordance with a resolution of the Board of Directors.

_____________________________

Humphrey Hale

Managing Director

Date: 27 September 2012

AUDITOR'S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF WOLF MINERALS LIMITED

In relation to our audit of the financial report of Wolf Minerals Limited for the year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

PKF Mack & Co

Simon Fermanis

Partner

27 September 2012

West Perth,

Western Australia

Directors' Declaration

The Directors of the Company declare that:

1. The financial statements and notes, as set out on pages 23 to 57, are in accordance with the Corporations Act 2001 and:

a. comply with Accounting Standards and the Corporations Regulations 2001; and

b. give a true and fair view of the financial position as at 30 June 2012 and of the performance for the year ended on that date of the Company and consolidated group;

c. the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the financial statements.

2. The Managing Director and Chief Financial Officer have each declared that:

a. the financial records of the Company for the financial year have been properly maintained in accordance with section 295A of the Corporations Act 2001;

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

c. the financial statements and notes for the financial year give a true and fair view;

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

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

_____________________________

Humphrey Hale

Director

Date: 27 September 2012

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF

WOLF MINERALS LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Wolf Minerals Limited, which comprises the statement of financial position as at 30 June 2012, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of Wolf Minerals Limited (the company) and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' Responsibility for the Financial Report

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

Auditor's Responsibility

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

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

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Opinion

In our opinion:

(a) the financial report of Wolf Minerals Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company's and consolidated entity's financial positions as at 30 June 2012 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1 in the financial report, which indicated that the consolidated entity incurred a net loss after tax of $(5,425,552) (2011: $(1,053,793)) during the year ended 30 June 2012. These conditions, along with other matters as set for in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the company and consolidated entity's ability to continue as a going concern and therefore, the company and consolidated entity maybe unable to realise its assets and discharge its liabilities in the normal course of business.

The financial report of the consolidated entity does not include any adjustments in relation to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the company and/or the consolidated entity not continue as going concerns.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 11 to 16 of the directors' report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Wolf Minerals Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001.

PKF Mack & Co

Simon Fermanis

Partner

27 September 2012

West Perth,

Western Australia

CONSOLIDATED Statement OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2012

The accompanying notes form part of these financial statements.

CONSOLIDATED Statement Of Changes In Equity

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012

The accompanying notes form part of these financial statements.

CONSOLIDATED Statement Of Cashflows

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012

The accompanying notes form part of these financial statements.

Notes To ThE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the consolidated financial statements and notes of Wolf Minerals Limited and controlled entities ('Consolidated Entity' or 'Group'), and the separate financial statements and notes of Wolf Minerals Limited as an individual parent entity ('Parent Entity').

Wolf Minerals Limited is a listed public company, trading on the Australian Securities Exchange and Alternative Investment Market of the London Stock Exchange, limited by shares, incorporated and domiciled in Australia.

Basis of Preparation

The accounting policies set out below have been consistently applied to all years presented.

Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group and the financial report of the Company comply with International Financial Reporting Standards (lFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements were authorised for issue by the Board of Directors on 27 September 2012.

Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

·; derivative financial instruments are measured at fair value

·; financial instruments at fair value through profit or loss are measured at fair value

·; available-for-sale financial assets are measured at fair value

·; liabilities for cash-settled share-based payment arrangements are measured at fair value

·; the defined benefit asset is measured as the net total of the plan assets, plus unrecognised past service cost and unrecognised actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation.

Functional and Presentation Currency

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

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest dollar unless otherwise stated.

Use of Estimates and Judgements

The preparation of financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Going Concern

The accounts have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. The Group incurred a loss of $5,425,552 for the year ended 30 June 2012 (2011: $1,053,793).

The ability of the Company and the Group to continue to pay its debts as and when they fall due is dependent upon the Company successfully raising additional share capital and ultimately developing one of its mineral properties.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

Note 1: Statement of Significant Accounting Policies (continued)

Going Concern (continued)

On 20 July 2012 the Company announced the completion of the A$5,000,000 placement to RCF and Traxys following shareholder approval at a meeting on 16 July 2012. An additional 14,166,667 shares were issued to RCF for A$3,825,000. The funds will provide additional working capital for the Company as it continues to complete the financing arrangements for the project.

On 3 September 2012 the Company announced UniCredit Bank AG (UniCredit Corporate & Investment Banking), ING Bank N.V. and Caterpillar Financial SARL had been mandated to seek revised credit approval for an increase in senior debt finance facilities from £55 million to £75 million to fund the commercial development of the Hemerdon Project. The increase in senior debt facilities provides a simplified finance structure for the project and will enable the Company to finalise the offtake agreements without the need for subordinated debt facilities. The revised credit approval is expected to be completed by mid-October 2012.

Should the project funding be delayed, the Directors consider that there are reasonable grounds to believe that the company will be able to raise equity to meet its short and medium term funding requirements.

The Directors believe it is appropriate to prepare these accounts on a going concern basis because:

·; the Directors have an appropriate plan to raise additional funds as and when it is required. In light of the Group's current exploration and development projects, the Directors believe that the additional capital required can be raised in the market; and

·; the Directors have an appropriate plan to contain certain operating and exploration expenditure if appropriate funding is unavailable.

The accounts have been prepared on the basis that the entity can meet its commitments as and when they fall due and can therefore continue normal business activities, and the realisation of assets and liabilities in the ordinary course of business.

a. Significant accounting estimates, judgments and assumptions

The preparation of financial statements requires management to make judgments and estimates relating to the carrying amounts of certain assets and liabilities. Actual results may differ from the estimates made. Estimates and assumptions are reviewed on an ongoing basis.

The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next accounting period are:

(i) Share based payment transactions

The consolidated entity measures the cost of equity settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options and performance rights is determined by an external valuer using an appropriate valuation model.

(ii) Impairment of exploration and evaluation assets and investments in and loans to subsidiaries

The ultimate recoupment of the value of exploration and evaluation assets, the company's investment in subsidiaries, and loans to subsidiaries is dependent on the successful development and commercial exploitation, or alternatively, sale, of the exploration and evaluation assets.

Impairment tests are carried out on a regular basis to identify whether the asset carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts.

The key areas of judgement and estimation include:

- Recent exploration and evaluation results and mineral resource estimates;

- Environmental issues that may impact on the underlying tenements;

- Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

Note 1: Statement of Significant Accounting Policies (continued)

a. Significant accounting estimates, judgments and assumptions (continued)

(iii) Income tax expenses

Judgement is required in assessing whether deferred tax assets and liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from temporary differences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised.

(iv) Classification of investments

The group has decided to classify investments in listed securities as available for sale. These securities are accounted for at fair value. Any increments or decrements in their value at year end are charged or credited to the revaluation reserves.

b. Exploration and Evaluation Assets

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

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

·; The expenditures are expected to be recouped through successful development and exploitation of the area of interest; or

·; Activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

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.

An impairment exists when the carrying amount of capitalised exploration and evaluation expenditure relating to an area of interest exceeds its recoverable amount. The asset is then written down to its recoverable amount. Any impairment losses are recognised in the statement of comprehensive income.

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

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. Where applicable, such costs are determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

Note 1: Statement of Significant Accounting Policies (continued)

c. Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Wolf Minerals Limited ('company' or 'parent entity') as at 30 June 2012 and the results of all controlled entities for the year then ended. Wolf Minerals Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full.

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

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

The purchase method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. All controlled entities have a June financial year end.

A list of controlled entities is contained in Note 10 to the financial statements.

d. Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the reporting date.

Deferred tax is accounted for using the balance sheet liability 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 either accounting profit 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 credited in 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.

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 economic 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.

Tax Consolidation

Wolf Minerals Limited and its wholly-owned Australian subsidiary have not formed an income tax consolidated group under tax consolidation legislation.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Freehold land

Freehold land is recognised at historic cost and is not depreciated as it has an indefinite useful economic life.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

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

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a diminishing value basis over the asset's useful life to the consolidated entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

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

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.

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. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Financial Instruments

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

(i) 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 there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. 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.

(ii) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the consolidated entity 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.

(iii) 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 being the date on which the consolidated entity 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 consolidated entity has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables 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 investments revaluation reserve are recognised in equity in the "available for sale 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.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Financial Instruments (continued)

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 consolidated entity 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 methods refined to reflect the issuer's specific circumstances.

The consolidated entity 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.

Fair value

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

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

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the consolidated entity for similar financial instruments.

g. Impairment

(i) Financial Assets

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

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the effective interest rate. 

An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised either in the statement of comprehensive income or revaluation reserves in the period in which the impairment arises.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Impairment (continued)

(ii) Exploration and Evaluation Assets

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount at the reporting date.

Exploration and evaluation assets are tested for impairment in respect of cash generating units, which are no larger than the area of interest to which the assets relate.

(iii) Non-financial Assets Other Than Exploration and Evaluation Assets

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

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

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

h. Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the group's entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity's functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Foreign Currency Transactions and Balances (continued)

Group companies

The financial results and position of foreign operations whose functional currency is different from the group's presentation currency are translated as follows:

- Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

- Income and expenses are translated at average exchange rates for the period; and

- Retained profits are translated at the exchange rate prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the group's foreign currency translation reserve in the statement of financial position, Theses differences are recognised in the statement of comprehensive income in the period in which the operation is disposed.

i. Employee Benefits

a. Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave expected to be settled within one year of the reporting date are recognised in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

b. Employee benefits payable later than one year

Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

c. Superannuation

Contributions are made by the consolidated entity to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred.

d. Employee benefit on costs

Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

e. Options

The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date.

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

Equity-settled compensation

The group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black-Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

j. Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 12 months or less, and bank overdrafts.

l. Revenue and Other Income

Interest revenue is recognised as it accrues. Dividend revenue is recognised when the right to receive a dividend has been established.

m. 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. Receivables and payables in the statement of financial position are shown inclusive of GST. 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.

n. Receivables

Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

o. EPS

Basic earnings per share

Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

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

p. Contributed Equity

Ordinary shares are classified as equity.

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

q. Investments

Interests in listed and unlisted securities are initially brought to account at cost.

Controlled entities are accounted for in the consolidated financial statements as set out in note 1(a).

Other securities are included at fair value at reporting date. Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (f) (i) financial assets at fair value through profit or loss. Unrealised gains/losses on securities held for long term investment are accounted for as set out in Note 1 (f) (iii) available for sale financial assets.

r. Acquisition of Assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Borrowing Costs

Transaction costs associated with financial instruments are initially capitalised and then deducted from the initial amount recognised as a financial liability at amortised cost.

t. Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

u. New standards and interpretations not yet adopted

The AASB has issued the following new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards, and has not yet determined the potential impact on the financial statements from the adoption of these standards and interpretations.

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

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

The construction of the link road is a condition of the planning permission for the Hemerdon Project. The group is required to construct the road for public adoption by Devon County Council. During the year, all expenditure incurred in constructing the link road has been expensed to the statement of comprehensive income on the basis that the future economic benefits of the road are not directly attributable to the group. Refer to Note 19 Commitments for further details of contracted expenditure to complete the construction of the road.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 4: INCOME TAX EXPENSE (continued)

The tax benefits of the above Deferred Tax Assets will only be obtained if:

(a) The company derives future assessable income of a nature and an amount sufficient to enable the benefits to be utilised; and

(b) The company continues to comply with the deductibility conditions imposed by the Income Tax Assessment Act 1997 and its overseas equivalent; and

(c) No change in income tax legislation adversely affects the company in utilising the benefits.

NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION

a. Names and positions held of consolidated and parent entity key management personnel in office at any time during the financial year are:

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2012

NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION (continued)

b. Options and performance rights holdings

For the year ended 30 June 2011 no options or performance rights were issued to key management personnel.

c. Shareholdings