Annual Report 2008 - Indo Mines · 2012-03-14 · Indo Mines Limited Annual Report 2008 1 MANAGING DIRECTOR’S REPORT JOGJAKARTA LIQUID IRON PROJECT - INDONESIA The Company has continued

Annual Report 2008

A.B.N. 40 009 245 210

CONTENTS

DIRECTORS

Mr Darryl Harris – Chairman

Mr Philip Welten – Managing Director

Mr Ian Middlemas

Mr Keith Brooks

Mr Matthew Rimes

COMPANY SECRETARY

Mr Mark Pearce

REGISTERED AND PRINCIPAL OFFICE

Level 9, BGC Centre

28 The Esplanade

Perth WA 6000

Telephone: +61 8 9322 6322

Facsimile: +61 8 9322 6558

SHARE REGISTER

Computershare Investor Services Pty Ltd

Level 2

45 St Georges Terrace

Perth WA 6000

Telephone: 1300 557 010

International: +61 8 9323 2000

Facsimile: +61 8 9323 2033

STOCK EXCHANGE LISTING

Australian Stock Exchange Limited

Home Branch – Perth

2 The Esplanade

Perth WA 6000

ASX CODE

IDO – Fully paid ordinary shares

SOLICITORS

Hardy Bowen Lawyers – Australia

Hadiputranto, Hadinoto & Partners – Indonesia

AUDITOR

KPMG

BANKERS

Australia and New Zealand Banking Group Ltd

CORPORATE DIRECTORY

MANAGING DIRECTOR’S REPORT 1

DIRECTORS’ REPORT 9

AUDITOR’S INDEPENDENCE DECLARATION 20

INCOME STATEMENTS 21

BALANCE SHEETS 22

CASH FLOW STATEMENTS 23

STATEMENTS OF CHANGES IN EQUITY 24

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 26

DIRECTORS’ DECLARATION 59

INDEPENDENT AUDIT REPORT 60

COMPLIANCE WITH ASX CORPORATE GOVERNANCE RECOMMENDATIONS 62

ASX ADDITIONAL INFORMATION 63

Indo Mines Limited Annual Report 2008 1

MANAGING DIRECTOR’S REPORT

JOGJAKARTA LIQUID IRON PROJECT - INDONESIA

The Company has continued to make signifi cant progress on the development of the Jogjakarta Liquid Iron Project (‘JLIP’) located on the south coast of central Java, Indonesia. During the year, the following milestones were reached in regard to the JLIP:

On 8th September 2008, the Indonesian Department of Minerals and Energy issued a letter

authorizing the Company and PT Jogja Magasa Mining (JMM) to form a Foreign Investment Joint

Venture Company, Penanaman Modal Asing (PMA), in preparation to sign the Kontrak Karya (KK) or

Contract of Works (CoW). The JV company, PT Jogja Magasa Iron (JMI) was offi cially formed on the

15th September with the Company holding 70% and JMM holding the remaining 30%.

Outotec’s CircoSmelt® Technology for the Pig Iron (Liquid Iron) Plant design has been recommended as the most effective and viable technology following a review by Onyx Projects Pty Ltd of the various hot metal processing technologies available. This technology may have signifi cant cost benefi ts over the SLRN technology currently in use in New Zealand and will be used as the base case for the Feasibility Study.

The Pilot Plant in Jogjakarta was commissioned and 50 tonnes of concentrate was produced and dispatched to Germany for large scale confi rmation test work by Outotec in its full scale CircoSmelt® test facility. The results of this should be available for inclusion in the Feasibility Study for the 1 million tonne per annum Pig Iron Plant that is due for completion in 2009. The Pilot Plant performed above expectations that resulted in the rapid benefi ciation of the iron sands to achieve the targeted grade. The plant also confi rmed that a consistent grade and sized concentrate could be produced very economically, and further enhancements to the design may result in a substantial reduction in the unit cost of production.

The Company fi nalised arrangements with Gadjah Mada University in Jogjakarta to commence a Rehabilitation Study Program on the Pilot Plant site that will demonstrate in a practical way the environmental and agricultural improvements that are included in the Company’s proposed Mine Plan.

The Company completed the sale of its 10% claw-back right in the Wonarah Phosphate Project to a subsidiary of Minemakers Limited (ASX Code: MAK) for consideration of $2 million cash and 3 million Minemakers Shares.

2

MANAGING DIRECTOR’S REPORT(CONTINUED)

GOING FORWARD

Activities for the 2009 fi nancial year include:

Continue the Contract of Works (CoW) application with the Indonesian Government. The CoW is protected by International Law and provides the security of tenure over the project site to ensure a smooth transition from exploration through to production from the project.

Update the Scoping Study, completed by Promet Engineers Pty Ltd in May 2007, to refl ect the increase in pig iron pricing and its impact on the JLIP’s NPV and IRR.

Complete the Feasibility Study for the 1 Million tonne per annum Pig Iron Plant. This will include:

• Outotec completing the sample test work and developing the fl ow sheet and engineering required for the hot metal plant.

• URS completing the environmental and social impact assessments and the fi nalisation of the AMDAL required by the Indonesian Government.

• GR Engineering designing the Concentrator, Infrastructure tie-ins and incorporation of the hot metal plant into the overall plant design.

• Onyx Pty Ltd overseeing the whole study.

Continue negotiations to acquire additional iron sands land holdings with a target of a three to fi ve fold increase in potential tonnage across its iron sands tenements.

Review the gravels resource, cut-off grades and potential improvement in recoveries to extend the potential reserve available for processing with the aim of increasing overall process plant output.

Continue to evaluate various opportunities to advance the exploration of the Nangali / Chinguela assets in Northern Peru.

2

Figure 1: Location Map of the Jogjakarta Liquid Iron Project


PROJECT SUMMARY

The JLIP is located 30 kilometres from Jogjakarta on the south coast of Java. The JORC compliant mineral resource is made up of surface sands and gravel on the coastline. The iron sand will be quarried using simple mining methods, the sand is concentrated on the project site and the concentrate is transferred to the Pig Iron Plant also located near the mining area. Approximately 90% of the sand is returned to the mining area from the concentrator for rehabilitation using simple, low cost revegetation methods. The Company has committed to rehabilitate the mining area to a better standard than prior to mining to reduce erosion and improve farming quality and productivity. The iron sand concentrate is mixed with low cost (~4300kcal) thermal coal, that is readily available in Indonesia, and processed into Direct Reduction Iron (DRI) which is then fed into electric furnaces to form pig iron billets. There is a signifi cant domestic market for pig iron in Indonesia that is still expanding, with approximately 95% of all steel making raw materials currently being imported.

The JLIP is considered low cost because of the following:

1. The iron units are readily extracted from the fi ne sand when compared to other magnetite and direct shipping iron ores;

2. Minor freight costs, the ore is processed on site and the coal is sourced locally in Indonesia; and

3. The coal used is low quality thermal coal which is considerably cheaper than the coking coals used in blast furnace operations

Approximate commodity cost per tonne of pig iron for blast furnaces compared to the JLIP:

Blast Furnace JLIP

Direct Shipping Ore (DSO) iron unit $160 -

Iron sand concentrate - $32

Coking Coal $300 -

Thermal Coal - $55

Total $460 $87

JORC Resource

Based on 929 holes for a total of 14,468m of air core drilling, Australian based geological consultants, Mackay & Schnellmann Pty Limited, reported in September 2006 (refer ASX announcement dated 27 September 2006) a JORC Code compliant mineral resource of 605 million tonnes of magnetite-bearing sediment for the 22km long by up to 1.8km wide deposit. This equates to an equivalent contained iron of 65 million tonnes of Fe.

This type of magnetite-rich mineral sand deposit has been successfully exploited in New Zealand for the past 30 years where iron sand is mined and 700,000 tonnes of pig iron are produced annually.

Figure 2: Location Map of the Jogjakarta Liquid Iron Project JORC compliant Resource

4


Scoping Study

The Scoping Study completed in May 2007 by ProMet Engineers Pty Ltd confi rmed the economic viability and cash fl ow potential of the 1 million tonnes per annum of pig iron production from the JLIP. The study was based on a sales price of US$300 per tonne of pig iron.

The Company intends to revisit the Scoping Study to ascertain the improvement in project fi nancials based on the signifi cant increase in the price of pig iron from US$300 (May 2007) to more recently traded pricing of US$500-US$600 per tonne.

Overview

With a capital cost of US$582 million (determined to a nominal accuracy of 30%) and a mining rate of 9 million tonnes of iron sands per annum the JLIP will support a production rate of 1 million tonnes of Pig Iron per annum at an operating cost of US$152 per tonne. At the time of the study the spot price of US$300 indicated the JLIP has the potential to generate operating cash fl ows of around US$148 million per annum. Market fundamentals for pig iron demand within Indonesia remain favourable.

The Scoping Study identifi ed several more cost effective options for developing the JLIP, including three alternative hot metal processing technologies that have the potential to signifi cantly improve the economics of the project.

As part of the Scoping Study, URS Australia has completed an Environmental and Social Scoping Study that identifi ed no unmanageable community or environmental issues with the development of the JLIP at this stage, based on the preliminary work. URS indicated that there was potential for the land reclamation processes to see improved productivity of the mined out areas compared to the existing land form, and the proposed waste stream management would assist in minimising the JLIP’s environmental impact.

Based on these encouraging results Indo Mines has commenced a Feasibility Study for a 1 Million tonne per annum Pig Iron Plant due for completion in 2009.

Mining & Pre-concentrating

As the resource occurs at surface the mining process is a simple quarrying exercise using standard rubber tyred loaders and bulldozers to move the material to and from the pre-concentrator facility.

Initial processing will take place at the mining operation using a semi-portable modularized plant incorporating a screening trommel and single stage wet magnetic separators to generate a pre-concentrate. The 2 million tonnes per annum of pre-concentrate will be transported using standard highway trucks to a centrally located process plant. The 7 million tonnes per annum of reject sand from the pre-concentrator plant will be placed back into the mined out area and rehabilitated to allow cropping by the local land users.

Surface

Sands

Gravels

Typically 6m Mining Depth

Figure 3:Typical drill hole cross section showing depth of mining


Processing

For the purposes of the Scoping Study a processing facility similar to that currently processing iron sands in New Zealand was used as a base case to model the capital and operating costs for the JLIP.

At the central facility the pre-concentrate will be processed to upgrade the feed by grinding and further magnetic concentration. This fi nal concentrate will be feedstock to the ironmaking plant.

The conceptual fl ow sheet for a 1 million tonne per annum pig iron plant incorporates 6 multiple hearth furnaces (MHF) for preheating the concentrate and charring the coal, followed by 6 rotary kilns used to produce Direct Reduction Iron (DRI) which is then transferred into 3 smelters for the fi nal processing to produce Pig Iron Billets. 3 Vanadium Removal Units will be incorporated to extract the vanadium rich slag for sale. Additional equipment includes an oxygen plant, pig caster and co-generation plant to extract power from the MHF and Kiln off gases.

Coal

Slag

Electricity

Buffer

VanadiumSlag

VanadiumRecovery

Unit

Hot MetalPig Iron Casting

Pig Iron Billets

Storage

Co-generation turbine

Kiln +Melter Off-gas

Melterx3

MoltenFe

Electricity

Rail

Sea

Road

Mining

Kalimantanor Sumatra

Iron SandConcentrate

B

St

Melandtrate

Coal

Rail

Iron SaConcent

Concentrate

Pre-concentrator

O2

Figure 4: Conceptual Process Flow Sheet

6


Social and Environmental

URS used the information obtained from a desktop review, data searches and site visit to conduct a high-level environmental and social risk assessment to identify the key environmental and social issues to be addressed early in JLIP development.

The results of that assessment indicate that there are no high risk issues that could impact the JLIP.

PRELIMINARY INDICATION OF SIGNIFICANCE OF ENVIRONMENTAL AND SOCIAL ISSUES

Factor Aspect Preliminary Assessment of Signifi canceLow Medium High

Sustainability Sustainability ✓

Social Factors Local Communities ✓

Public Health and Safety ✓

Culture and Heritage ✓

Surrounding Land Use ✓

Biophysical Factors

Terrestrial Flora and Vegetation ✓

Weeds ✓

Marine and Estuarine Flora ✓

Terrestrial Vertebrate Fauna ✓

Terrestrial Invertebrate Fauna ✓

Biodiversity ✓

Conservation Values ✓

Subterranean Fauna ✓

Marine and Estuarine Fauna ✓

Landform and Soils ✓

Surface Water Quantity ✓

Groundwater Quantity ✓

Pollution Prevention Factors

Air – Dust ✓

Air – Greenhouse Gas Emissions ✓

Air – Other Emissions ✓

Noise and Vibration ✓

Light ✓

Liquid and Solid Waste Disposal ✓

Surface Water Quality ✓

Groundwater Quality ✓

Waste Stream Management

The main waste streams from the JLIP have signifi cant potential for recycling as follows:

Reject sand material from pre-concentrator – backfi ll into mined out areas• Slimes from Concentrator grinding circuit – used as a soil conditioner in the rehabilitation • Titaniferous slag – to be sold for construction material and/or fertilizer• Vanadium Slag – saleable commodity• Fly ash – on-sold for cement production • Industrial waste – recycle as much as possible• Offi ce and green waste - recycle as much as possible• Domestic effl uent – fertilizer• Waste water, domestic and process – recycle as appropriate•

Infrastructure

Access to the JLIP is by sealed road and is a 1 hour drive from the city of Jogjakarta. The majority of the roads within the contract area are also sealed. The mine is located adjacent to the coast line and has three rivers passing across the lease; these should provide suffi cient water for processing the iron sands.


The Java-Bali 500,000MW Grid, a 150,000 volt supply station and modern rail facilities are located within 6 kilometres of the proposed plant site. There are several options for port facilities for the importation of coal and exporting of product within close proximity of the JLIP.

The majority of the infrastructure costs have been included in the estimates for Capital Expenditure. The additional items are not expected to materially impact the economics of the project.

Feasibility Studies

The Scoping Study identifi ed three alternative hot metal processing technologies that could signifi cantly reduce the operating costs. The Outotec CircoSmelt® technology has since been identifi ed as the preferred option for inclusion in the Feasibility Study.

This technology could have signifi cant operating and capital cost benefi ts over the existing SLRN technology currently in use in New Zealand. Capital costs may be reduced by up to $60 million and operating cost savings approaching $30 per tonne may be achieved, a signifi cant savings on a 1 million tonne per annum basis.

URS Australia is also working in conjunction with PT Asana Wirasta Setia, an environmental consulting fi rm based in Jogjakarta, to complete the AMDAL environmental and social impact study administered by the Indonesian government.

Onyx Pty Ltd have been engaged to manage the Feasibility Study for the Company, with engineering input from GR Engineering Services and Hot Metal processing and engineering design from Outotec. The Feasibility Study is due for completion in 2009.

PILOT PLANT

Concentrator Pilot Plant

A 10 tonne per day Pilot Plant was commissioned in Jogjakarta in June 2008. To date over 500 tonnes of sand have been treated through the plant and the following works have been completed:

A 50 tonne concentrate sample was shipped to Germany for large scale test work to confi rm the design parameters • from the current laboratory testing process. The results of this should be available in the coming months for inclusion in the Feasibility Study.

The Pilot Plant performed above expectations that resulted in the rapid benefi ciation of the Iron Sands to achieve the targeted • grade. The plant also confi rmed that a consistent grade and sized concentrate could be produced very economically, and further enhancements to the design may result in a substantial reduction in the unit cost of production.

COAL IRON SAND

CHAR

PREHEATING

STAGE I

DUST

GAS

LIFT

HOT

MAGNETIC

SEPARATION

PREREDUCED

IRON SANDSSTEAM

OFFGASPROCESS GAS

COMPRESSOR

PROCESS

GAS HEATER

SMELTING

FURNACE

PIG IRON

SOLIDS GAS

RECYCLE

CHAR

PNEUMATIC

TRANSPORT

O2

SLAG

SLURRY

CO2ABSORBER

VENTURI SCRUBBERMULTICLONE

CO2

STAGE II

HEATER

CFB

Figure 5: Outotec Circosmelt® Technology Flow Diagram

8

Two cultivation plots have been back fi lled with the Pilot Plant Reject material. These plots will now be used for • environmental and agricultural research and training.

Signifi cant comminution data has been collected from the operation of the Pilot Plant and will now be included in • the Concentrator design parameters.

Rehabilitation Study

Gadjah Mada University in Jogjakarta has commenced the Rehabilitation Study Program on the JLIP Site.

The Study will demonstrate in a practical way the environmental and agricultural improvements that are included in the Company’s proposed Mine Plan, including:

Construction of wind break structures by pattern planting Casuarina trees. These structures have been proven to be • benefi cial for crop propagation and also to aid in tsunami mitigation.

Cultivation of crops in the processed sands to demonstrate that extracting the iron concentrate does not impact on • soil productivity.

Investigation of alternative higher value crops for use on the rehabilitated landform.•

Maximizing the effi ciency of the rehabilitation effort.•

Transfer of technology to the local residents on improved land care and agricultural techniques.•

EXPLORATION PROJECTS - LATIN AMERICA

NANGALI GOLD PROJECT (Terrace Gold: 30%)

CHINGUELA GOLD PROJECT (Terrace Gold: 100%)

There has been a recent change in the Mining Law in Peru. Two key aspects of the new Mining Law are the approximate 20 fold increase in tenement rental charges and the mandatory relinquishment of tenements after 13 years of non-production.

The Company, through its 80% owned subsidiary Terrace Gold NL, is currently re-assessing its strategies for advancing the Peruvian assets to obtain the maximum benefi t to shareholders.

Note: The information in this report that relates to Exploration Results and Mineral Resources of the Jogjakarta Liquid Iron Project is based on information compiled by Mr Philip Welten, who is a member Australian Institute of Mining and Metallurgy. Mr Welten is a full-time employee of Indo Mines Limited. Mr Welten has suffi cient experience, which is relevant to the style of iron ore mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defi ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Welten consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.


Figure 6: The Pilot Plant

Figure 7: Seedlings being germinated for the Rehabilitation Studies


DIRECTORS’ REPORT

The Directors of Indo Mines Limited present their report on the Consolidated Entity consisting of Indo Mines Limited (“the Company” or “Indo Mines” or “Parent”) and the entities it controlled at the end of, or during, the year ended 30 June 2008 (“Consolidated Entity” or “Group”).

DIRECTORS

The names of Directors in offi ce at any time during the fi nancial year or since the end of the fi nancial year are:

Mr Darryl Harris Non-Executive Chairman

Mr Philip Welten Managing Director

Mr Ian Middlemas Non-Executive Director

Mr Keith Brooks Non-Executive Director

Mr Matthew Rimes Non-Executive Director

Unless otherwise disclosed, Directors held their offi ce from 1 July 2007 until the date of this report.

CURRENT DIRECTORS AND OFFICERS

Darryl Harris – Chairman Qualifi cations - B.Sc. MAusIMM

Darryl Harris is an engineering metallurgist with over 20 years experience in the design and commissioning of mineral processing plants, in particular diamonds. Mr Harris has had a long association with engineering companies including Nedpac and Signet Engineering and was involved in the development of various projects, including project co-ordinator for the An Feng-Kingstream Steel Project and other Australian ferrous projects. Mr Harris is currently Australian Project Development Manager of the large international engineering fi rm Outotec Australasia Pty Ltd.

Mr Harris was appointed a Director of Indo Mines Limited on 16 June 1987. During the three year period to the end of the fi nancial year, Mr Harris did not hold any other directorships of listed companies. Mr Harris was appointed a director of Beacon Minerals Limited in July 2008.

Philip Welten – Managing Director Qualifi cations - B.ASc. (Mining Eng), MAusIMM

Philip Welten is a mining engineer with over 28 years experience in a range of commodities including iron ore, gold, copper and uranium. During his extensive career in the resources sector Mr Welten has primarily worked for major mining companies including the Rio Tinto Group, North Limited, WMC, Barrick and Newmont. His background is in Operations Management, Project Feasibility and Resource Development both in Australia and overseas. Mr Welten held the position of Operations Manager at Robe River Mining’s Pannawonica Mesa J mine and also worked on the feasibility studies for the Angeles Iron Ore Project. Prior to joining the board of Indo Mines he held a senior management position at the Barrick / Newmont Joint Venture owned Superpit in Kalgoorlie.

Mr Welten was appointed a Director of Indo Mines Limited on 22 January 2007. Mr Welten has not held any other directorships of listed companies in the last three years.

Keith Brooks – Non-Executive Director Qualifi cations – FCCA, MCT, MBA

Mr Brooks has 30 years international experience spanning the energy, mining and fi nance sectors. Since 2002 Mr Brooks has been involved in projects and venture capital for start-up companies involved in the North American, European and Asia capital markets that has enabled these companies to grow substantially in value. Prior to 2002, Mr Brooks held positions in Accounting, Treasury and Project Management in the UK for Atlantic Richfi eld Company before moving to ARCO’s Power Group as Chief Financial Offi cer (CFO) for Great Yarmouth Power Ltd set up by Amoco and ARCO (later taken over by BP). As CFO for Great Yarmouth Power Ltd, Mr Brooks assisted in the negotiation of the £237 million project fi nance with a banking consortium led by Societe Generale.

Mr Brooks was appointed a Director of Indo Mines Limited on 22 March 2006. Mr Brooks has not held any other directorships of listed companies in the last three years.

10

DIRECTORS’ REPORT(CONTINUED)

CURRENT DIRECTORS AND OFFICERS (CONTINUED)

Ian Middlemas – Non-Executive Director Qualifi cations - B Com, CA

Mr Middlemas is a Chartered Accountant, a member of the Financial Services Institute of Australasia and holds a Bachelor of Commerce degree. He worked for a large international Chartered Accounting fi rm before joining the Normandy Mining Group where he was a senior group executive for approximately 10 years. He has had extensive corporate and management experience, and is currently a director of a number of publicly listed companies in the resource sector.

During the three year period to the end of the fi nancial year, Mr Middlemas has held directorships in Salinas Energy Limited (November 1995 - present), OmegaCorp Ltd (October 2000 – August 2007), QED Occtech Limited (July 2001 – present), GulfX Limited (May 2007 – February 2008), Global Petroleum Limited (April 2007 – present), Mantra Resources Limited (September 2005 – present), Mavuzi Resources Limited (January 2007 – March 2008), Odyssey Energy Limited (September 2005 – present), Pacifi c Energy Limited (June 2006 – present), Fusion Resources Limited (May 2002 – present), Sierra Mining Limited (January 2006 – present), Sovereign Metals Limited (July 2006 – present), Xenolith Resources Limited (March 2007 – present), Leyshon Resources Limited (November 2001 – April 2006) and Berkeley Resources Limited (July 2003 – November 2006).

Mr Middlemas was appointed a director of Indo Mines Limited on 12 December 2006.

Matthew Rimes – Non-Executive Director Qualifi cations - AWASM (Mining Eng), Exec MBA, Grad IEAust, MAusIMM

Mr Rimes is a mining engineer with over thirty years experience in a range of commodities including gold, copper, nickel and iron ore. He was with North Ltd from 1989, and then subsequently with the Rio Tinto group since the takeover of North Ltd in 2000. Mr Rimes is also currently the Managing Director of Iron Ore Holdings Ltd. Over the last ten years he has been with Robe River, and has held senior operational positions at both of Robe’s operations at Pannawonica and West Angelas. He brings a wide range of experience in operations, feasibility studies and acquisitions to the board, together with a broad knowledge of the iron ore sector.

During the three year period to the end of the fi nancial year, Mr Rimes has held directorships in Fusion Resources Ltd (June 2005 – present), Iron Ore Holdings Ltd (April 2007 – present) and Sovereign Metals Ltd (July 2006 – present).

Mr Rimes was appointed a director of Indo Mines Limited on 12 December 2006.

Mark Pearce – Company Secretary Qualifi cations - B.Com, CA, ACIS, F Fin

Mr Pearce is a Chartered Accountant and is currently a director of several listed companies that operate in the resources sector. He has had considerable experience in the formation and development of listed resource companies and has worked for several large international Chartered Accounting fi rms. Mr Pearce is also a Fellow of the Institute of Chartered Secretaries and a member of the Financial Services Institute of Australasia.

Mr Pearce was appointed Company Secretary of Indo Mines Limited on 12 December 2006.

PRINCIPAL ACTIVITIES

The principal activities of the Consolidated Entity during the year consisted of mineral exploration and development activities and there has been no change in the nature of those activities.

EMPLOYEES

2008 2007

The number of full time equivalent people employed by the Consolidated Entity at balance date 2 2


DIVIDENDS

No dividends have been declared, provided for or paid in respect of the fi nancial year ended 30 June 2008 (2007: nil).

EARNINGS PER SHARE

2008Cents

2007Cents

Basic earnings/(loss) per share 3.6 (1.7)Diluted earnings/(loss) per share 3.2 (1.7)

CORPORATE STRUCTURE

Indo Mines Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company has prepared a consolidated fi nancial report including the entities it incorporated and controlled during the fi nancial year.

CONSOLIDATED RESULTS

2008 2007 $ $

Profi t/(loss) of the Consolidated Entity before income tax expense 3,711,721 (1,023,841)

Income tax expense (853,151) -Net profi t/(loss) 2,858,570 (1,023,841)

REVIEW OF OPERATIONS AND ACTIVITIES

The profi t after tax of the Consolidated Entity for the year ended 30 June 2008 was $2,858,570 (2007: loss of $1,023,841). The profi t for the year arose primarily as a result of the sale of the Company’s 10% clawback right in the Wonarah phosphate project in the Northern Territory.

During the year ended 30 June 2008, Indo Mines continued to focus on the development of the Jogjakarta Ironsands Project in Indonesia.

Onyx Projects Pty Ltd completed a review of the various hot metal processing technologies available and recommended Outotec’s CircoSmelt® Technology for the Pig Iron Plant design as it is the most viable and cost effective in the present market conditions. This technology may have signifi cant cost benefi ts over the existing SLRN technology currently in use in New Zealand.

The Pilot Plant in Jogjakarta was commissioned and 50 tonnes of concentrate at a grade of 55% Fe was produced and dispatched to Germany for large scale confi rmation test work by Outotec. The results of this should be available for inclusion in the Feasibility Study.

Gadjah Mada University in Jogjakarta has commenced the Rehabilitation Study Program on the Project Site that will be used to demonstrate in a practical way the environmental and agricultural improvements that are included in the Company’s proposed Mine Plan.

URS Australia together with PT Asana Wirasta Setia, an environmental consulting fi rm based in Jogjakarta, continued with the AMDAL environmental and social impact study. The study is due for completion in mid 2009.

GR Engineering Services continued to progress the Bankable Feasibility Study for the Concentrate Plant; this is due for completion in late 2009.

The Contract of Works application continues to progress through the various Indonesian Government approvals.

The Company commenced discussions with Compass Resources on the exploration opportunities for the Hilorico / Chinguela assets in Northern Peru.

12


SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The following signifi cant changes in the state of affairs of the Consolidated Entity occurred during the year:

On 6 July 2007, following shareholder approval the Company issued 10,000,000 fully paid ordinary shares to i. Nusantara Energy Ltd in accordance with the Acquisition Agreement for the Jogjakarta Iron Sands Project;

On 6 July 2007, following shareholder approval the Company granted 1,250,000 incentive options exercisable ii. at $0.35 each on or before 31 December 2009 and 1,250,000 incentive options exercisable at $0.45 each on or before 30 June 2010 to Mr Philip Welten in accordance with the terms of his employment agreement. These incentive options vest on 22 January 2008 and 22 January 2009 respectively;

On 6 July 2007, following shareholder approval the Company granted 1,050,000 options exercisable at $0.90 iii. each on or before 30 November 2009, 1,050,000 options exercisable at $1.20 each on or before 30 November 2010 and 1,000,000 options exercisable at $0.20 each on or before 30 June 2010 to key consultants and employees; and

On 16 June 2008, the Company disposed of its 10% clawback right in the Wonarah phosphate project in iv. the Northern Territory to a subsidiary of Minemakers Limited. As part of the transaction, the Company also disposed of its right to a 50% contributing interest in the project area for the exploration and development of deposits for diamonds, gold and base metals. The Company received consideration of $2 million cash and 3 million Minemakers Limited (MAK) shares, which are subject to a holding lock until 16 June 2009.

SIGNIFICANT POST BALANCE DATE EVENTS

As at the date of this report there are no matters or circumstances, which have arisen since 30 June 2008 that have signifi cantly affected or may signifi cantly affect:

the operations, in financial years subsequent to 30 June 2008 of the Consolidated Entity;a.

the results of those operations, in financials years subsequent to 30 June 2008 of the Consolidated Entity; orb.

the state of affairs, in financial years subsequent to 30 June 2008 of the Consolidated Entity.c.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Consolidated Entity’s operations are subject to various environmental laws and regulations under the relevant government’s legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identifi ed either by external compliance audits or inspections by relevant government authorities.

There have been no signifi cant known breaches by the Consolidated Entity during the fi nancial year.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

It is the Board’s current intention that the Consolidated Entity will focus on maximising the value of the Company’s Jogjakarta Ironsands Project in Indonesia and is currently undertaking a Feasability Study for the project and continuing to progress the Contract of Works application. The Company will also continue to examine new opportunities in mineral exploration, particularly in the iron sands sector.

All of these activities are inherently risky and the Board is unable to provide certainty that any or all of these activities will be able to be achieved. In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Consolidated Entity and the expected results of these operations in subsequent fi nancial years may prejudice the interests of the Company and accordingly, has not been disclosed.


SHARE OPTIONS

At the date of this report the following options have been issued over unissued capital:

450,000 unlisted options exercisable at $0.20 each on or before 31 July 2009;•

10,000,000 unlisted options exercisable at $0.20 each on or before 30 June 2010;•

1,250,000 incentive options exercisable at $0.35 each on or before 31 December 2009 vesting 22 January 2008;•

1,250,000 incentive options exercisable at $0.45 each on or before 30 June 2010 vesting 22 January 2009;•

1,050,000 unlisted options exercisable at $0.90 each on or before 30 November 2009; and•

1,050,000 unlisted options exercisable at $1.20 each on or before 30 November 2010. •

Since 30 June 2008, no shares have been issued as a result of the exercise of options.

INFORMATION ON DIRECTORS’ INTERESTS IN SECURITIES

The following table sets out each Director’s relevant interest in shares and options in shares of the Company as at the date of this report:

Interest in Securities at the date of

this Report

Interest in Securities issued/granted during the year

Shares(1)

$0.20 31 Jul 2009 Options(2)

$0.20 30 Jun 2010 Options(3)

$0.35Incentive Options(4)

$0.45 Incentive Options(5)



Current Directors

Darryl Harris 60,000 150,000 - - - - -Philip Welten - - - 1,250,000 1,250,000 1,250,000 1,250,000Ian Middlemas 3,700,000 - 3,330,000 - - - -Keith Brooks 3,269,214 150,000 - - - - -Matthew Rimes 300,000 - 270,000 - - - -

Notes

”Shares” means fully paid ordinary shares in the capital of the Company.1.

“$0.22. 0 31 Jul 2009 Options” means an option to subscribe for 1 ordinary Share in the capital of the Company at an exercise price of $0.20 or before 31 July 2009.

“$3. 0.20 30 Jun 2010 Options” means an option to subscribe for 1 ordinary Share in the capital of the Company at an exercise price of $0.20 or before 30 June 2010.

“$0.35 Incentive Options” means an option to subscribe for 1 ordinary Share in the capital of the Company at 4. an exercise price of $0.35 on or before 31 December 2009. The Incentive Options were granted on 6 July 2007, following shareholder approval at a general meeting held on 5 July 2007.

“$0.45 Incentive Options” means an option to subscribe for 1 ordinary Share in the capital of the Company at an 5. exercise price of $0.45 on or before 30 June 2010. The Incentive Options were granted on 6 July 2007, following shareholder approval at a general meeting held on 5 July 2007.

14


MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2008, and the number of meetings attended by each Director.

Board Meetings

Number eligible to attendBoard Meetings

Number Attended

Darryl Harris 3 2

Philip Welten 3 3

Ian Middlemas 3 3

Keith Brooks 3 3

Matthew Rimes 3 2

REMUNERATION REPORT - AUDITED

The remuneration policy for the Group’s Key Management Personnel (including the Managing Director) has been developed by the Board taking into account:

the size of the Group;•

the size of the management team for the Group;•

the nature of the Group’s current operations; and•

market conditions and comparable salary levels for companies of a similar size and operating in similar sectors.•

In considering the above general factors, the Board has also placed emphasis on the following specifi c issues:

risks associated with resource companies whilst exploring and developing projects; and•

other than profi t which may be generated from asset sales (if any), the Company does not expect to be undertaking • profi table operations until some time after the successful commercialisation, production and sales of commodities from one or more of its current projects, or the acquisition of a profi table mining operation.

Remuneration Policy for Executives

The Group’s remuneration policy is to provide a fi xed remuneration component and a performance based component (options and a cash bonus, see below). The Board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate in aligning Key Management Personnel objectives with shareholder and business objectives.

Performance Based Remuneration – Incentive Options

The Board has chosen to issue incentive options to Key Management Personnel as a key component of the incentive portion of their remuneration, in order to attract and retain the services of the Key Management Personnel and to provide an incentive linked to the performance of the Company. The Board considers that each Key Management Personnel’s experience in the resources industry will greatly assist the Company in progressing its projects to the next stage of development and the identifi cation of new projects. As such, the Board believes that the number of incentive options granted to Key Management Personnel is commensurate to their value to the Company.

The Board has a policy of granting options to Key Management Personnel with exercise prices at and/or above market share price (at time of agreement). As such, incentive options granted to Key Management Personnel will generally only be of benefi t if the Key Management Personnel perform to the level whereby the value of the Company increases suffi ciently to warrant exercising the incentive options granted.


Other than service-based vesting conditions, there are no additional performance criteria on the incentive options granted to Key Management Personnel, as given the speculative nature of the Company’s activities and the small management team responsible for its running, it is considered the performance of the Key Management Personnel and the performance and value of the Company are closely related.

Performance Based Remuneration – Cash Bonus

In addition, some Key Management Personnel are entitled to an annual cash bonus upon achieving various key performance indicators, as set by the Board. The Board has determined that the key performance indicators will include measures such as successful completion of business development activities (e.g. project acquisitions and capital raisings), exploration activities (e.g. completion of exploration programs within budgeted timeframes and costs) and other corporate activities (e.g. recruitment of key personnel).

On an annual basis, after consideration of performance against key performance indicators, the Board determines the amount, if any, of the annual cash bonus to be paid to each Key Management Personnel.

Impact of Shareholder Wealth on Key Management Personnel Remuneration

The Board does not directly base remuneration levels on the Company’s share price or movement in the share price over the fi nancial year. However, as noted above, a number of Key Management Personnel have received options which generally will only be of value should the value of the Company’s shares increase suffi ciently to warrant exercising the incentive options granted.

As a result of the Company’s exploration, development and new business activities, the Board anticipates that it will retain future earnings (if any) and other cash resources for the operation and development of its business. Accordingly the Company does not currently have a policy with respect to the payment of dividends, and as a result the remuneration policy does not take into account the level of dividends or other distributions to shareholders (e.g. return of capital).

Impact of Earnings on Key Management Personnel Remuneration

As discussed above, the Company is currently undertaking exploration activities, and does not expect to be undertaking profi table operations until some time after the successful commercialisation, production and sales of commodities from one or more of its current projects.

Accordingly the Board does not consider current or prior year earnings when assessing remuneration of Key Management Personnel.

Remuneration Policy for Non-Executive Directors

The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, incentive options have been used to attract and retain Non-Executive Directors. 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 a General Meeting. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors’ interests with shareholders’ interests, the Directors are encouraged to hold shares in the Company and Non-Executive Directors have in limited circumstances received incentive options in order to secure their services.

General

Where required, Key Management Personnel receive superannuation contributions, currently equal to 9% of their salary, and do not receive any other retirement benefi t. From time to time, some individuals have chosen to sacrifi ce part of their salary to increase payments towards superannuation.

All remuneration paid to Key Management Personnel is valued at cost to the company and expensed. Incentive options are valued using the Black-Scholes option valuation methodology. The value of these incentive options is expensed over the vesting period.

16


REMUNERATION REPORT - AUDITED (CONTINUED)

Employment Contracts with Key Management Personnel

Mr Philip Welten, Managing Director, has a contract of employment with Indo Mines Limited which specifi es the duties and obligations to be fulfi lled by the Managing Director. The contract has a rolling annual term and may be terminated by the Company by giving 2 months notice. No amount is payable in the event of termination for neglect or incompetence in regards to the performance of duties. Mr Welten receives a fi xed remuneration component of $250,000 per annum inclusive of superannuation together with a bonus of up to $50,000 per annum.

Following shareholder approval at a general meeting held on 5 July 2007, Mr Welten was granted the following option package in accordance with his employment contract:

1,250,000 unlisted incentive options exercisable at $0.35 each on or before 31 December 2009, vesting after i. 12 months’ service; and

1,250,000 unlisted incentive options exercisable at $0.45 each on or before 30 June 2010, vesting after 24 ii. months’ service.


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18

REMUNERATION REPORT – AUDITED (CONTINUED)

NotesMr Welten was appointed 22 January 2007. i.

Mr Middlemas was appointed 12 December 2006.ii.

Mr Brooks was appointed on 22 March 2006. iii.

Mr Rimes was appointed 12 December 2006.iv.

Mr Sas resigned 12 December 2006.v.

Mr Stewart resigned 12 December 2006.vi.

Mr Pearce and Mr Cranswick provide services as the Company’s Company Secretary and Chief Financial Officer vii. respectively through a services agreement with Apollo Group Pty Ltd. Under the agreement, Apollo Group Pty Ltd provides administrative, company secretarial and accounting services, and the provision of a fully serviced office to the Company for a monthly retainer of $15,000 (2007: $15,000). The monthly retainer has increased to $16,500 from 1 July 2008. Apollo Group Pty Ltd is a company controlled by Mr Pearce. Mr Cranswick is an employee of Apollo Group Pty Ltd.

Value of Options Granted to Key Management Personnel

The following table discloses the value of options granted, exercised or lapsed during the year:

Options Granted

Options Exercised

Options Lapsed

Total Value of Options Granted, Exercised

and Lapsed

Value of Options

included in Compensation

for the Year

Percentage of Compensation

for the Year that consists of Options

Value atGrant

Date (i)

Value at Exercise

Date

Value attime ofLapse

$ $ $ $ $ %

2008Phil Welten 2,606,250 - - 2,606,250 2,245,891 88.1Mark Pearce 232,650 - - 232,650 232,650 100.0Shane Cranswick 775,500 - - 775,500 775,500 100.0

2007Darryl Harris 12,450 - - 12,450 12,450 32.3Keith Brooks 12,450 - - 12,450 12,450 49.9Zlad Sas 12,450 - - 12,450 12,450 13.2Mark Stewart 12,450 - - 12,450 12,450 52.3

NoteFor details on the valuation of the options, including models and assumptions used, please refer to Note 18 to i. the financial statements.

Each option converts into one ordinary share of Indo Mines on exercise.ii.



INSURANCE OF OFFICERS AND AUDITORS

Under the Constitution the Company is obliged, to the extent permitted by law, to indemnify an offi cer (including Directors) of the Company against liabilities incurred by the offi cer in that capacity, against costs and expenses incurred by the offi cer in successfully defending civil or criminal proceedings, and against any liability which arises out of conduct not involving a lack of good faith.

The Company has in respect of any person who is or has been an offi cer of the Company or a related body corporate paid or agreed to pay a premium of $18,848 (2007: $19,986) in respect of a contract insuring against a liability incurred as an offi cer for the costs or expenses to defend legal proceedings.

The Company has indemnifi ed offi cers of the Company against a liability incurred as an offi cer including costs and expenses in successfully defending legal proceedings.

The Company has not, during or since the end of the fi nancial year, indemnifi ed or agreed to indemnify an auditor of the Company or of any related body corporate against a liability incurred as such an auditor.

NON-AUDIT SERVICES

There were no non-audit services provided by the auditor (or by another person or fi rm on the auditor’s behalf) during the fi nancial year.

The auditor’s independence declaration, which forms part of this Directors’ Report, for the year ended 30 June 2008 is on Page 20.

This report is made in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001.

For and on behalf of the Directors

PHILIP WELTENManaging Director

Dated this 26th day of September 2008

Note: The information in this report that relates to Exploration Results and Mineral Resources of the Jogjakarta Ironsands Project is based on information compiled by Mr Philip Welten, who is a member Australian Institute of Mining and Metallurgy. Mr Welten is a full-time employee of Indo Mines Limited. Mr Welten has suffi cient experience, which is relevant to the style of iron ore mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defi ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Welten consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

20

AUDITOR’S INDEPENDENCE DECLARATION


INCOME STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

Consolidated CompanyNote 2008 2007 2008 2007

$ $ $ $

Continuing Operations

Other Income 2(a) 7,850,000 425,963 7,850,000 425,963

Exploration, evaluation and development expenditure 2(b) (3,037,753) (979,083) (3,022,289) (773,577)Business development expenses 2(b) (16,045) (66,000) (16,045) (66,000)Administration expenses 2(b) (1,821,360) (574,312) (1,811,360) (566,823)Finance costs (4,842) (3,181) (4,636) (3,020)Other expenses 2(b) - - (21,489) (213,730)Results from operating activities 2,970,000 (1,196,613) 2,974,181 (1,197,187)

Net fi nancial income 2(c) 741,721 172,772 741,704 172,768

Profi t/(loss) before income tax 3,711,721 (1,023,841) 3,715,885 (1,024,419)

Income tax expense 3 (853,151) - (857,003) -

Profi t/(loss) from continuing operations 2,858,570 (1,023,841) 2,858,882 (1,024,419)

Attributable to:Minority interests - - - -Equity holders of Indo Mines Limited 2,858,570 (1,023,841) 2,858,882 (1,024,419)

2,858,570 (1,023,841) 2,858,882 (1,024,419)

Basic profi t/(loss) per share from continuing operations (cents per share) 23 3.6 (1.7)

Diluted profi t/(loss) per share from continuing operations (cents per share) 23 3.2 (1.7)

Notes to and forming part of the Income Statements are set out on Pages 26 to 58.

22


$ $ $ $

ASSETS

Current AssetsCash and cash equivalents 24(b) 1,973,439 4,542,813 1,973,173 4,542,383Restricted cash and cash equivalents 70,000 10,000 70,000 10,000Trade and other receivables 4 37,771 78,372 37,771 78,372Other fi nancial assets 5 5,341,500 1,285,551 5,341,500 1,285,551Total Current Assets 7,422,710 5,916,736 7,422,444 5,916,306

Non-current AssetsTrade and other receivables 6 - - - -Investments 7 - - - -Property, plant and equipment 8 42,902 27,076 42,902 27,076Exploration and evaluation assets 9 21,798,342 3,967,063 21,798,342 3,967,063Total Non-current Assets 21,841,244 3,994,139 21,841,244 3,994,139

TOTAL ASSETS 29,263,954 9,910,875 29,263,688 9,910,445

LIABILITIESCurrent LiabilitiesTrade and other payables 10 177,626 192,165 171,626 190,165Current tax liabilities 3(a) 936,658 - 938,710 -Provisions 11 24,150 7,864 24,150 7,864Total Current Liabilities 1,138,434 200,029 1,134,486 198,029

Non-Current LiabilitiesDeferred tax liabilities 3(f) 178,701 - 180,501 -Total Non-Current Liabilities 178,701 - 180,501 -

TOTAL LIABILITIES 1,317,135 200,029 1,314,987 198,029

NET ASSETS 27,946,819 9,710,846 27,948,701 9,712,416

EQUITYIssued capital 12 33,959,299 20,652,341 33,959,299 20,652,341Reserves 13 2,976,608 906,163 2,976,608 906,163Accumulated losses 14 (8,989,088) (11,847,658) (8,987,206) (11,846,088)Total equity attributable to equityholders of the Company 27,946,819 9,710,846 27,948,701 9,712,416Minority interest 15 - - - -

TOTAL EQUITY 27,946,819 9,710,846 27,948,701 9,712,416

Notes to and forming part of the Balance Sheets are set out on Pages 26 to 58.

BALANCE SHEETSAS AT 30 JUNE 2008


CASH FLOW STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2008


$ $ $ $

Cash fl ows from operating activitiesInterest received 144,841 124,772 144,824 124,768Payments to suppliers and employees (980,563) (970,347) (974,357) (970,821)Net cash outfl ows fromoperating activities 24(a) (835,722) (845,575) (829,533) (846,053)

Cash fl ows from investing activitiesProceeds from disposal of property, plant and equipment - 4,500 - 4,500Purchase of property, plant and equipment (35,370) (28,227) (35,370) (28,227)Payments for exploration, evaluation and development (4,494,383) (2,143,732) (4,479,570) (2,143,098)Loans to related entities - - (20,838) (500)Proceeds from sale of tenements - 50,000 - 50,000Acquisition of other fi nancial assets (625) - (625) -Proceeds from sale of other fi nancial assets 858,068 - 858,068 -Proceeds from sale of mining rights 2,000,000 - 2,000,000 -Net cash outfl ows frominvesting activities

(1,672,310) (2,117,459) (1,678,335) (2,117,325)

Cash fl ows from fi nancing activitiesProceeds from issue of shares 20,000 6,530,000 20,000 6,530,000Transaction costs from issue of shares (21,342) (208,327) (21,342) (208,327)Security deposits (60,000) - (60,000) -Net cash infl ows/(outfl ows)from fi nancing activities (61,342) 6,321,673 (61,342) 6,321,673Net increase/(decrease) incash and cash equivalents (2,569,374) 3,358,639 (2,569,210) 3,358,295

Cash and cash equivalents at the beginning of the fi nancial year 4,542,813 1,184,174 4,542,383 1,184,088

Cash and cash equivalents at the end of the fi nancial year 24(b) 1,973,439 4,542,813 1,973,173 4,542,383

Notes to and forming part of the Cash Flow Statements are set out on Pages 26 to 58.

24

ConsolidatedShare-Based Investment

Ordinary Payments Revaluation Accumulated TotalShares Reserve Reserve Losses Equity

$ $ $ $ $

Balance at 1 July 2006 14,481,218 - - (10,805,286) 3,675,932

Minority interest in controlled entity taken up by parent company - - - (18,531) (18,531)Net loss for the year - - - (1,023,841) (1,023,841)Total recognised income and expense - - - (1,042,372) (1,042,372)

Net unrealised gain on availablefor sale fi nancial assets - - 697,513 - 697,513Issue of shares 6,530,000 - - - 6,530,000Share issue costs (371,327) - - - (371,327)Exercise of options 12,450 (12,450) - - -Share-based payments - 221,100 - - 221,100Balance at 30 June 2007 20,652,341 208,650 697,513 (11,847,658) 9,710,846

Minority interest in controlled entity taken up by parent company - - - - -Net profi t for the year - - - 2,858,570 2,858,570Total recognised income and expense - - - 2,858,570 2,858,570

Net unrealised loss on availablefor sale fi nancial assets - - (1,795,696) - (1,795,696)Issue of shares 13,320,000 - - - 13,320,000Share issue costs (21,342) - - - (21,342)Exercise of options 8,300 (8,300) - - -Share-based payments - 3,874,441 - - 3,874,441Balance at 30 June 2008 33,959,299 4,074,791 (1,098,183) (8,989,088) 27,946,819

Notes to and forming part of the Statements of Changes in Equity are set out on Pages 26 to 58.

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2008


CompanyShare-Based Investment

Ordinary Payments Revaluation Accumulated TotalShares Reserve Reserve Losses Equity

$ $ $ $ $

Balance at 1 July 2006 14,481,218 - - (10,821,669) 3,659,549

Net loss for the year - - - (1,024,419) (1,024,419)Total recognised income and expense - - - (1,024,419) (1,024,419)

Net unrealised gain on available for sale fi nancial assets - - 697,513 - 697,513Issue of shares 6,530,000 - - - 6,530,000Share issue costs (371,327) - - - (371,327)Exercise of options 12,450 (12,450) - - -Share-based payments - 221,100 - - 221,100Balance at 30 June 2007 20,652,341 208,650 697,513 (11,846,088) 9,712,416

Net profi t for the year - - - 2,858,882 2,858,882Total recognised income and expense - - - 2,858,882 2,858,882

Net unrealised loss on available for sale fi nancial assets - - (1,795,696) - (1,795,696)Issue of shares 13,320,000 - - - 13,320,000Share issue costs (21,342) - - - (21,342)Exercise of options 8,300 (8,300) - - -Share-based payments - 3,874,441 - - 3,874,441Balance at 30 June 2008 33,959,299 4,074,791 (1,098,183) (8,987,206) 27,948,701

Notes to and forming part of the Statements of Changes in Equity are set out on Pages 26 to 58

26

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in preparing the fi nancial report of the Company, Indo Mines Limited and its consolidated entities (“Consolidated Entity” or “Group”) for the year ended 30 June 2008 are stated to assist in a general understanding of the fi nancial report. These policies have been consistently applied to all the years presented, except as described below.

Indo Mines Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

The fi nancial report of the Company for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors on 26 September 2008.

(a) Basis of Preparation

The fi nancial report is a general purpose fi nancial report which has been prepared in accordance with Australian Accounting Standards (“AASBs”) including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The fi nancial report has also been prepared on an accruals basis and is based on historical costs, except for available-for-sale investments, which have been measured at fair value.

The fi nancial report is presented in Australian dollars.

The preparation of fi nancial statements in conformity with Australian equivalents to International Financial Reporting Standards (AIFRS) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements, are disclosed in Note 21.

(b) Statement of Compliance

The fi nancial report complies with Australian Accounting Standards, which include AIFRS. The fi nancial report also complies with International Financial Reporting Standards (IFRS).

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 30 June 2008. These are outlined in the table below:

Reference Title Summary

Application date of

standardImpact on Group fi nancial report

Application date for Group

AASB 8 Operating Segments Replaces the presentation requirements of segment reporting in AASB 114 Segment Reporting.

1 January 2009

AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group’s fi nancial statements.

1 July 2009

AASB 2007-3

Amendments to Australian Accounting Standards[AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023, & AASB 1038]

Amendments arise from the release of AASB 8 Operating Segments

1 January 2009

As above. 1 July 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2008


Reference Title Summary

Application date of

standardImpact on Group fi nancial report

Application date for Group

AASB I-12 Service Concession Arrangements

This Interpretation gives guidance on the accounting by operators for public-to-private service concession arrangements.

1 January 2008

As the Group is not a party to any service concession arrangements, this interpretation is not expected to have any impact on the Group’s fi nancial report.

1 July 2008

AASB 2007-2 Amendments to Australian Accounting Standards [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131, & AASB 139.]

Amendmentsarise from the release of AASB Interpretation 11.

1 January 2008

As above. 1 July 2008

AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]

Amending standard issued as a consequence of AASB 123 (revised) Borrowing Costs.

1 January 2009

As the Group does not currently construct or produce any qualifying assets which are fi nanced by borrowings the revised standard will have no impact.

1 July 2009

AASB 123(revised June 2007)

Borrowing Costs AASB 123 previously permitted entities to choose between expensing all borrowing costs and capitalising those that were attributable to the acquisition, construction or production of a qualifying asset. The revised version of AASB 123 requires borrowing costs to be capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset.

1 January 2009

Refer to AASB 2007-6 above.

1 July 2009

AASB Interpretation 129 (revised June 2007)

Service Concession Arrangements: Disclosures

The revised interpretation was issued as a result of Interpretation 12 and requires specifi c disclosures about service concession arrangements entered into by an entity, whether as a concession provider or a concession operator.

1 January 2008

Refer to AASB 2007-2 above.

1 July 2008

28

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Principles of Consolidation

The consolidated fi nancial statements incorporate the assets and liabilities of all subsidiaries of Indo Mines Limited (“Company” or “Parent Entity”) as at 30 June 2008 and the results of all subsidiaries for the year then ended. Indo Mines Limited and its subsidiaries together are referred to as the Group or the Consolidated Entity.

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

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

Intercompany transactions and 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.

(d) Exploration and evaluation expenditure

Exploration and evaluation expenditure encompasses expenditures incurred by the Group in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditure incurred by the Group is accumulated for each area of interest and recorded as an asset if:

the rights to tenure of the area of interest are current; and i.

at least one of the following conditions is also met: ii.

the exploration and evaluation expenditures are expected to be recouped through successful development 1. and exploitation of the area of interest, or alternatively, by its sale; and/or

exploration and evaluation activities in the area of interest have not at the reporting date reached a stage 2. 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.

For each area of interest, expenditure incurred in the acquisition of rights to explore is capitalised, classifi ed as tangible or intangible, and recognised as an exploration and evaluation asset. Exploration and evaluation assets are measured at cost at recognition. Exploration and evaluation expenditure incurred by the Group subsequent to acquisition of the rights to explore is expensed as incurred, up to costs associated with the preparation of a feasibility study.

Capitalised exploration costs are reviewed each reporting date to establish whether an indication of impairment exists. If any such indication exists, the recoverable amount of the capitalised exploration costs is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision is made to proceed with development, accumulated expenditure is tested for impairment and transferred to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2008 (CONTINUED)


(e) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.

All revenue is stated net of the amount of goods and services tax (GST).

(f) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profi t or taxable profi t or loss.

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

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

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Indo Mines Limited and its Australian controlled entity have not consolidated for tax purposes.

(g) Impairment of Non-Financial Assets

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

(h) Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with fi nancial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(i) Trade Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less an allowance for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition. An estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

(j) Investments and Other Financial Assets

The Group classifi es its investments in the following categories: fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments, and available-for-sale fi nancial assets. The classifi cation depends on the purpose for which the investments were acquired. Management determines the classifi cation of its investments at initial recognition and re-evaluates this designation at each reporting date.

30


(j) Investments and Other Financial Assets (continued)

Financial assets at fair value through profit or lossi.

Financial assets at fair value through profi t or loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classifi ed as current assets.

Loans and receivablesii.

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They arise when the Group 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 twelve months after the balance sheet date which are classifi ed as non-current assets. Loans and receivables are included in other fi nancial assets in the balance sheet.

Held-to-maturity investmentsiii.

Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities that the Group’s management has the positive intention and ability to hold to maturity.

Available-for-sale financial assetsiv.

Available-for-sale fi nancial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classifi ed in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within twelve months of the balance sheet date.

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

Subsequent to initial recognition, investments in subsidiaries are measured at cost. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated fi nancial statements and the cost method in the company fi nancial statements.

Available-for-sale fi nancial assets and fi nancial assets at fair value through profi t or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest rate method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘fi nancial assets at fair value through profi t or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classifi ed as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. When securities classifi ed as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a fi nancial asset is not active (and for unlisted securities), the Group 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 fl ow analysis, and option pricing models.

The Group assesses at each balance date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired. In the case of equity securities classifi ed as available-for-sale, a signifi cant 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 fi nancial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that fi nancial asset previously recognised in profi t and loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.



(k) Fair value estimation

The fair value of fi nancial 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 balance sheet date. The quoted market price used for fi nancial assets held by the Group is the current bid price; the appropriate quoted market price for fi nancial liabilities is the current ask price.

The fair value of fi nancial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as discounted cash fl ows, are used to determine fair value for the remaining fi nancial instruments. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash fl ows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.

(l) Property, Plant and Equipment

Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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 benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.

Plant and equipment are depreciated or amortised on a reducing balance or straight line basis at rates based upon their expected useful lives as follows:

Life

Plant and equipment 2 - 40 years

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

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

(m) Trade and Other Payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. The amounts are unsecured and are usually paid within 30 days.

Payables to related parties are carried at the principal amount.

(n) Employee Benefi ts

Liabilities for wages and salaries, including non-monetary benefi ts and annual leave expected to be settled within twelve months of the reporting date are recognised in provisions 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. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Employee benefi ts payable later than one year are measured at the present value of the estimated future cash fl ows to be made for those benefi ts.

(o) Issued Capital

Ordinary shares are classifi ed as equity. Issued and paid up capital is recognised at the fair value of the consideration received by the Company.

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.

(p) Dividends

Provision is made for the amount of any dividend declared on or before the end of the year but not distributed at balance date.

32


(q) Earnings per Share

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

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

(r) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case • the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables are stated with the amount of GST included.•

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

Cash fl ows are included in the Cash Flow Statement on a gross basis and the GST component of cash fl ows arising from investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority are classifi ed as operating cash fl ows.

(s) Share-Based Payments

Share-based payments are provided to Directors, employees, consultants and other advisors.

The fair value of options granted (determined using the Black-Scholes option pricing model) is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which option holders become unconditionally entitled to the options.

(t) Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. The company operates in a single business segment, being the mining and exploration for diamonds, precious metals and industrial minerals, in three geographical segments, being Australia, Indonesia and Peru.

(u) Foreign Currency Translation

Functional and presentation currency

Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Australian dollars, which is Indo Mines Limited’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash fl ow hedges and qualifying net investments hedges.



Consolidated Company2008 2007 2008 2007

$ $ $ $

2. PROFIT/(LOSS) FROM OPERATIONS

(a) Other income

Gain on disposal of mineral rights 7,850,000 425,963 7,850,000 425,963

(b) Profi t/(loss) before tax

Profi t/(loss) before income tax has been arrived atafter charging the following expenses attributableto continuing operations:

Exploration, evaluation and development expenditureImpairment losses on exploration andevaluation assets 15,463 729,130 - 523,764Write back of capitalised exploration and evaluation expenditure - (19,450) - (19,450)Share based payments expense 2,711,191 - 2,711,191 -Exploration expenditure 311,099 269,403 311,098 269,263

3,037,753 979,083 3,022,289 773,577

Business development expensesTransaction costs related to project acquisition - 66,000 - 66,000Project evaluation expenses 16,045 - 16,045 -

16,045 66,000 16,045 66,000

Administration expensesDepreciation – plant and equipment 18,410 9,121 18,410 9,121Impairment losses on plant and equipment - 5,519 - 5,519Property expenses 75,381 28,103 75,381 28,103Corporate expenses 277,627 332,621 275,627 331,618Audit expenses 40,364 26,850 32,364 23,600Employee benefi ts expense 134,655 87,323 134,655 86,623Share based payments expense 1,163,250 58,100 1,163,250 58,100Other expenses 111,673 26,675 111,673 24,139

1,821,360 574,312 1,811,360 566,823

Other expensesProvision for write-down of intercompany loan - - 21,489 213,730

(c) Financial income

Interest revenue 144,841 124,772 144,824 124,768Gain on disposal of other fi nancial assets 596,880 - 596,880 -Impairment reversal on other fi nancial assets - 48,000 - 48,000

741,721 172,772 741,704 172,768

34


$ $ $ $

3. INCOME TAX

(a) Recognised in the income statement

Current income tax 936,658 (125,367) 938,710 (123,343)

Deferred income tax:Adjustments in relation to current income tax of previous years (282,176) 59,061 (461,220) 20,689Origination and reversal of temporary differences 836,117 - 830,871 -Temporary differences not previously broughtto account (637,448) (376,516) (455,158) (402,113)Income tax benefi t not recognised - 442,822 - 504,767Income tax expense reported in the income statement 853,151 - 853,203 -

(b) Recognised directly in equity

Deferred income tax related to items charged or credited directly to equityAvailable-for-sale fi nancial assets 262,208 - 262,208 -Income tax expense/(benefi t) reported in equity 262,208 - 262,208 -

(c) Reconciliation of income tax expense to prima facie tax payable

Profi t/(loss) from continuing operations before income tax 3,711,721 (1,023,841) 3,715,885 (1,024,419)

Tax at the Australian tax rate of 30% (2007: 30%) 1,113,516 (307,152) 1,114,766 (307,326)

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:Entertainment 414 415 414 415Income not assessable for income tax purposes (513,000) - (513,000) -Blackhole expenditure 4,814 (23,540) 4,814 (23,540)Provision for dimunition - 209,254 - 209,254Exploration, evaluation and development expenditure 4,443 (384,265) - (407,503)Sundry items 256 (14,025) 255 (14,186)Share-based payments 1,162,332 17,430 1,162,332 17,430Temporary differences not previously brought to account (637,448) - (455,158) -Adjustments in relation to current income tax of previous years (282,176) 59,061 (461,220) 20,689

(260,365) (442,822) (261,563) (504,767)Income tax benefi t not recognised - 442,822 - 504,767Income tax expense 853,151 - 853,203 -

(d) Tax losses not brought to account

Unused tax losses for which no deferred tax asset has been recognised - 1,545,578 - 752,814Potential tax benefi t @ 30% (2007: 30%) - 463,763 - 225,844



(e) Tax Consolidation

The Board has not yet resolved to consolidate eligible entities within the Group for tax purposes. The Board will review this position annually, before lodgement of the year’s tax return.


(f) Deferred income tax $ $ $ $

Deferred income tax relates to the following:

Deferred tax liabilitiesAvailable-for-sale investments 262,208 209,254 262,208 -Deferred tax assets used to offset deferredtax liabilities (83,507) (209,254) (81,707) -

178,701 - 180,501 -Deferred tax assets

Share issue costs 58,562 - 58,562 -Provisions 7,245 2,359 7,245 2,359Accrued expenses 17,700 14,287 15,900 13,687Exploration and evaluation assets - 157,129 - 157,129Deferred tax assets used to offset deferredtax liabilities (83,507) (209,254) (81,707) -Tax losses available to offset against futuretaxable income - 463,673 - 225,844Deferred tax assets not brought to account - (428,194) - (399,019)

- - - -

NoteThe benefi t of deferred tax assets not brought to account will only be brought to account if:-

fa. uture assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

the conditions for deductibility imposed by tax legislation continue to be complied with; andb.

no changes in tax legislation adversely affect the Company in realising the benefit.c.

4. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES

GST receivable 37,103 78,372 37,103 78,372Sundry debtors 668 - 668 - 37,771 78,372 37,771 78,372

5. CURRENT ASSETS – OTHER FINANCIAL ASSETS

Available-for-sale fi nancial assets at fair value:Shares – listed 5,304,500 1,012,425 5,304,500 1,012,425Options – listed 37,000 55,000 37,000 55,000Options – unlisted - 218,126 - 218,126

5,341,500 1,285,551 5,341,500 1,285,551

Available-for-sale fi nancial assets comprise investments in listed ordinary shares, listed options and unlisted options.

For the year ended 30 June 2007, the Directors sought independent advice regarding the fair value of the unlisted available-for-sale fi nancial assets. Based on this advice the Board determined the fair value to be $218,126. There are no unlisted available-for-sale fi nancial assets as at 30 June 2008.

36


$ $ $ $

6. NON-CURRENT ASSETS – TRADE AND OTHER RECEIVABLES

Loans to controlled entities (unsecured) - - 1,657,785 1,635,596Less impairment provision - - (1,657,785) (1,635,596)

- - - -

7. NON-CURRENT ASSETS – INVESTMENTS

(a) Investments comprise:

Shares in controlled entities - at cost 19 - - 100,005 100,005Less impairment provision for dimunition - - (100,005) (100,005)Net carrying amount - - - -

(b) Financial Support of Controlled Entities

By a resolution of directors, the parent entity has committed itself to providing fi nancial support to its controlled entity so that it may meet its debts as and when they fall due. The directors believe that no adjustment is required to the carrying value of the parent entity’s investment in this entity or the loans receivable from this entity, except as disclosed in notes 6 and 7(a). In forming this opinion the directors have relied upon their assessment of the future prospects of this entity. The fair value of the fi nancial guarantee is considered to be $nil (2007: $nil)

(c) Investment in Controlled Entities

The parent entity has an investment at cost of $100,001 (2007: $100,001) and has advanced loan funds of $1,657,785 (2007: $1,635,596) as at 30 June 2008, to a controlled entity, Terrace Gold NL (“Terrace”). The principal asset of Terrace is deferred exploration and evaluation expenditure in respect of its overseas areas of interest. The recoupment of the loan and investment in Terrace is therefore dependent upon the successful development and commercial exploitation, or sale of the respective areas of interest, or alternatively the raising of additional capital by Terrace. The directors are confi dent of the future prospects of Terrace, but conservatively have made a provision for non-recovery of the loan (refer to Note 6), a full impairment adjustment in relation to the carried value of the exploration, evaluation and development expenditure, and a provision for diminution in the carrying value of the investment (refer to Note 7(a)).

During the fi nancial year the Company incorporated a wholly owned subsidiary, Indo Mines (Indonesia) Pty Ltd. The Board has also made a provision for the diminution in the carrying value of the investment of this subsidiary (refer to Note 7(a)).

The Company also has an investment at cost of $1 as at 30 June 2008 in Indo Energy Pty Ltd (2007: $1).

8. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT

(a) Offi ce furniture and equipment

Cost 63,596 29,360 63,596 29,360Accumulated depreciation and impairment (20,694) (2,284) (20,694) (2,284)Net carrying amount 42,902 27,076 42,902 27,076

(b) Reconciliation

Carrying amount at beginning of year, net of accumulated depreciation and impairment 27,076 46,468 27,076 46,468Additions 34,236 29,360 34,236 29,360Disposals - (34,112) - (34,112)Impairment loss - (5,519) - (5,519)Depreciation charge for the year (18,410) (9,121) (18,410) (9,121)Carrying amount at end of year, net of accumulated depreciation and impairment 42,902 27,076 42,902 27,076




$ $ $ $

9. NON-CURRENT ASSETS – EXPLORATION AND EVALUATION ASSETS

The Company has mineral exploration costs carried forward in respect of the following areas of interest:

(a) Areas of interest:IndonesiaJogjakarta Ironsands Project 21,798,342 3,967,063 21,798,342 3,967,063

21,798,342 3,967,063 21,798,342 3,967,063PeruChinguela - - - -Nangali - - - -

- - - -

21,798,342 3,967,063 21,798,342 3,967,063

(b) Reconciliation

Carrying amount at beginning of year 3,967,063 2,629,375 3,967,063 2,501,469Deferred exploration, evaluation and development expenditure incurred 4,546,742 2,148,443 4,531,279 2,070,983Expenditure associated with acquisitions 13,300,000 - 13,300,000 -Disposal of interest in mining tenements - (101,075) - (101,075)Amounts written back/(off) during the year - 19,450 - 19,450Impairment adjustment (15,463) (729,130) - (523,764)Carrying amount at end of year, at cost 21,798,342 3,967,063 21,798,342 3,967,063

The ultimate recoupment of the above deferred exploration, evaluation and development expenditure is dependent upon the successful development and commercial exploitation or, alternatively, sale of the respective areas of interest. All of the above expenditure relates to exploration and evaluation phases.

During the year the Company has expended funds totaling $4,531,279 (2007: $2,089,832) through Jogja Magasa Mining, an Indonesian registered company which owns the Jogjakarta Ironsands project. The Company is funding a feasibility study on the project in order to increase its interest in the project to 70%. During the 2007 year the Company became benefi cially entitled to a 30% interest following completion of a JORC compliant measured resource at Jogjakarta.

10. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES

Trade creditors 72,287 77,693 66,287 77,693Accrued expenses 85,258 98,314 85,258 96,314Other payables 20,081 16,158 20,081 16,158

177,626 192,165 171,626 190,165

11. CURRENT LIABILITIES – PROVISIONS

Employee benefi ts 24,150 7,864 24,150 7,864

(a) Movement in provisions

Opening balance 7,864 40,241 7,864 40,241Amounts paid to employees - (40,241) - (40,241)Additional provisions 16,286 7,864 16,286 7,864Closing balance 24,150 7,864 24,150 7,864

38


$ $ $ $

12. ISSUED CAPITAL

(a) Issued and paid up capital:

80,731,745 (2007: 70,631,745) fully paid ordinary shares 33,959,299 20,652,341 33,959,299 20,652,341

33,959,299 20,652,341 33,959,299 20,652,341

(b) Movements in ordinary share capital during the past two years were as follows:-

Date DetailsNumber

of Shares $

1 Jul 2006 Opening Balance 50,481,745 14,481,218

8 Dec 2006 Placement at $0.17 10,000,000 1,700,00023 Feb 2007 Placement at $0.48 10,000,000 4,800,00025 May 2007 Exercise of $0.20 Options 150,000 30,000

Transfer from option premium reserve - 12,450 Share issue expenses - (371,327)

30 Jun 2007 Closing Balance 70,631,745 20,652,341

6 Jul 2007 Issue to Iron Sands Vendors 10,000,000 13,300,0007 May 2008 Exercise of $0.20 Options 100,000 20,000

Transfer from option premium reserve - 8,300Share issue expenses - (21,342)

30 Jun 2008 Closing Balance 80,731,745 33,959,299

Holders of ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held and the amount paid up. Shareholders are entitled to one vote per share held either in person or by proxy at a meeting of the company.

Effective 1 July 1998, the Company Law Review Act abolished the concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.

The Company also has issued share options (see Note 13(a)).




$ $ $ $

13. RESERVES

(a) Reserves:

Share-based payments reserve450,000 (2007: 550,000) $0.20 Unlisted Options exercisable on or before 31 July 2009 37,350 45,650 37,350 45,6501,250,000 (2007: nil) $0.35 Incentive Optionsexercisable on or before 31 December 2009 1,327,500 - 1,327,500 -1,250,000 (2007: nil) $0.45 Incentive Optionsexercisable on or before 30 June 2010 918,391 - 918,391 -1,050,000 (2007: nil) $0.90 Unlisted Optionsexercisable on or before 30 November 2009 815,850 - 815,850 -1,050,000 (2007: nil) $1.20 Unlisted Optionsexercisable on or before 30 November 2010 812,700 - 812,700 -10,000,000 (2007: 10,000,000) $0.20 UnlistedOptions exercisable on or before 30 June 2010 163,000 163,000 163,000 163,000

4,074,791 208,650 4,074,791 208,650Available-for-sale investment revaluation reserve

Shares – listedOptions – listed Options – unlistedDeferred tax liability in respect of unrealised taxable gain

(872,975)37,000

-

(262,208)

559,95044,00093,563

-

(872,975)37,000

-

(262,208)

559,95044,00093,563

- (1,098,183) 697,513 (1,098,183) 697,513

Total Reserves 2,976,608 906,163 2,976,608 906,163

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of share-based payments made by the Company.

Available-for-sale investment revaluation reserve

The available-for-sale investment revaluation reserve is used to record fair value changes on available-for-sale investments.

40

13.

RES

ERV

ES (

CO

NTI

NU

ED)

(b)

Mo

vem

ents

in o

pti

on

s d

uri

ng

th

e p

ast

two

yea

rs w

ere

as f

ollo

ws:

Dat

eD

etai

ls

Nu

mb

er o

f $0

.20

31 J

ul 2

009

Op

tio

ns

Nu

mb

er o

f $0

.20

30 J

un

201

0 O

pti

on

s

Nu

mb

er o

f $0

.35

31 D

ec 2

009

Op

tio

ns

Nu

mb

er o

f $0

.45

30 J

un

201

0 O

pti

on

s

Nu

mb

er o

f $0

.90

30 N

ov

2009

O

pti

on

s

Nu

mb

er o

f $1

.20

30 N

ov

2010

O

pti

on

s

Cu

mu

lati

ve

shar

e-b

ased

p

aym

ent

rese

rve

$

1 Ju

l 200

6O

pen

ing

Bal

ance

--

--

--

-

3 A

ug 2

006

Gra

nt o

f O

ptio

ns70

0,00

0-

--

--

58,1

006

Dec

200

6G

rant

of

Opt

ions

(1)

--

--

--

163,

000

11 D

ec 2

006

Gra

nt o

f O

ptio

ns-

9,00

0,00

0-

--

--

25 M

ay 2

007

Exer

cise

of

Opt

ions

(150

,000

)-

--

--

(12,

450)

30 J

un

200

7C

losi

ng

Bal

ance

550,

000

9,00

0,00

0-

--

-20

8,65

0

6 Ju

l 200

7G

rant

of

Opt

ions

--

1,25

0,00

0-

--

1,32

7,50

06

Jul 2

007

Gra

nt o

f O

ptio

ns-

--

1,25

0,00

0-

-91

8,39

16

Jul 2

007

Gra

nt o

f O

ptio

ns-

--

-1,

050,

000

-81

5,85

06

Jul 2

007

Gra

nt o

f O

ptio

ns-

--

--

1,05

0,00

081

2,70

06

Jul 2

007

Gra

nt o

f O

ptio

ns(1

)-

1,00

0,00

0-

--

--

7 M

ay 2

008

Exer

cise

of

Opt

ions

(100

,000

)-

--

--

(8,3

00)

30 J

un

200

8C

losi

ng

Bal

ance

450,

000

10,0

00,0

001,

250,

000

1,25

0,00

01,

050,

000

1,05

0,00

04,

074,

791

Not

eO

n 6

July

200

7 th

e C

ompa

ny g

rant

ed 1

,000

,000

opt

ions

exe

rcis

able

at

$0.2

0 ea

ch o

n or

bef

ore

30 J

une

2010

in c

onsi

dera

tion

for

the

prov

isio

n of

ong

oing

cor

pora

te a

nd

1.

advi

sory

ser

vice

s to

the

Com

pany

, in

clud

ing

a ca

pita

l rai

sing

whi

ch w

as c

ompl

eted

on

6 D

ecem

ber

2006

. In

acc

orda

nce

with

AA

SB 2

– S

hare

-bas

ed P

aym

ent,

an

inde

pend

ent

valu

atio

n w

as u

nder

take

n (r

efer

Not

e 18

) and

an

amou

nt o

f $1

63,0

00 w

as r

ecog

nise

d as

a s

hare

issu

e ex

pens

e in

the

200

7 fin

anci

al y

ear.



(c) Movements in available-for-sale investment revaluation reserve during the past two years were as follows:


$ $ $ $

Opening Balance 697,513 - 697,513 -Net valuation gain/(loss) on available-for-sale investments (1,533,488) 697,513 (1,533,488) 697,513Deferred tax liability in respect of unrealised taxable gain (262,208) - (262,208) -Closing Balance (1,098,183) 697,513 (1,098,183) 697,513

(d) Terms and conditions of Options

The Options are granted based upon the following terms and conditions:

Each Option entitles the holder to subscribe for one Share upon exercise of each Option.•

The Options have exercise prices and expiry dates as follows:•

$0.20 Options expire 31 July 2009. •

$0.20 Options expire 30 June 2010.•

$0.35 Incentive Options expire on 31 December 2009 and vested on 22 January 2008.•

$0.45 Incentive Options expire on 30 June 2010 and vest on 22 January 2009.•

$0.90 Options expire on 30 November 2009.•

$1.20 Options expire on 30 November 2010. •

The Options are exercisable at any time prior to the Expiry Date.•

Shares issued on exercise of the Options rank equally with the then shares of the Company.•

Application will be made by the Company to ASX for offi cial quotation of the Shares issued upon the exercise • of the Options.

If there is any reconstruction of the issued share capital of the Company, the rights of the Optionholders • may be varied to comply with the ASX Listing Rules which apply to the reconstruction at the time of the reconstruction.

No application for quotation of the Options will be made by the Company.•

14. ACCUMULATED LOSSES

Balance at the beginning of year (11,847,658) (10,805,286) (11,846,088) (10,821,669)Minority interest in controlled entity taken up by parent company - (18,531) - -Net profi t/(loss) 2,858,570 (1,023,841) 2,858,882 (1,024,419)Balance at end of year (8,989,088) (11,847,658) (8,987,206) (11,846,088)

42

15. MINORITY INTERESTS IN CONTROLLED ENTITIES

2008 2007 $ $

Interest in:- Share capital 350,000 350,000- Accumulated losses (350,000) (350,000)

- -

16. KEY MANAGEMENT PERSONNEL COMPENSATION

(a) Details of Key Management Personnel

Mr Darryl Harris Non-Executive Chairman

Mr Philip Welten Managing Director

Mr Ian Middlemas Non-Executive Director

Mr Keith Brooks Non-Executive Director

Mr Matthew Rimes Non-Executive Director

Mr Mark Pearce Company Secretary

Mr Shane Cranswick Chief Financial Offi cer

There were no other key management personnel of the Company or the Consolidated Entity.

(b) Key Management Personnel Compensation

2008 2007Company and Consolidated: $ $

Short-term employee benefi ts 329,370 148,184Post-employment benefi ts 28,293 12,211Other – Consulting fees 36,000 111,200Share-based payments 3,254,041 49,800Total compensation 3,647,804 321,395

Key management personnel disclosures previously required by AASB 124 Related Party Disclosures paragraphs Aus25.2 to Aus25.6 and Aus25.7.1 and Aus25.7.2 and by Corporations Regulations 2M.3.03 are included the Remuneration Report section of the Directors’ Report.

Loans to key management personnel and their related parties

There were no loans made to key management personnel or their related parties during the reporting period.

Other key management personnel transactions

A number of directors, or their related parties, hold positions in other entities that result in them having control or signifi cant infl uence over the fi nancial or operating policies of those entities. A number of these entities transacted with the Company or its controlled entities in the reporting period. The terms and conditions of these transactions were no more favourable than those available, or which might be available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.

Apollo Group Pty Ltd, a company of which Mr Pearce is a Director and benefi cial shareholder, was paid $180,000 (2007: $97,500) during the year under a services contract for the provision of serviced offi ce facilities and administration services. The amount is based on a monthly retainer due and payable in arrears, with no fi xed term. This item has been recognised as an expense in the Income Statement.

There were no liabilities arising from the above transactions at 30 June 2008 (2007: nil).



(c) Value of Options Granted to Key Management Personnel

The following table discloses the value of options granted, exercised or lapsed during the year:

Options Granted

Options Exercised

Options Lapsed

Total Value of Options Granted, Exercised

and Lapsed

Value of Options

included in Compensation

for the Year

Percentage of Compensation

for the Year that consists of Options

Value at Grant Date (i)

Value at Exercise Date

Value at time of Lapse

$ $ $ $ $ %

2008Philip Welten 2,606,250 - - 2,606,250 2,245,891 88.1Mark Pearce 232,650 - - 232,650 232,650 100.0Shane Cranswick 775,500 - - 775,500 775,500 100.0

2007Darryl Harris 12,450 - - 12,450 12,450 32.3Keith Brooks 12,450 - - 12,450 12,450 49.9Zlad Sas 12,450 - - 12,450 12,450 13.2Mark Stewart 12,450 - - 12,450 12,450 52.3

NoteFor details on the valuation of the options, including models and assumptions used, please refer to Note 18 to i. the financial statements.

Each option converts into one ordinary share of Indo Mines on exercise.ii.

(d) Employment Contracts with Key Management Personnel

Mr Philip Welten, Managing Director, has a contract of employment with Indo Mines Limited dated 21 December 2006. The contract specifi es the duties and obligations to be fulfi lled by the Managing Director. The contract has a rolling annual term and may be terminated by the Company by giving 2 months notice. No amount is payable in the event of termination for neglect or incompetence in regard to the performance of duties. Mr Welten receives a fi xed remuneration component of $250,000 per annum inclusive of superannuation together with a bonus of up to $50,000 per annum.

Following shareholder approval at a general meeting held on 5 July 2007, Mr Welten was granted the following option package in accordance with his employment contract:

1,250,000 unlisted incentive options exercisable at $0.35 each on or before 31 December 2009, vesting after i. 12 months service; and

1,250,000 unlisted incentive options exercisable at $0.45 each on or before 30 June 2010, vesting after 24 ii. months service.

44

17.

REL

ATE

D P

AR

TY D

ISC

LOSU

RES

(a)

Op

tio

n h

old

ing

s an

d t

ran

sact

ion

s o

f K

ey M

anag

emen

t Pe

rso

nn

el

H

eld

at

1 Ju

ly 2

006

Gra

nte

d a

s co

mp

ensa

tio

nH

eld

at

30

Jun

e 20

07

Ves

ted

&

exer

cise

able

at

30

Jun

e 20

07Ex

erci

sed

Gra

nte

d a

s co

mp

ensa

tio

nH

eld

at

30

Jun

e 20

08

Ves

ted

&ex

erci

seab

le

at 3

0 Ju

ne

2008

Dar

ryl H

arris

(i)-

150,

000

150,

000

150,

000

--

150,

000

-Ph

ilip

Wel

ten

--

--

-2,

500,

000(iv

)2,

500,

000(iv

)1,

250,

000

Ian

Mid

dlem

as(ii

i)3,

330,

000(ii

)-

3,33

0,00

03,

330,

000

--

3,33

0,00

03,

330,

000

Kei

th B

rook

s(i)-

150,

000

150,

000

150,

000

--

150,

000

150,

000

Mat

thew

Rim

es(ii

i)27

0,00

0(ii)

-27

0,00

027

0,00

0-

-27

0,00

027

0,00

0M

ark

Pear

ce(ii

i)45

0,00

0(ii)

-45

0,00

045

0,00

0-

300,

000(v

)75

0,00

075

0,00

0Sh

ane

Cra

nsw

ick

--

--

-1,

000,

000(v

i)1,

000,

000

1,00

0,00

0Zl

ad S

as-

150,

000

150,

000(v

ii)15

0,00

0(vii)

--

--

Mar

k St

ewar

t-

150,

000

150,

000(v

ii)15

0,00

0(vii)

--

--

Not

eO

ptio

ns a

re e

xerc

isab

le a

t $0

.20

each

on

or b

efor

e 31

Jul

y 20

09.

i.

Opt

ions

are

exe

rcis

able

at

$0.2

0 ea

ch o

n or

bef

ore

30 J

une

2010

.ii.

As

at d

ate

of a

ppoi

ntm

ent

– 12

Dec

embe

r 20

06.

iii.

1,25

0,00

0 in

cent

ive

optio

ns e

xerc

isab

le a

t $0

.35

each

on

or b

efor

e 31

Dec

embe

r 20

09, v

estin

g af

ter

12 m

onth

s se

rvic

e an

d 1,

250,

000

ince

ntiv

e op

tions

exe

rcis

able

at

iv.

$0.4

5 ea

ch o

n or

bef

ore

30 J

une

2010

, ves

ting

afte

r 24

mon

ths

serv

ice.

150,

000

optio

ns e

xerc

isab

le a

t $0

.90

each

on

or b

efor

e 30

Nov

embe

r 20

09, a

nd 1

50,0

00 o

ptio

ns e

xerc

isab

le a

t $1

.20

each

on

or b

efor

e 30

Nov

embe

r 20

10.

v.

500,

000

optio

ns e

xerc

isab

le a

t $0

.90

each

on

or b

efor

e 30

Nov

embe

r 20

09, a

nd 5

00,0

00 o

ptio

ns e

xerc

isab

le a

t $1

.20

each

on

or b

efor

e 30

Nov

embe

r 20

10.

vi.

Hel

d as

at

date

of

resi

gnat

ion

– 12

Dec

embe

r 20

06vi

i.



(b)

Shar

e h

old

ing

s an

d t

ran

sact

ion

s o

f K

ey M

anag

emen

t Pe

rso

nn

el

H

eld

at

1 Ju

ly 2

006

Purc

has

esO

ther

C

han

ges

Sale

sH

eld

at

30

Jun

e 20

07Pu

rch

ases

/(S

ales

)H

eld

at

30

Jun

e 20

08

Dar

ryl H

arris

78,5

0060

,000

--

138,

500

(78,

500)

60,0

00Ph

ilip

Wel

ten

--

--

--

-Ia

n M

iddl

emas

--

3,70

0,00

0(i)-

3,70

0,00

0-

3,70

0,00

0K

eith

Bro

oks

6,16

6,30

010

2,91

4-

(2,0

00,0

00)

4,26

9,21

4(1

,000

,000

)3,

269,

214

Mat

thew

Rim

es-

-30

0,00

0(i)-

300,

000

-30

0,00

0M

ark

Pear

ce-

-50

0,00

0(i)-

500,

000

-50

0,00

0Sh

ane

Cra

nsw

ick

--

--

-15

,000

15,0

00Zl

ad S

as95

4,00

3-

--

954,

003(ii

)-

-M

ark

Stew

art

66,0

00-

--

66,0

00(ii

)-

-

Not

eH

eld

as a

t da

te o

f ap

poin

tmen

t –

12 D

ecem

ber

2006

i.

Hel

d as

at

date

of

resi

gnat

ion

– 12

Dec

embe

r 20

06ii.

(c)

Tran

sact

ion

s w

ith

Rel

ated

Par

ties

in t

he

Co

nso

lidat

ed G

rou

p

The

cons

olid

ated

gro

up c

onsi

sts

of In

do M

ines

Lim

ited

and

its c

ontr

olle

d en

titie

s (s

ee N

ote

7).

Indo

Min

es L

imite

d en

tere

d in

to t

he f

ollo

win

g tr

ansa

ctio

ns d

urin

g th

e ye

ar w

ith r

elat

ed p

artie

s in

the

gro

up:

Loan

s w

ere

adva

nced

on

an in

ter-

com

pany

acc

ount

to

Terr

ace

Gol

d N

L. T

he a

mou

nt o

wed

as

at 3

0 Ju

ne 2

008

was

$1,

657,

785

(200

7: $

1,63

5,59

6). T

he a

mou

nt d

ue h

as

• be

en f

ully

pro

vide

d fo

r as

set

out

in n

ote

7(c)

.

Thes

e tr

ansa

ctio

ns w

ere

unde

rtak

en o

n co

mm

erci

al t

erm

s an

d co

nditi

ons,

exc

ept

that

:

Ther

e w

as n

o fix

ed r

epay

men

t of

loan

s be

twee

n th

e re

late

d pa

rtie

s; a

ndi.

No

inte

rest

was

pay

able

on

the

loan

s.ii.

Loan

s w

ith c

ontr

olle

d en

titie

s ar

e di

sclo

sed

in N

ote

6.

46

17. RELATED PARTY DISCLOSURES (CONTINUED)

(d) Remuneration Report

Information relating to remuneration of directors is provided in the Directors Report and Note 16.

18. SHARE-BASED PAYMENTS

The following table illustrates the number (No.) and weighted average exercise prices (“WAEP”) of, and movements in, share options issued during the year:

2008 2008 2007 2007 No. WAEP No. WAEP

Outstanding at beginning of year 9,550,000 $0.20 - -Granted during the year(i) 5,600,000 $0.61 9,700,000 $0.20Exercised during the year (100,000) $0.20 (150,000) $0.20Outstanding at end of year 15,050,000 $0.35 9,550,000 $0.20

NoteSubsequent to 2007 year end, on 6 July 2007 the Company granted 1,000,000 options exercisable at $0.20 i. each on or before 30 June 2010 in consideration for the provision of ongoing corporate and advisory services to the Company, including a capital raising which was completed on 6 December 2006. In accordance with AASB 2 – Share-based Payment, an amount of $163,000 was recognised as a share issue expense in equity in the 2007 financial year.

The outstanding balance as at 30 June 2008 is represented by:

450,000 (2007: 550,000) unlisted options with an exercise price of $0.20 each that expire on 31 July 2009.•

10,000,000 (2007: 9,000,000) unlisted options with an exercise price of $0.20 each that expire on 30 June 2010;•

1,250,000 (2007: nil) incentive options with an exercise price of $0.35 each that vest on 22 January 2008 and • expire on 31 December 2009;

1,250,000 (2007: nil) incentive options with an exercise price of $0.45 each that vest on 22 January 2009 and • expire on 30 June 2010;

1,050,000 (2007: nil) unlisted options with an exercise price of $0.90 each that expire on 30 November 2009; and•

1,050,000 (2007: nil) unlisted options with an exercise price of $1.20 each that expire on 30 November 2010.•

The weighted average remaining contractual life for the share options outstanding as at 30 June 2008 is 1.9 years (2007: 2.1 years).

The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black Scholes option valuation model taking into account the terms and conditions upon which the options were granted.

Where applicable, the fair value is calculated at grant date and recognised over the period during which the incentive option holder becomes unconditionally entitled to the incentive options in accordance with AASB 2 – Share-based Payment. An amount of $2,245,891 (of a total valuation of $2,606,250) was included as a share based payment expense in the current period in relation to the 2,500,000 incentive options issued during the period. A further $360,359 will be expensed in future periods as and when the holder of the incentive options becomes unconditionally entitled to these incentive options.



The following table lists the inputs to the model used for the year ended 30 June 2008:

$0.35 Options

31 Dec 2009

$0.45Options

30 Jun 2010

$0.90 Options

30 Nov 2009

$1.20Options

30 Nov 2010

Exercise price $0.35 $0.45 $0.90 $1.20Share price on date of valuation $1.33 $1.33 $1.33 $1.33Dividend yield - - - -Volatility 75% 75% 75% 75%Risk-free interest rate 6.4% 6.4% 6.4% 6.4%Valuation date 5 Jul 07 5 Jul 07 5 Jul 07 5 Jul 07Expiry date 31 Dec 09 30 Jun 10 30 Nov 09 30 Nov 10Expected life of option (years) 2.4 2.9 2.3 3.3Fair value at grant date $1.062 $1.023 $0.777 $0.774

The following table lists the inputs to the model used for the year ended 30 June 2007:

$0.20 Options

31 Jul 2009

$0.20 Options

30 Jun 2010

Exercise price $0.20 $0.20Share price on date of valuation $0.19 $0.26Dividend yield - -Volatility 60% 75%Risk-free interest rate 5.99% 5.52%Valuation date 31 July 2006 6 Dec 2006Expiry date 31 July 2009 30 Jun 2010Expected life of option (years) 3 3.6 Fair value at grant date $0.083 $0.163

The dividend yield refl ects the assumption that the current dividend payout will remain unchanged. The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

The total share based payment expense for both employees and consultants was $3,874,441 (2007: $58,100).

19. CONTROLLED ENTITIES

All controlled entities are included in the consolidated fi nancial statements. The fi nancial year-end of the controlled entities is the same as that of the parent entity.

Place of incorporation

% of Shares held(i)

Name of controlled entity 2008 2007

Terrace Gold NL Australia 80 80Indo Energy Pty Ltd Australia 100 100Indo Mines (Indonesia) Pty Ltd Australia 100 -

The above named investments in controlled entities have a carrying value at balance date of nil (2007: nil)

NotesThe percentage of voting power is its proportion to ownership.i.

48


$ $ $ $

20. REMUNERATION OF AUDITORS

Audit servicesKPMG Australia 28,000 - 20,000 -Other Auditors 12,364 26,850 12,364 23,600Total Auditors’ Remuneration 40,364 26,850 32,364 23,600

21. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

Estimated impairment of deferred exploration, evaluation and development expenditurei.

The Group tests annually whether deferred exploration, evaluation and development expenditure has suffered any impairment, in accordance with the accounting policy.

Valuation of share-based paymentsii.

The fair value of options granted (determined using the Black-Scholes option pricing model) is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which option holders become unconditionally entitled to the options.



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50

23. EARNINGS PER SHARE

Consolidated Consolidated2008 2007

Cents per

ShareCents per

Share

Basic profi t/(loss) per share:From continuing operations 3.6 (1.7)Total basic profi t/(loss) per share 3.6 (1.7)

Diluted profi t/(loss) per share:From continuing operations 3.2 (1.7)Total diluted profi t/(loss) per share 3.2 (1.7)

The following refl ects the income and share data used in the calculations of basic and diluted earnings per share:


$ $

Net profi t/(loss) used in calculating basic and diluted earnings per share 2,858,570 (1,023,841)

Number of Number ofShares Shares

2008 2007

Weighted average number of ordinary shares used in calculating basic earnings per share 80,510,160 59,675,033Effect of dilutive securities* 10,320,043 -Adjusted weighted average number of ordinary shares and potential ordinary shares used in calculating basic and diluted earnings per share 90,830,203 59,675,033

*Dilutive securities

At 30 June 2007, these options were not included in the calculation of diluted EPS as they were not considered dilutive. Accordingly, for the year ended 30 June 2007, diluted loss per share is the same as the basic loss per share.

Conversions, calls, subscriptions or issues after 30 June 2008

Since 30 June 2008, nil shares have been issued, nil incentive options and nil options have been granted. No shares have been issued as a result of the exercise of options since 30 June 2008.




$ $ $ $

24. NOTES TO THE CASH FLOW STATEMENTS

(a) Reconciliation of loss from continuing operations after tax to net cash fl ows from operating activities

Profi t/(loss) for the year 2,858,570 (1,023,841) 2,858,882 (1,024,419)

Adjustment for non-cash income and expense itemsDepreciation 18,410 9,121 18,410 9,121Provision for dimunition of investments - (48,000) - (48,000)Gain on sale of mining tenements (7,850,000) (425,963) (7,850,000) (425,963)Impairment/loss on disposal of property, plant and equipment - 5,519 - 5,519Gain on sale of other fi nancial assets (596,880) - (596,880) -Share-based payments expensed 3,874,441 58,100 3,874,441 58,100Exploration expenditure written off 14,812 709,680 - 504,314Doubtful debts - - 21,489 205,366

Changes in assets and liabilitiesDecrease/(Increase) in trade and other receivables 40,601 (62,422) 40,601 (62,482)Increase/(Decrease) in trade and other payables (51,422) (35,392) (56,074) (35,232)Increase in current tax liabilities 936,658 - 938,710 -Increase/(Decrease) in deferred tax balances (83,507) - (81,707) -Increase/(Decrease) in provisions 2,595 (32,377) 2,595 (32,377)Net cash outfl ows from operating activities (835,722) (845,575) (829,533) (846,053)

(b) Reconciliation of Cash and Cash Equivalents

Cash at bank and on hand 252,384 709,821 252,118 709,391Short term deposits 1,721,055 3,832,992 1,721,055 3,832,992

1,973,439 4,542,813 1,973,173 4,542,383

(c) Credit Standby Arrangements with Banks

At balance date, the Company had no used or unused fi nancing facilities.

(d) Non-cash Financing and Investing Activities

30 June 2008

During the fi nancial year ended 30 June 2008, the Company issued 10,000,000 fully paid ordinary shares to Nusantara Energy Ltd at an issue price of $1.33 per share (refer Note 12) pursuant to the Acquisition agreement to acquire an interest in the Jogjakarta Ironsands Project (“Project”).

It is noted that the Company will issue a further 5,000,000 shares to Nusantara Energy Ltd upon the Company increasing its interest in the Project from 30% to 70% and the signing of a Contract of Works for the Project.

The Company also disposed of its 10% clawback right in the Wonarah phosphate project in the Northern Territory. As part of the transaction, the Company also disposed of its right to a 50% contributing interest in the project area for the exploration and development of deposits for diamonds, gold and base metals.

52

24. NOTES TO THE CASH FLOW STATEMENTS (CONTINUED)

(d) Non-cash Financing and Investing Activities (continued)

$

Consideration received3,000,000 Minemakers ordinary shares (MAK) (holding lock until 16 June 2009) 5,850,000Cash 2,000,000

7,850,000Net Assets Disposed Exploration and evaluation assets -Fair value of net assets -Excess of consideration over fair value of assets disposed 7,850,000

Non-cash consideration:3,000,000 Minemakers ordinary shares (MAK) 5,850,000 5,850,000Net Cash Infl ow Upon Disposal 2,000,000

30 June 2007

During the fi nancial year ended 30 June 2007, the Company disposed of its remaining 18.75% equity in the historic Bird-in-Hand underground gold mine and the surrounding exploration licence EL 3215.

$

Consideration received1,350,000 Maximus ordinary shares (MXR) 216,000675,000 Flinders ordinary shares (FDL) 11,475

227,475

Net Assets Disposed Exploration and evaluation assets 602Fair value of net assets 602

Excess of consideration over fair value of assets disposed 226,873

Non-cash consideration:1,350,000 Maximus ordinary shares (MXR) 216,000675,000 Flinders ordinary shares (FDL) 11,475 227,475Net Cash Infl ow Upon Disposal -

The Company also disposed of its 100% interest in the Wonarah phosphate project in the Northern Territory. The Company retains the right to a 50% contributing interest in the project area for the exploration and development of deposits for diamonds, gold and base metals. At the time of the initial sale, Indo Mines also had the right to clawback up to 10% equity in the phosphate rights in the project area by reimbursing Minemakers 20% of their total incurred expenditure on the project (this right was sold in June 2008).



$

Consideration receivedReimbursement of costs 50,000625,000 Minemakers ordinary shares (MAK) 125,000625,000 Minemakers unlisted options exercisable at $0.001 each 124,563

299,563

Net Assets Disposed Exploration and evaluation assets 100,563Fair value of net assets 100,563

Excess of consideration over fair value of assets disposed 199,000

Non-cash consideration:625,000 Minemakers ordinary shares (MAK)625,000 Minemakers unlisted options exercisable at $0.001 each

125,000124,563249,563

Net Cash Infl ow Upon Disposal 50,000

25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Overview

The Company’s and Group’s principal fi nancial instruments comprise trade and other receivables, trade and other payables, available-for-sale investments, cash and short-term deposits. The main risks arising from the Company’s and Group’s fi nancial instruments are interest rate risk, equity price risk, foreign currency risk, credit risk and liquidity risk.

This note presents information about the Company’s and Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Other than as disclosed, there have been no signifi cant changes since the previous fi nancial year to the exposure or management of these risks.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Given the nature and size of the business, no formal risk management committees have been established, however responsibility for control and risk management is delegated to the appropriate level of management with the chairman and chief fi nancial offi cer (or their equivalent) having ultimate responsibility to the Board for the risk management and control framework.

Risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Company’s activities.

Arrangements put in place by the Board to monitor risk management include monthly reporting to the Board in respect of the operations and fi nancial position of the Company. The Board also reviews risks that relate to operations and fi nancial instruments as required, but at least every six months.

Given the uncertainty as to the timing and amount of cash infl ows and outfl ows, the Company has not implemented any additional strategies to mitigate the fi nancial risks and no hedging has been put in place. As the Company’s operations change, the Directors will review this policy periodically going forward.

(b) Credit risk

Credit risk is the risk of fi nancial loss to the Company or Group if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations. This arises principally from cash and cash equivalents and trade and other receivables.

54

25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(b) Credit risk

The carrying amount of the Company’s and Group’s fi nancial assets represents the maximum credit risk exposure, as represented below:


$ $ $ $

Cash and cash equivalents 1,973,439 4,542,813 1,973,173 4,542,383Restricted cash and cash equivalents 70,000 10,000 70,000 10,000Trade and other receivables 37,771 78,372 37,771 78,372Other fi nancial assets 5,341,500 1,285,551 5,341,500 1,285,551 7,422,710 5,916,736 7,422,444 5,916,306

The Group does not have any signifi cant customers and accordingly does not have any signifi cant exposure to bad or doubtful debts.

Trade and other receivables comprise GST and other tax refunds due. Where possible the Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verifi cation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not signifi cant. At 30 June 2008, none (2007: none) of the Group’s receivables are past due. No impairment losses have been recognised in the Group accounts.

Signifi cant concentration of credit risk exists within cash and cash equivalents and other fi nancial assets. Cash and cash equivalents is invested at a counterparty with a good credit rating. Other fi nancial assets consist of mainly listed securities tradable on ASX.

The Company’s accounts include receivables from controlled entities for which some provision for non-recovery has been made. Provision is made against loans to entities where the underlying exploration assets have been fully provided for or written off. The provision is reconciled below:

CompanyReceivables from controlled entities impairment provision: 2008 2007

$ $

Opening balance 1,657,785 1,635,596Provision for non-recovery of receivables from controlled entities (1,657,785) (1,635,596)Closing balance (note 6) - -

With respect to credit risk arising from cash and cash equivalents, the Company’s and Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Cash and cash equivalents are held with the ANZ Bank which is an Australian bank with an AA credit rating (Standard & Poor’s).

In relation to credit risk arising from other fi nancial assets, the Group limits its exposure by only investing in liquid securities tradable on the Australian Securities Exchange (ASX).

(c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due. The Board’s approach to managing liquidity is to ensure, as far as possible, that the Group will always have suffi cient liquidity to meet its liabilities when due. At 30 June 2007 and 2008, the Group has suffi cient liquid assets to meet its fi nancial obligations.

The contractual maturities of fi nancial liabilities, including estimated interest payments, are provided below. There are no netting arrangements in respect of fi nancial liabilities.



2008≤6

months6-12

months1-5

years≥5

Years TotalGroup $ $ $ $ $

Financial LiabilitiesTrade and other payables 177,626 - - - 177,626

177,626 - - - 177,626

2008Company


171,126 - - - 171,126

2007Group


192,165 - - - 192,165

2007Company


190,165 - - - 190,165

(d) Interest rate risk

The Company’s and Group’s exposure to the risk of changes in market interest rates relates primarily to the cash and short-term deposits with a fl oating interest rate.

These fi nancial assets with variable rates expose the Company and Group to cash fl ow interest rate risk. All other fi nancial assets and liabilities, in the form of receivables, investments and payables are non-interest bearing.

All cash balances were interest bearing as disclosed below:


$ $ $ $

Interest-bearing fi nancial instruments Cash at bank and on hand 252,384 709,821 252,118 709,391Short term deposits 1,721,055 3,832,992 1,721,055 3,832,992Restricted short term deposits 70,000 10,000 70,000 10,000

2,043,439 4,552,813 2,043,173 4,452,383

The Group’s cash at bank and on hand and short term deposits had a weighted average fl oating interest rate at year end of 7.41% (2007: 6.21%) and for the Company the weighted average fl oating interest rate at year end was 7.35% (2007: 6.21%).

The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk.

56

25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(d) Interest rate risk (Continued)

Interest rate sensitivity

A sensitivity of 10 per cent has been selected as this is considered reasonable given the current level of both short term and long term interest rates. A 10% movement in interest rates at the reporting date would have increased (decreased) equity and profi t and loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2007. This analysis is prepared based on cash balances as at year end and due to signifi cant decreases in the cash balance throughout the year is not considered representative of the risk during the year.

Profi t or loss

10%

increase10%

decrease

2008GroupCash and cash equivalents 14,794 (14,794)CompanyCash and cash equivalents 14,794 (14,794)

2007GroupCash and cash equivalents 27,758 (27,758)CompanyCash and cash equivalents 27,758 (27,758)

(e) Foreign currency risk

As a result of activities overseas, the Group’s balance sheet can be affected by movements in exchange rates.

The Group also has transactional currency exposures. Such exposure arises from exploration expenditure denominated in foreign currencies.

The Group currently does not engage in any hedging or derivative transactions to manage foreign currency risk.

(f) Equity Price risk

The Group is exposed to equity price risk arising from its equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments and no hedging or derivative transactions have been used to manage equity price risk.

Equity price sensitivity

The sensitivity analyses below have been determined based on the exposure to equity price risks arising from available-for-sale fi nancial assets held at the reporting date. At reporting date, if the equity prices had been 20% higher or lower:

Net profi t or loss for the years ended 30 June 2008 and 30 June 2007 would be unaffected by price movements at • balance date as the equity investments are classifi ed as available for sale; and

Equity reserves at 30 June 2008 would increase/decrease by $1,068,300 (2007: increase/decrease by $257,110) for • the Group and the Company as a result of the changes in fair value of available-for-sale investments.

The Group’s sensitivity to equity prices has increased signifi cantly from the prior year following the sale of the Wonarah 10% clawback right (see Note 24(d)) and the receipt of Minemakers shares as part consideration.



(g) Commodity Price risk

The Group is exposed to commodity price risk. These commodity prices can be volatile and are infl uenced by factors beyond the Group’s control. As the Group is currently engaged in exploration and business development activities, no sales of commodities are forecasted for the next 12 months, and accordingly, no hedging or derivative transactions have been used to manage commodity price risk.

(h) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confi dence and to sustain future development of the business. Given the stage of development of the Group, the Board’s objective is to minimise debt and to raise funds as required through the issue of new shares.

There were no changes in the Group’s approach to capital management during the year.

The Group is not subject to externally imposed capital requirements.

(i) Fair Value

The net fair value of fi nancial assets and fi nancial liabilities approximates their carrying value. The methods for estimating fair value are outlined in the relevant notes to the fi nancial statements.

26. COMMITMENTS

Estimated commitments for which no provisions were included in the fi nancial statements are as follows:

(a) Exploration Expenditure Commitments

The company has no obligations to perform minimum exploration work. All other tenements are farmed out whereby the farminee is contracted to meet the minimum expenditure commitment.

A controlled entity holds a number of tenements in Peru. There is no minimum exploration work commitment for these tenements.

(b) Operating Lease Commitments


$ $

Non-cancellable operating lease contracted for but not capitalised in the fi nancial statements

Minimum lease payments payable:- not later than one year 129,001 15,463- later than one year but not later than 5 years 490,493 -- later than 5 years - -

619,494 15,463

The non-cancellable operating lease recognised in the current year expires 19 November 2012. The non-cancellable operating lease recognised in the 2007 year is for the Company’s former offi ce premises which expired on 30 November 2007.

(c) Minera Andes del Norte SAC

Terrace Gold NL (“Terrace”) a controlled entity exercised its option to acquire the issued capital of Minera Andes del Norte SAC in 1997. Terrace issued 5,000,000 ordinary fully paid shares to the vendor as part of the settlement of this acquisition. Further shares in Terrace may need to be issued to the vendor upon the Stock Exchange listing of Terrace in order that the vendor’s holding will equate to the greater of 5,000,000 shares or 10% of the issued capital of Terrace at the time of such listing.

58

26. COMMITMENTS (CONTINUED)

(d) Financial Support of Controlled Entity

The parent entity has committed itself to provide fi nancial support to its controlled entity, Terrace Gold NL. Refer Note 7(c).

(e) Acquisition of Nangali

Terrace and Compass Resources NL signed a letter of intent with Compania LJB Normandy Peru SA to acquire the Nangali Gold Project in 2004. Pursuant to the Letter of Intent, the parties paid US$30,000 upon signing with a further US$200,000 due when full title has been transferred to Terrace and Compass. In June 2006 the parties agreed to expedite the purchase and varied the terms of this Letter of Intent such that the balance of the purchase price was reduced to US$150,000 payable immediately. Terrace’s share of the balance outstanding is US$45,000, which was paid on 14 July 2006. A supreme decree is now being sought so that full title can be transferred to Terrace and Compass.

27. CONTINGENT LIABILITIES

In accordance with normal industry practice the economic entity has entered into joint venture operations and i. farm-in agreements with other parties for the purpose of exploring and developing its mineral interests. If a party to a joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venturers are liable to meet those obligations. In this event the interest in the tenements held by the defaulting party may be redistributed to the remaining joint venturers. A contingent liability exists in respect of contributions due to be paid by farm-in partners of the economic entity to some of its joint ventures.

At the end of the financial year there existed claims against the Company totalling $38,791 (excluding interest) ii. currently in dispute. In the opinion of the directors no liability exists for these amounts and any action taken by the relevant parties to retrieve these amounts will be defended.

On 30 April 2004 the economic entity sold Minera Andes del Norte SAC (“Mansa”) to Lumina Copper iii. Corporation. The parent entity provided warranties concerning the status of Mansa and its project to the purchaser. The warranties provided were industry standard for such a sale.

On 30 June 2004 the economic entity sold AKD Brasil Limitada (“AKDB”) to Trans Pacific Gold Pty Ltd. The iv. parent entity provided warranties concerning the status of AKDB to the purchaser. The warranties provided were industry standard for such a sale.

In relation to point (ii) above, the company has sought legal advice and based on this advice, the directors are confi dent of successfully defending all claims. Accordingly, no provision has been made elsewhere in the fi nancial statements for these amounts.

28. SUBSEQUENT EVENTS

As at the date of this report there are no matters or circumstances which have arisen since 30 June 2008 that have signifi cantly affected or may signifi cantly affect:

the operations, in financial years subsequent to 30 June 2008, of the Company or Group;a.

the results of those operations, in financial years subsequent to 30 June 2008, of the Company or Group; orb.

the state of affairs, in financial years subsequent to 30 June 2008, of the Company or Group.c.



In accordance with a resolution of the Directors of Indo Mines Limited, I state that:

1. In the opinion of the Directors:

the financial statements, notes and the additional remuneration disclosures included in the remuneration a. report included in the directors’ report designated as audited of the Company and of the Consolidated Entity are in accordance with the Corporations Act 2001 including:

giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June i. 2008 and of their performance for the year ended on that date; and

complying with accounting standards (including the Australian Accounting Interpretations) and the ii. Corporations Act 2001;

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

the financial statements also comply with International Financial Reporting Standards as disclosed in note 1(b);c.

the remuneration disclosures contained in the Remuneration Report in the Directors’ report comply with d. Australian Accounting Standard AASB 124, Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001; and

2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the fi nancial year ending 30 June 2008.

For and on behalf of the Directors

PHILIP WELTENManaging Director

Dated this 26th day of September 2008

DIRECTORS’ DECLARATION

60

INDEPENDENT AUDIT REPORT


62

COMPLIANCE WITH ASX CORPORATE GOVERNANCE RECOMMENDATIONS

During the 2008 fi nancial year, the Company complied with the ASX Principles and Recommendations other than in relation to the matters specifi ed below.

Recommendation Ref

Notifi cation of Departure

Explanation for Departure

2.1, 2.2, 2.3 No independent directors, including Chairman

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the expense of the appointment of independent Non-Executive Directors.

The Board believes that the individuals on the Board can make, and do make, quality and independent judgments in the best interests of the Company on all relevant issues. Directors having a confl ict of interest in relation to a particular item of business must absent themselves from the Board meeting before commencement of discussion on the topic.

The Company’s Chairman, Mr Darryl Harris, is considered by the Board not to be independent in terms of the ASX Corporate Governance Council’s defi nition of independent director. However the Board believes that the Chairman is able to and does bring quality and independent judgment to all relevant issues falling within the scope of the role of a Chairman.

2.4 A separate Nomination Committee has not been formed.

The Board considers that the Company is not currently of a size to justify the formation of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing Directors to enable identifi cation of attributes required in new Directors. Where appropriate independent consultants are engaged to identify possible new candidates for the Board.

4.2, 4.3, 4.4 A separate Audit Committee has not been formed and there is not an Audit Committee operating charter.

The Board considers that the Company is not of a size, nor are its fi nancial affairs of such complexity to justify the formation of an audit committee. The Board as a whole undertakes the selection and proper application of accounting policies, the identifi cation and management of risk and the review of the operation of the internal control systems.

9.2 There was no separate Remuneration Committee.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of a remuneration committee. The Board as a whole is responsible for the remuneration arrangements for Directors and executives of the Company.

If the Company’s activities increase in size, scope and/or nature, the appointment of a remuneration committee will be reviewed by the Board and implemented if appropriate.

As the Company’s activities increase in size, scope and/or nature the Company’s corporate governance principles will be reviewed by the Board and amended as appropriate.

Further details of the Company’s corporate governance policies and practices are available on the Company’s website at www.indomines.com.au.


ASX ADDITIONAL INFORMATION

The shareholder information set out below was applicable as at 30 September 2008.

1. TWENTY LARGEST SHAREHOLDERS

The names of the twenty largest holders of each class of listed securities are listed are:

Ordinary shares Number Percentage

1 Nusantara Energy Limited 13,000,000 16.10%2 Merrill Lynch (Australia) Nominees Pty Limited 8,826,242 10.93%3 Indian Ocean Resources Limited 4,616,666 5.72%4 Arredo Pty Ltd 3,700,000 4.58%5 Crown Valley Resources Limited 3,000,000 3.72%6 Mr Michael Charles Mann 2,000,000 2.48%7 AWJ Family Pty Ltd 1,742,542 2.16%8 ANZ Nominees Limited 1,719,030 2.13%9 Seasaf I Resources Pte Ltd 1,663,247 2.06%10 Mr William Richard Brown 1,623,023 2.01%11 Asian Lion Limited 1,300,000 1.61%12 Archipelago Energy & Resources Pte Ltd 1,000,000 1.24%13 Blackmort Nominees Pty Ltd 1,000,000 1.24%14 Mountainside Investments Pty Ltd 1,000,000 1.24%15 Reef Investments Pty Ltd 990,109 1.23%16 Anglo Pacifi c Group Plc 900,000 1.11%17 Colbern Fiduciary Nominees Pty Ltd 800,000 0.99%18 Philaton Pty Ltd 650,000 0.81%19 Mr John Gary Gold 593,733 0.74%20 Mr Ernest Saronga Massawe 590,000 0.73%

Total Top 20 50,714,592 62.83%Others 30,017,153 37.17%

Total Ordinary Shares on Issue 80,731,745 100%

2. DISTRIBUTION OF EQUITY SECURITIES

Analysis of numbers of shareholders by size of holding:

Ordinary shares

Number of

ShareholdersNumber of

Shares

1 - 1,000

521 307,2451,001 - 5,000 531 1,407,5455,001 - 10,000 172 1,401,41610,001 - 100,000 342 11,434,639100,001 - and over 89 66,180,900

1,655 80,731,745The number of shareholders holding less than a marketable parcel of shares are: 317 118,886

64

ASX ADDITIONAL INFORMATION(CONTINUED)

3. VOTING RIGHTS

See Note 12(b) of the Notes to the Financial Statements.

4. SUBSTANTIAL SHAREHOLDERS

As at 30 September 2008, Substantial Shareholder notices have been received from the following:

Number of

Shares

Anglo Pacifi c Group Plc 14,336,515

Nusantara Energy Limited 13,000,000

5. UNQUOTED SECURITIES

The names of the security holders holding more than 20% of an unlisted class of security are listed below:

Number of Options

Unlisted Options (Exercisable at $0.20 on or before 31 July 2009)Mr Keith Charles Brooks 150,000D Harris 150,000Mark Stewart 150,000TOTAL 450,000

Unlisted Options (Exercisable at $0.20 on or before 30 June 2010)Arredo Pty Ltd 3,330,000Mountainside Investments Pty Ltd 2,700,0009 other holders (less than 20%) 3,970,000TOTAL 10,000,000

Unlisted Options (Exercisable at $0.90 on or before 30 November 2009)Black Swan Capital Pty Ltd 500,000Helen Barton 300,0002 other holders (less than 20%) 250,000TOTAL 1,050,000

Unlisted Options (Exercisable at $1.20 on or before 30 November 2010)Black Swan Capital Pty Ltd 500,000Oldbridge Holdings Pty Ltd 300,0002 other holders (less than 20%) 250,000TOTAL 1,050,000

Incentive Options (Exercisable at $0.35 on or before 31 December 2009)Mr Philip John Welten & Mrs Peta Margaret Welten 412,844Ms Peta Welton 837,156TOTAL 1,250,000

Incentive Options (Exercisable at $0.45 on or before 30 June 2010, vesting 22 January 2009)Ms Peta Welten 1,250,000TOTAL 1,250,000


6. ON-MARKET BUY BACK

There is currently no on-market buy back program for any of Indo Mines Limited’s listed securities.

7. EXPLORATION/PROJECT INTERESTS

As at 30 September 2008, the Company has an interest in the following projects:

Project Tenement Interest

IndonesiaJogjakarta KP15/KPTS/KP/EXPL/X/2007 30%

PeruChinguela 01-01282-96 100%

Nangali 01-00038-01 30%01-00039-01 30%01-00553-01 30%01-00554-01 30%01-00555-01 30%01-00556-01 30%01-01177-02 30%

A.B.N. 40 009 245 210

Level 9, BGC Centre28 The EsplanadePerth WA 6000

Telephone: +61 8 9322 6322Facsimile: +61 8 9322 6558

Documents

Annual Report 2008 - Indo Mines · 2012-03-14 · Indo Mines Limited Annual Report 2008 1 MANAGING DIRECTOR’S REPORT JOGJAKARTA LIQUID IRON PROJECT - INDONESIA The Company has continued