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metals finance limitedannual report 2009metals finance limitedannual report 2009

metals finance limitedannual report 2009

corporate directory

RegisteRed Office shaRe RegistRyMetals finance Limited Registries Limited

c/o hillhouse, Burrough & McKeown Level 7, 207 Kent street

Level 7, grant thornton house sydney, NsW 2000

102 adelaide street, Brisbane, QLd, 4000 telephone: +61 2 9290 9667

telephone: +61 7 3220 1144 facsimile: +61 2 9279 0664

facsimile: +61 7 3220 3434 Website: www.registries.com.au

Website: www.metalsfinance.com

email: [email protected]

diRectORs BaNKeRsgeoff hill (chairman) Bank of Queensland – australia

tony treasure (executive director) National australia Bank – australia

Warren eades (Non–executive director) Bankwest – australia

Richard stacy anthon (Non–executive director) standard Bank – south africa

Michael John gunn (Non–executive director) scotia Bank – canada

PRiNciPaL Office auditORunit 32, 28 Burnside Road PKf chartered accountants

yatala, Qld, australia, 4207 Level 6, 10 eagle street

Brisbane Qld 4000

sOLicitORs iNvestOR eNQuiReshemming + hart Lawyers unit 32, 28 Burnside Road

Level 2, 307 Queen street yatala, QLd, 4207

Brisbane, QLd, 4000 PO Box 689, Ormeau, Qld, 4208

telephone: +61 7 3002 8700 telephone: +61 7 3807 4166

facsimile: +61 7 3221 3068 facsimile: +61 7 3807 3801

www.metalsfinance.com

cOMPaNy secRetaRyarno de vos (chief financial Officer)

aBN 83 127 131 604



table of contents

Metals Finance liMited and its controlled entities 2009 annual report

chairman’s letter 2

chief executive officers report 4

directors report 12

remuneration report 17

auditor’s independence declaration 20

income statement 21

Balance sheet 22

statement of changes in equity 23

cash Flow statement 24

notes to the Financial statements 25

directors’ declaration 51

independent auditor’s report 58

shareholder information 60

corporate Governance 62


metals finance limitedannual report 2009|2

chairmans letter

dear shareholder,

2009 was a busy and successful year for Metals Finance limited, notwithstanding the Global Financial crisis,

• We moved house from Vancouver to sunny Queensland and saved over $1 million per annum

• We bought a very good investment in Bass Metals ltd. and have made an unrealized gain of $4.2 million as at the date of preparation of this report. We still have $8.2 million on deposit

• our nta per share whilst significantly above our share price grew from 19 cents per share last year to 21 cents this year

• palabora in which we own 50% finally turned into positive cash flow, not without difficulties

• our 2 australian nickel development projects Barnes Hill and lucky Break have actually started to look better than previously thought as tony treasure will explain in the report below

• We have been fortunate in seeing some very good quality project opportunities in europe, america and africa

• Which gives us a strong pipeline going into 2010

so, i have pleasure in reporting to you at this time that, although no company has been immune to these events, Metals Finance limited has not only survived the crisis well, it has made significant progress on a number of fronts.

the company commences the upcoming year with one of its projects up and running and a number of opportunities under late stages of feasibility study. the company also has a healthy cash position and a substantial and increasing value in its 20.9% holding in the australian listed Bass Metals ltd. We confidently expect the value of this strategic investment to continue growing, on the basis of plans by Bass to shortly commence development of its Hellyer base metal mine and treatment facility in tasmania.

Metals Finance is fortunate in being in the position where it can take stakes in good companies and thus indirectly in projects, or directly as participants in mining ventures. the company’s target is to achieve the best outcome for shareholders.

our major disappointment for the year has been the failure of the palabora project in south africa to achieve the returns that the company had been expecting. as is explained in more detail below by our ceo, the implementation of the palabora nickel sulphate project in south africa has represented a significant milestone and technical success for Metals Finance. However, although the company has not incurred any cost beyond the capital provided for construction, its financial performance to date has been disappointing. the project has operated at a modest profit over the past nine months, but revenue has been severely impacted by limitations in supply of nickel feedstock from our joint venture partner’s copper refinery and by the low prevailing world nickel price through the period.

our australian and south african management are currently working closely with the palabora Mining company to ensure that the previous limitations in nickel supply are resolved. Management are confident that the next year will see significantly enhanced performance from this project. the Board of Metals Finance will be reviewing the company’s strategy in respect of Metals Finance africa MFa at the end of the year and expect to finalise its position early in the first quarter of next year.

during the year the company has completed its transitioning from canada to australia and we have already started to see the benefits of a reduction in overheads and greater efficiency in technical and administrative management. We have also commenced enhancing of our technical capabilities at management level.


metals finance limitedannual report 20093|

chairmans letter

our management team is expected to deliver definitive Feasibility studies on two high potential projects around the end of this year,

1. the revised lucky Break nickel project, in north Queensland, and 2. the chambishi copper/cobalt tailings project, in Zambia.

they are in addition making solid progress on late stage studies on the Barnes Hill nickel project in tasmania, a joint venture with australian listed company proto resources and investments ltd., and are reviewing a number of other potential opportunities which at this stage appear to suit the Metals Finance business model.

i look forward to a year of further solid progress for Metals Finance limited and would particularly thank tony treasure for his unstinting efforts to deliver value to shareholders. Finally i would like to welcome to Metals Finance our two new appointments Mike Gunn and rick anthon to our board, thank Warren eades for his efforts and acknowledge the dedication and hard work of our small management team.

i would invite all of our shareholders to attend our annual General Meeting, which will be held in Brisbane at the Marriot Hotel in eagle street on

Friday 18th december 2009.

G.G.HillcHairMan



chief executives officers report

oVerVieW

Projects

substantial progress has been achieved in a number of areas and the company is now poised to complete definitive Feasibility studies on a number of its key projects, as outlined in the project review provided below.

on the project front at this point in time, the company has:

• one project up and running (palabora, south africa)

• two high potential projects in late feasibility stage

(lucky Break and chambishi)

• two projects in earlier feasibility stage

(Barnes Hill and pigment)

• a number of further opportunities under investigation

the studies to date on all of these projects suggest that they are technically feasible. their progressive development over the next couple of years has the potential to establish strong long term cash flow for the company.

Investments

during the year the company made a significant strategic investment in the asX listed resource company Bass Metals ltd. (BsM). Metals Finance now owns a 20.9% stake in Bass and holds a seat on its board of directors. the purpose of this investment for Metals Finance has been to undertake equity investment in well managed resource companies which have attractive resource projects.

the Bass Metals investment has already borne significant fruit for the company in its substantial increase in market value, from a cost of $2.07 million to a current market value of approximately $6.3 million (based on a share price of 29 cents on 12 november). Bass Metals recently reported to the market its intent to proceed with the development of the Hellyer Mine project in tasmania. Based on a detailed feasibility study this project is expected to yield an operating surplus of $50 million after capital costs of $26 million over the next three or so years. the company therefore expects to see continued increase in the value of its investment over the next couple of years.

Administration

during the year the company implemented the resolution made at the last annual General Meeting, to change its country of domicile from canada to australia. although this entailed significant administrative effort, the move was achieved smoothly and at lower cost than originally expected. as of the 15th May 2009, the company became a wholly australian organisation and changed its name from Metals Finance corp. to Metals Finance limited. the move, as expected, has resulted

in significant reduction in overhead costs (in excess of $1 million per annum) and more effective administrative and technical management. the only undertaking that the company has maintained in canada has been its 50% shareholding in the Met-solve testing laboratories in Vancouver. agreement has recently been reached with the company’s partner (Falcon concentrators inc.), subject to completion of appropriate documentation, to assume 100% ownership of the laboratory.

The Board

the company has, since moving its jurisdiction to australia, added significant strength to its Board through the appointment of a further two directors. rick anthon, a Brisbane specialist resources lawyer who joined the board on 7 october 2009, brings to the team a wealth of legal and corporate experience. Mike Gunn, who joined the board on the same date, is a highly regarded metallurgist and who is, again highly experienced in Metals Finances field of endeavour. the company has in addition secured the full time contract services of Harald Muller, a chemical engineer with significant experience in technical and project management.

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chief executives officers report

palaBora proJect (50% oWned)

the implementation of the palabora nickel sulphate project in south africa has represented a significant milestone and technical success for Metals Finance. However, the financial performance of the project over the past 12 months has been disappointing. this has been the result of a number of factors which have been outside of the company’s control, but which have been primarily: • the significant drop in nickel value since the onset of the global financial crisis • lower than design supply of nickel in solution to the facility

completion of commissioning of the facility and establishment of steady state operations were completed during February 2009. Working capital for the commissioning and ramp up stages of the project was provided by pMc.

the projections of output for the facility in the original feasibility study (around 80 tonnes per month of nickel sulphate) were based on projected production from the copper mine at the time as reported by pMc. since commissioning, nickel supply has averaged around 65% of the design capacity of the plant. pMc’s current projections, provided recently, indicate that nickel supply going forward will be closer to design capacity of the nickel plant.

revenue has also been impacted by the production of a proportion of high iron product that has attracted lower sales values. operating costs for the plant have been higher than expected. However, even in the face of these negative factors, the project has generated positive cash flow over the past twelve months. the following table provides a summary of the results achieved - both since commissioning of the plant and during the period after continuous operations were established, in February 2009:

auG 2008 to FeB 2009 to auG 2008 to FeB 2009 to

sep 2009 sep 2009 sep 2009 sep 2009

Zar Zar a$* a$*

sales revenue 11,408,153 8,662,892 1,728,508 1,312,559

stock at end sept 09 922,000 922,000 139,697 139,697

Total 12,330,153 9,584,892 1,868,205 1,452,256

operating costs 11,828,727 7,508,421 1,792,231 1,137,640

Cash surplus/deficit 501,426 2,076,471 75,974 314,617

Note : ZAR:A$ conversion at 6.6:1

The ongoing operation

pMc is the operator of the project and is responsible for marketing, with the nickel sulphate being sold under a ‘rio tinto’ label.

under the joint venture agreement with pMc there is a defined life to this operation of five years. as long as sufficient supply of nickel is provided to the plant by pMc, it is capable of yielding a significant ongoing cash flow to the Metals Finance Group. pMc have provided Metals Finance with their internal forward projections of nickel supply, based on planned copper supply from the mine and its average nickel content. the following chart illustrates pMc’s projected supply of nickel to the joint venture plant over the next 2 years (expressed as equivalent tonnes per month of nickel sulphate) before provision for plant availability in the nickel plant and potential for losses through the sulphate circuit.

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pMc proJection potential nickel supply to sulpHate plant

sept 2009 to dec 2011



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the average supply of nickel to the plant over the period of the projection is equivalent to approximately 97 tonnes per month of nickel sulphate. the company’s internal models have been established on a range of production from the plant going forward between 70 and 90 tonnes per month of sulphate.

the following chart tracks cumulative expected cash return to Metals Finance africa (converted to australian dollars) from the operation between now and 2014, at an average output of 70 and 90 tonnes of nickel sulphate per month over the period.

the trends in the graph (above) reflect the following factors:

1. during the first period 100% of surplus cash flow is directed to recoupment of capital 2. after capital is recovered surplus is directed 60% to Metals Finance africa and 40% to pMc 3. the nickel price assumptions provided above 4. the last year in the model is a part year

Accounting treatment

under the joint venture agreement signed in september 2005, it was Metals Finance africa’s responsibility to fund the establishment of the project, retaining ownership of the plant until capital had been recouped through receipt of 100% of operating surplus from the operation. after capital repayment surplus was to be distributed 60% to Metals Finance africa and 40% to pMc for a period of five years from commencement of steady state operations. at the end of this period ownership of the plant was to be transferred to pMc at no cost.

this arrangement has been modified through an addendum to the Joint Venture agreement entered into during the year, to simplify accounting of the operation for Metals Finance africa and pMc and to ensure that Metals Finance africa does not incur a further tax liability on its capital repayments. under the amended agreement ownership of the plant has been transferred to pMc and the accumulated outstanding capital plus interest (approx a$4,900,000) is now owing to Metals

Finance africa by pMc as a receivable. pMc has also incurred capital costs in the construction of the plant (approx a$140,000). 100% of surplus from ongoing operations will be allocated to repayment of the two capital accounts, on a pro rata basis. after the receivable is paid, Metals Finance africa will receive 60% of the surplus from operations until the expiry of five years from commencement of steady state operations.

as a result of the new agreement deferred development costs previously capitalised in Metals Finance africa pty ltd’s accounts have been treated as a sale at the capitalised value and converted to a receivable from pMc. as the transfer has been performed at cost, the transaction has resulted in no profit or loss to Metals Finance africa and is therefore not reflected in the company’s consolidated profit and loss statement. it also has no impact on the loan account between Metals Finance limited and Metals Finance africa. shareholders are directed to the relevant notes to the company’s accounts for further information.

chief executive officers report

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Bass Metals (21% oWned)

Metals Finance limited purchased a 19.9% interest in the australian junior miner Bass Metals limited (Bass) in november 2008, and has subsequently taken its interest to 20.9% through on market purchases. the hub of Bass’ activities over the past year has been its 100% owned Que river base and precious metals project in tasmania, coupled with the acquisition of a fully installed production facility at Hellyer and completion of a definitive Feasibility study on a significant base metal resource suitable for treatment at the plant.

Bass Metals ltd (asX:BsM) is a profitable mining and exploration company with operations in Western tasmania. it posted a $7.4 million underlying operating profit for the year to June 30, 2009 from sales of its Que river polymetallic (zinc, lead, copper, silver & gold) ore. in september this year the company revealed it had struck a new agreement to sell up to 100,000 tonnes of Que river ore to MMG australia which, based on the current mine plan, has ore sales from the Que river project continuing until september 2010.

the Que river Mine and the ore sales arrangement has provided Bass with the cash-flow to fund all its exploration and development activities over the past two years including the acquisition of the 1.5mtpa Hellyer processing plant and the completion of a feasibility study on the nearby Fossey base metal resource. Bass’ near-term production growth is planned to come from the Hellyer Mine project, which comprises a high grade polymetallic Mineral resource of 2.3 million tonnes in close proximity to its Hellyer plant, with scope to support a five year project life.

Bass reported to the asX on 21 october 2009 that it is now on track to kick-start development of its Hellyer Mine project after a definitive feasibility study concluded that the Fossey deposit is financially robust. the planned project is based on initial ore production of 851,000 tonnes over two-three years, producing a total of 167,000 tonnes of saleable zinc, lead and copper-precious metals concentrates. the Fossey start-up is expected to pave the way for larger-scale development at Hellyer through conversion of the existing 2.3 million tonne resource to reserves, providing scope for increase in production rate and mine life. the Fossey deposit is estimated to generate an operating surplus of $50 million after capital costs of $26 million.

Bass Metals is an exciting, well managed company with significant experience in gaining profits from small scale operations and high potential to grow rapidly through its short term plans for the Hellyer project.




lucky Break

the lucky Break nickel laterite project in north Queensland is being developed under a joint venture agreement between the tenement owners, Metallica Minerals limited, and the company. under the joint venture agreement, Metals Finance is responsible for funding and managing the project, if it proceeds. upon implementation, 85% of cash flow surplus will be directed to repayment of capital to Metals Finance. . the company has recently agreed, subject to suitable documentation, to revise the surplus sharing arrangement to achieve equal sharing of total cash surplus from the operation after capital repayment.

the company has progressed studies on the lucky Break project through the year under review, with significant time being spent on:

• review of the potential scale of operations • review of flow sheet • remodelling of planned site works • revised financial analysis

early in 2009, the company established a set of ‘target criteria’ under which it would consider continuing with development of the project – these being principally:

1. availability of sulphuric acid for leaching of the ore at a price of not more than a$100/tonne 2. establishment of a reasonable confidence level in a long term nickel value of us$7/lb 3. the establishment of a smaller higher grade operation than originally envisaged

the company is in the process of completing a definitive Feasibility study (dFs) on the remodelled project. this study is targeted for completion around the end of 2009, with a view to making a development decision on the project (if supported by the dFs) early in 2010.

the project is targeting higher grade ore already defined in two separate ore bodies in the lucky Break tenements. raising cut off grade to 1.0% ni (previously 0.3% ni) provides a resource in one deposit of approximately 200,000 tonnes with a head grade of 1.47% ni; and in another approximately 120,000 tonnes at 1.14% ni. the remodelled project is examining a relatively low mining rate, of 60,000 tonnes per annum, to produce between 600 and 800 tonnes per year of nickel.

Most of the permitting for the lucky Break project is already in place, requiring minimal updating to take into account the revised scale of the project. a substantial water supply reservoir has already been established and much of the engineering previously completed remains appropriate for the project. in the event that the dFs confirms a viable and robust project, it will therefore be possible for the company to progress development relatively rapidly.

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cHaMBisHi tailinGs proJect (MFc 75%)

Metals Finance africa pty ltd (MFa) and MFc have entered into an agreement to examine the feasibility of establishing a treatment facility to recover cobalt and copper from a substantial stockpile of refinery waste at the chambishi copper/cobalt mine in Zambia.

the chambishi Metals copper and cobalt refinery is located in the well known copper belt in Zambia. it is a primary producer of cathode copper and high grade cobalt cathode. the target materials under this agreement are a substantial stockpile, of approximately 2.0 million tonnes of refinery residue containing copper and cobalt, in addition to a potential further 20,000 tonnes per month of similar quality material produced whilst the refinery is operating.

Definitive feasibility Study (DFS)

MFc and MFa are in the process of completing a definitive Feasibility study (dFs) on the project, supported by Bateman engineering and Mintek, large engineering groups based in south africa. the dFs on the chambishi project is currently scheduled for completion around the end of this year.

Detailed drilling

the results of a recent detailed drilling exercise recently completed on the chambishi dump are currently being independently reviewed by an international resources consulting group, snowden, with a view to their formal classification as a resource under the Jorc code. the work to date has provided reasonable confirmation of the resource parameters in accordance with reports provided by chambishi.

Metallurgical work

preliminary metallurgical testing was completed on surface samples of the tailings material during 2008, and is continuing as part of the dFs programme based on samples from the drilling programme. depending on the conditions applied, this work has yielded recoveries of up to 80% of copper and cobalt contained in the tailings.

Preliminary Financial Analysis

the company has continued refining its preliminary financial modelling for the project as further information has become available. For the purposes of its ongoing analysis of the chambishi project, the company’s base model assumes long term metal prices approximately 90% of current prices. the following table summarises the modelled result.

US$m ToTal tonnes cu 11,318 tonnes co 2,981 projected revenue us$m 170.0 projected operating costs us$m 58.0 projected surplus us$m 112.0 capital cost -8.00 -8.0 capital recovery MFa/MFl 8.0 surplus share MFa/MFl 49.4 cash flow MFa/MFl 57.4 MFa/MFl irr 100% MFa/MFl npV 25% 12.7

on the basis of this model, MFl’s share in projected surplus from the project after capital repayment would be of the order of us$37.5 million (through its direct 50% equity and through its 50% shareholding in MFa), which at a discount rate of 25% would have a net present value of approximately us$9.5 million.

detailed analysis of the project and the impact of all risks, of both technical and financial nature, will be fully examined in the dFs.



piGMent proJect, soutH aFrica (50 %MFc)

MFa has entered into an offtake agreement to supply up to 50,000 tonnes per annum of iron pigment to a manufacturer and supplier in south africa. the purchaser of the material has established facilities in the outskirts of Johannesburg, with already established infrastructure and other facilities, which can be used by MFa to establish an initial operation.

the value of iron pigment produced will depend on achievement of required specifications, the material targeted in this project currently selling internationally at a price in excess of us$800 per tonne. the arrangement with the purchaser is accompanied by a technical co-operation agreement, under which the potential purchaser has provided significant technical services and process test work over the past 12 months.

a suitable process flow sheet for the production of a high grade iron pigment has now been established and preliminary engineering and costing have been completed. a pre-feasibility study on the project is currently under preparation and is targeted for completion by the end of January 2010. the project’s model, at this stage, assumes that sale of by products will cover the costs of the initial reagents – and it is likely that the eventual scale of the pigment project will be governed by the market for by products.

on the basis of the above assumptions the potential financial result over a ten year period, of establishing an initial operation at 1,200 tonnes per annum of pigment with expansion to 10,000 tonnes per annum in year three, is summarised in the following table:

ToTal production – tonnes pigment 82,360 projected capital a$000’s –11,800 projected revenue a$000’s 75,000 projected operating costs a$000’s 37,900 projected surplus a$000’s 36,900 projected cash flow a$000’s 25,100 project irr 53% project npV (25% dcF) 7,854

Barnes Hill (50% MFc)

the Barnes Hill nickel laterite project in tasmania is being advanced under a joint venture agreement between the project owners, proto resources and investments limited (proto), and the company. the agreement entails Metals Finance taking responsibility for the technological aspects of the proposed mining and processing, operations, as well as sourcing finance to support the project.

in the event that development of the project is warranted, Metals Finance will arrange and/or provide funding for the project in addition to managing the development process and ongoing operations. in the event that Metals Finance elects not to participate in the funding of the project, the company will receive a royalty of 3% of the value of ni and co produced for a period of 10 years.

proto resources and Metals Finance recently agreed to extend the term of the joint venture agreement. under the revised terms, completion of bulk sampling and pilot leach test work, in conjunction with detailed engineering design and costing, will await the completion of the proto drilling programme to upgrade the Barnes Hill Mineral resource to Measured in accordance with the guidelines of the Jorc code (2004).


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the Barnes Hill project contains a global reported Jorc compliant indicated resource of 12.1 million tonnes 0.83% nickel and 0.07% cobalt (douglas Mckenna and partners ltd, a Jannink 2006). it is made up of three interconnected mineralised zones known as the Barnes Hill, Vulcan and scott’s resources. one of these (the Barnes Hill deposit) exhibits a generally higher grade than the others and was subjected to further drilling in late 2008 (75 aircore drill holes for a total of 1080m, on a general 50m by 50m grid) by proto.

the project at this stage is considered to have significant potential for commercial development. unlike most ni laterite deposits, Barnes Hill is situated at a location in close proximity to necessary services and consumable sources – which offers significant capital and operating cost savings.

Metals Finance have recently completed an updated scoping study analysis of potential in the project, based on a model resource of 8.5 million tonnes at average nickel and cobalt grade at similar level to that indicated in drilling carried out by proto late in 2008. the assumptions and factors incorporated into the scoping study model reflect the drilling and metallurgical data currently available and preliminary cost information collected over the past 12 months. the results of that scoping study are summarised in the following table:

BarneSHillmodelParameTerS* BaSecaSe available material* 8.6 Mt average ni content* 1.1 % average co content* 0.06 % projected leach recovery ni 80 % projected leach recovery co 70 % life of projected operation 12 years ni price 7.00 us$/lb acid price 90 a$/t delivered exchange rate 0.8 us:au total projected capex 85 a$ million total projected revenue 1,526 a$ million operating costs 672 a$ million operating cost contingency 15 % projected surplus 854 a$ million project irr % 55 % project npV (at a discount rate of 15%) 165 a$ million

the project is not sufficiently advanced to carry out a rigorous financial analysis and sensitivity study. the projected result will be significantly impacted by any rise in capital cost and by any sustained rise in ni price.

proJect opportunities under inVestiGation

in addition to its aggressive pursuit of completion of studies on the projects outlined above, the company has recently expanded its search for other project opportunities which may meet the requirements of the Metals Finance business plan, including:

• Well defined metal bearing resource • preliminary metallurgical test work indicating recoverability of metals • the achievement of an agreement satisfactory to the company • the demonstration of potential irr% in excess of 40% on initial scoping study • the identification of a local project manager

the company is currently investigating two potentially near term opportunities:

Pyrite tailings Europe

the company is in discussion with the owners of a substantial gold bearing pyrite tailings dump in europe. the potential resource is of the order of 500,000 tonnes at a reported average grade of 10+ g/t au. this resource is not classified under the Jorc code at this stage. the company will conduct an appropriate test programme immediately it secures an agreement with the owner, targeted at providing such a classification.

Tailings projects in Chile

prior to listing in december 2007, the company commissioned a broad investigation of potential tailings opportunities in chile. Metals Finance has recently commissioned a follow up of this investigation and has targeted 6 specific tailings projects which have potential to contain levels of various metals (including gold, copper and cobalt) which may be amenable to modern extraction methods. the first stage of this programme is targeted for completion in January 2010.


metals finance limitedannual report 2009|12

director’s report

the directors present their report together with the Financial report of Metals Finance limited (‘company’) and of the consolidated entity (‘consolidated entity’), being the company and its controlled entities, as at the the date of the report not during the year and the auditor’s report thereon.

directors

the directors of the company at the date of this report are:

naMe, QualiFications and eXperience, special responsiBilities and otHer directorsHips independence status

GeoFFrey Guild Hill Geoffrey Hill is a merchant banker based in Hong kong and is currently chairman of international chairperson pacific securities inc. and principal of debt Management corporation. He has over 30 years non–executive director experience in the resources industry, as director, investor and advisor. during this period he has acted for many of australia’s larger mining groups, including rio tinto, Woodside, new Hope, Woodside petroleum, santos, north Broken Hill, Homestake, Gold Mines of kalgoorlie and Bell resources. His career highlights include the formation of Bancorp Holdings, appointment to the board of Morgan Grenfell and co plc and the merger of his merchant banking business to form pitt capital partners, with W H soul pattinson partners in 2002. Geoff’s professional directorships include Hills industries limited, Metals Finance limited, centrex limited international pacific securities limited, so co. limited and Heritage Gold. He has served as a director of Metals Finance corp. since 9 March 2007, and chairman since 18 december 2008.

patrick antHony treasure tony treasure is a geologist by profession who has been actively involved in the resource and metal chief executive officer recovery industry for over 34 years, holding senior executive positions with a number of publicly listed companies in the process metallurgy and mining fields. Mr. treasure has extensive experience in corporate management, technology development, project evaluation and development. He was a founding director of Metals Finance limited and the primary architect of the company’s business plan. tony treasure has served as a director of Metals Finance limited since 2 september 2003. He was appointed as chief executive officer on 14 May 2005. He was chairman of the Board from 2 september to 7 March 2007 and secretary from 2 september 2003 to 20 november 2005.

ricHard stacy antHon rick anthon is the Managing partner of the Queensland law firm Hemming+Hart. He has practiced independent non–executive extensively in corporate, mining and resources law for over 20 years. He has advised on numerous director (appointed 7 october 2009) acquisitions, joint ventures, and debt and capital raisings both in australia and overseas. additionally rick has acted as non–executive director for a number of public resource companies over the last 15 years and has previously chaired audit and remuneration committees for those companies.

MicHael JoHn Gunn Mike Gunn is a metallurgical engineer with a 34 year career in mineral processing operations, project independent non–executive development with a number of engineering design companies, and project and technology evaluation director (appointed 7 october 2009) as an independent consultant. He has previously served as an executive director of a publicly listed resource company and has been a director of several private consulting and project development organisations. Mike is a specialist hydrometallurgist with significant expertise in the development and implementation of projects including, in recent years processing of lateritic nickel ores and bacterial treatment of refractory sulphide ores.

Warren ricHard eades Warren eades joined the Board of Metals Finance limited on 22 september 2008. Mr eades has held independent non–executive a number of executive and non executive positions on australian public company boards in the past director (appointed 22 september 2008) and he brings to the board a wealth of experience in the resources sector and equity capital markets. Warren was Managing director of international pacific securities limited (ips) from 1991 until 1996. He was chief executive of international pacific investments from 1991 to 1998. From 1998 to 2001, he was Group General Manager of the listed sabre Group ltd. From 1997 to 2003, he was a director of the listed Balmoral corporation limited and from 1999 to 2004, he was a director of pacific strategic investments. He currently acts as a portfolio manager to a private investment group.



director’s report

coMpany secretary

arno de Vos [B.com, B.com (Hons), B.compt (Hons), ca, pMp] is the chief Financial officer and was appointed to the added position of company secretary on 25 March 2009. arno previously held the role of director, compliance manager and company secretary with numerous private companies for the past nine years.

arno is a chartered accountant with over 17 years experience in accounting, audit, corporate finance, treasury and company secretarial, as well as 8 years as chief Financial officer of a property related industry company. arno has also served as a director on more than 34 private companies. employed by deloittes for a period of 5 years, arno was involved in numerous listed entities. arno is a member of the institute of chartered accountants australia (icaa), affiliate of chartered public accountants australia (cpa), affiliate of chartered secretaries australia (csa), registered project Management professional with the project Management institute and member of the australian institute of project Management (aipM).

corporate GoVernance

the Board adheres to strict corporate Governance practices in accordance with its corporate charter (a copy of which is provided on the company web site www.metalsfinance.com) and in accordance with asX best practice guidelines. Further information is provided in the last section of this report on page 69.

MeetinGs oF directors and coMMittees oF Board

the number of meetings held (including Meetings of directors) and the number of meetings attended during the financial year are:

Board MeetinGs audit coMMittee MeetinGs reMuneration coMMittee MeetinGsdirectors Held1 attended Held attended Held attendedG Hill 8 8 2 2 1* 1*t treasure 8 8 2 2 1* 1*W eades 6 6 1 1 1* 1*B Boyes 3 2 1 1 – –

1 Reflects the number of meetings held during the time the Director held office during the year.

* Meeting was held after the financial year–end (30 September 2009) but addressed remuneration matters relating to the 2009 financial year.

principal actiVities

Metals Finance limited has been formed for the specific purpose of providing a unique combination of finance and technical skills for the development of small to medium scale metal recovery projects around the globe. the company’s primary targets are those opportunities which, even during an upturn in world metal markets, may be too small, complex or unusual to easily attract the funding and high level technical input required to ensure their successful development.

Metals Finance does not assume the classical resource risks inherent to mineral exploration and mine development. it rather focuses its activities on metal–bearing resources and materials which have already been identified and fully outlined/measured. Metals Finance is not a mining or exploration company, rather it provides financial and production services to mining and metals companies.

the company is currently pursuing a number of projects around the world. it is also seeking to expand its portfolio of development opportunities in areas such as: • Medium sized, proven, high–grade primary resources • start up projects requiring demonstration of new technologies • Mine waste dumps and tailings • smelter and solid industrial wastes • industrial waste materials and streams

there are many high–grade, small to medium sized metal recovery opportunities available for evaluation and, if selected, for development through Metals Finance limited. they are widely varied in location and commodity, but are characteristically owned/controlled by parties who lack

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director’s report

We particularly seek associations where the opportunity has a high potential for viability but, without Metals Finance limited, is unlikely to proceed to profitable development.

access to development funding, application of key leading edge, metals recovery technologies and a highly skilled network of technical experts are all underlying factors in Metals Finance limited’s business strategy.

one of the inherent advantages that Metals Finance limited possesses is the capability to rapidly assess available projects. this is aided by the fact that the projects targeted are, from a resource point of view, late stage or already developed. the facts are generally known, and technical and financial assessment simply requires testing to determine an appropriate treatment methodolgy. Metals Finance follows a strict, sequential model in project development:

• establishment of a suitable process flow sheet • preliminary financial modelling and risk assessment • site testing of the proposed flow sheet • decision to proceed with plant design and engineering • determination of minimum scale for positive return • design and engineering of treatment facility including permitting • determination of capital and operating costs • establishment of personnel requirements and availability • Generation and independent review of project plan • project development

Metals Finance limited, through its range of contacts, has access to a network of individuals around the world who are highly experienced in the field of project establishment.

there have been some major recent developments in metal processing technology, which have resulted in:

• increased efficiency in process application • Modular construction of unit processes • reduction in unit capital and operating cost

as a consequence the potential economies of scale in metal recovery have changed. Whereas conventional recovery processes have, in their traditional application, required large scale projects to achieve viability, it is now possible to develop relatively small resources in the phased and rigidly controlled Metals Finance fashion.

Metals Finance limited employs proven metals recovery technologies that can be implemented quickly and in a modular fashion, in order to allow confirmation of project economics without protracted feasibility study. in many cases the first phase of the project is in essence the ‘bankable feasibility study’. in order to execute this model, a thorough working knowledge of the capabilities of the technologies to be used is necessary. this is a key competence of the team and technical network established by Metals Finance limited.

there were no other significant changes in the nature of the activities of the Group during the year.

reVieW and results oF operations

Consolidated Result

the consolidated loss after income tax for the year attributable to the Members of the company was $1,077,433 (2008: $3,841,815).

diVidends

there were no dividends paid or declared by the company (2008: nil).

state oF aFFairs

as resolved at the company’s annual General Meeting held on 16 december 2008 the company has proceeded with its plan to move the domicile of the company to australia, through lodgement of the appropriate application with the australian securities and investments commission (asic) and became a resident company of australia on 15 May 2009. on the same day the name of Metals Finance corp was changed to Metals Finance limited. Furthermore pkF chartered accountants were appointed auditors for the reporting period starting 1 september 2008.

From 1 september 2008 the company re–located its office and operations of Metals Finance limited from Vancouver, canada to its current location at yatala, Queensland. this re–location took place with the intention for all future transactions to be made in australian dollars as all operational and managerial decision making processes of the company were carried out in australia.

consequently the functional and presentation currency of Metals Finance limited has changed from canadian dollars to australian dollars from 1 september 2008. For reporting purposes the comparative figures in this financial report have been restated to australian dollars.

expenses relating to the closure of the canadian office are reflected in the income statement for the year ended 31 august 2009.

enVironMental reGulation

the consolidated entity’s operations are subject to environmental regulations under relevant local laws, council policies and state and federal government legislation in relation to operating activities.

operations are closely monitored in accordance with operating procedures to ensure that the potential for environmental contamination is minimised.

the directors are not aware of any significant breaches in environmental regulations during the period covered by this report.

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director’s report

suBseQuent eVents

Metals Finance limited appointed as from 7 october 2009 two new independent non–executive directors, richard stacy anthon (rick anthon) and Michael John Gunn (Mike Gunn).

subsequent to year end the share price of Bass Metals limited (asX code: BsM) increased from 20 cents a share at 31 august 2009 to approximately 31 cents a share at the date these accounts were approved. this results in a material increase in value of the company’s investment by approx $2,377,210. the investment is classified as an ‘available–for–sale’ financial instrument and movements in the value of the investment are taken directly to equity.

there has not arisen in the interval between the end of the financial year and the date of this report other than the appointment of two new directors and the increase in the Bass Metals financial instrument, any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years.

likely deVelopMents

likely developments have been reported in the directors’ report to the extent considered appropriate. Further information as to likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the consolidated entity.

directors’ interests

the relevant interest of each director in the shares of the company, as notified by the directors to the australian securities exchange (‘asX’) in accordance with section 205G (1) of the corporations act 2001, at the date of this report is as follows: ordinary sHares options G Hill* 4,904,350 600,000 t treasure* 2,760,187 1,500,000 W eades nil nil B Boyes** nil 600,000 M Gunn*** 30,000 75,000 r anthon*** nil nil

* Held directly and indirectly

** Resigned 16 December 2008

*** Appointed 7 October 2009

auditor’s independence declaration under section 307c oF tHe corporations act 2001We confirm that we have obtained the auditor’s independence declaration which is set out on page 20.

options

at the date of this report unissued ordinary shares of the company under option are:

eXpiry date eXercise price nuMBer oF options3 February 2010 $ 0.265 1,500,0006 March 2010 $ 0.265 3,600,000 5,100,000

indeMniFication and insurance oF directors and auditors

Indemnification

under the company’s constitution, the company indemnifies each director, officer and agent of the company (‘officer’) against:

• any liability incurred by that officer as such in defending any pro ceedings, whether civil or criminal, in which judgement is given in favour of the officer or which are discontinued, withdrawn, dismissed or struck out, or in which the officer is acquitted, or in connection with any application in relation to those proceedings in which relief is granted to the officer by the court; and • any liability incurred by an officer in carrying out the business or exercising the powers of the company which does not involve any negligence, default, breach of duty or breach of trust by the officer in relation to the company.

Insurance Premiums

each of the directors of the company have entered into an indemnity agreement with the company whereby the company has agreed at the company’s discretion, to effect and maintain insurance in respect of directors and officers liability. the company has also agreed to provide certain indemnities to each of the directors, to the fullest extent permitted by law. each deed is governed by and construed in accordance with the laws of the province of British columbia, canada.

since the end of the previous financial year the company has paid insurance premiums of $60,802 (this includes a portion of cover for 2010 financial year) in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current and former directors and officers, including senior executives of the company and directors, senior executives and secretaries of its controlled entities.

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director’s report

the insurance premiums relate to:

• costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and • other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

the insurance policies outlined above do not contain details of the premiums paid in respect of individual officers of the company.

proceedinGs on BeHalF oF tHe coMpany

no person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purposes of taking responsibility on behalf of the company for all or any part of those proceedings. the company was not a party to any such proceedings during the year.

roundinG

amounts in the Financial report and directors’ report are rounded off to the nearest dollar, unless otherwise stated.

non–audit serVices

during the year pkF, the consolidated entity’s external auditor performed certain other services in addition to statutory duties. the Board has considered the non–audit services provided during the year by the external auditor and in accordance with advice provided by the audit committee, is satisfied that the provision of those services during the year is compatible with, and did not compromise, the auditor independence requirements of the corporations act 2001 for the following reasons:

• all non–audit services were subject to the corporate govern ance procedures adopted by the consolidated entity and have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the external auditor; and • the non–audit services provided do not undermine the general principles relating to auditor independence as set out in code of conduct apes 110 code of ethics for professional accountants issued by the accounting professional & ethical standards Board, as they did not involve reviewing or auditing the external auditor’s own work, acting in a management capacity for the combined Group, acting as an advocate for the combined Group or jointly sharing risks or rewards.

the following amounts were paid or are payable by the consolidated entity for non–audit services provided during the year:

2009 $pkF cHartered accountants:other assurance services 7,190taxation services 9,115 16,305

signed in accordance with a resolution of the directors:

director

dated at Brisbane, 27 october 2009

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remuneration report

REMUNERATION REPORT

The remuneration committee reviews and makes recommendations to the board on remuneration packages and policies applicable to the executive officers and directors themselves of the Company and of other group executives for the Group. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies.

The members of the remuneration committee during the year were: • Warren Eades (Chairperson) (appointed 24 July 2009) – Independent Non–Executive • Geoffrey Hill (appointed 9 March 2007) – Non–Executive not considered independent

The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for security holders. The remuneration structures take into account a range of factors, including the following:

• the capability and experience of the key management personnel; • the requirement to utilise those skills in the furtherance of the Consolidated Entity’s strategic objectives; • the performance of the key management in their particular role; • the Consolidated Entity’s overall performance; • the remuneration levels being paid by competitors for similar positions; and • the need to ensure continuity of executive talent and smooth succession planning.

In assessing the performance of a particular executive, consideration of various other aspects are taken into account regardless of only the immediate profit and loss performance. The nature of the Consolidated Entity’s operations and investment is such that decisions are constantly being taken that will not have profit repercussions for several years. Moreover, the evaluation of executive performance also has regard to the Executive’s effectiveness in developing a capable support team and in showing leadership qualities and instilling positive cultural values within the Company.

Remuneration packages included fixed remuneration only for the past financial year, but a revision of a performance bonus structure is under consideration. There was no performance–based remuneration and equity–based remuneration paid in either the current or the prior financial period.

FIxEd REMUNERATION

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

Remuneration levels are reviewed annually by the Remuneration Committee through a process that considers the factors outlined above.

Non–executive Directors

The Board policy is to remunerate Non–executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non–executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non–executive directors is subject to approval by shareholders at a General Meeting. Fees for Non–executive directors are not linked to the performance of the Company. However, to align Non–executive directors’ interests with shareholder interests, the Non–executive directors are encouraged to hold shares in the Company and may receive options as long–term incentive remuneration.

Executives

Executive directors and Executives receive either a salary plus superannuation guarantee contributions as required by law, currently set at 9%, or provide their services via a consultancy arrangement. Individuals may elect to sacrifice part of their salary to increase payments towards superannuation. Bonus payments are at the discretion of the Board and are based on an executive’s performance.

All remuneration paid to directors and Executives is valued at cost to the Company and expensed. Options are valued using the Black– Scholes methodology.

Base Salary

Structured as a total employment cost package comprising cash, leave benefits and superannuation. Executives’ remuneration is reviewed annually with regard to competitiveness and performance. There are no guaranteed salary increases fixed in any senior executives’ contracts.

Benefits

directors and Executives may receive reimbursements of out–of–pocket expenses incurred in the undertaking of their duties, including reasonable travel, accommodation and entertainment expenses.

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remuneration report

Employment Contracts

The only employment contract in existence is for the Chief Executive Officer, Mr Tony Treasure, who is retained via an employment contractdated 17 October 2007 and is valid to 1 November 2011. This agreement provides for a total package amount inclusive of prescribed superannuation and for participation in the Company’s Share Purchase Plan and Employee Share Option Plan. The cash remuneration inclusive of superannuation paid under the agreement from 1 September 2008 is $272,500 and is subject to annual review.

The Company may terminate the employment of the Executive without prior notice and without any further obligation if:

• The Executive conducts himself in such a manner to justify termination for just cause; • Through sickness, accident or any other cause which renders the Executive unable to perform his duties under the Agreement for a continuous period of twelve (12) months; • Upon paying to the Employee an amount equal to the Severance Payment.

The Executive may terminate the Agreement upon:

• Giving the Company ninety (90) days’ notice; • In the event of a change in control of the Company (Change in Control) where: n the Employee within six (6) months of the Change in Control providing written notice to the Company whereupon the Company is required, subject to the ASx Listing Rules to pay the Executive an amount equal to the Severance Payment; or n where a Change in Control has occurred and the Agreement is terminated by the occurrence of one of the following triggering events: m the Agreement is terminated by the Company within 18 months of the Change in Control; or m the Employee terminates the Agreement within 18 months following the Change in Control because the Company has made significant changes to the Executive’s working condition and status, whereupon the Company is required to pay the Executive the Severance Payment.

The Agreement obliges the Executive for a period of one (1) year following the termination of the Agreement not to be involved in carrying on or engaged or be concerned with any business in the recovery of metals from waste dumps.

dISCUSSION ON THE RELATIONSHIP BETWEEN THE REMUNERATION POLICy ANd THE CONSOLIdATEd ENTITy’S PERFORMANCE

In considering the Consolidated Entity’s performance and the benefits for security holders’ wealth the Remuneration Committee have had regard to the following in respect of the current financial year and previous financial year:

2009 2008 NET PROFIT / (LOSS) ($) (1,077,433) (3,841,815) EPS (CENTS)1 (1.47) (6.21) dIvIdENdS / dISTRIBUTIONS ($) – – SECURITy PRICE AT yEAR ENd ($) 0.10 0.10 MARkET CAPITALISATION ($) 7,310,957 7,310,957

Metals Finance Limited listed in 2007 and as a result the data shown above is only for the previous two years.

The Remuneration Committee considers that the Consolidated Entity’s remuneration policy is generating desirable outcomes.

dETAILS OF dIRECTORS ANd kEy MANAGEMENT PERSONNEL

Directors

Name PositionG Hill Non–Executive ChairmanT Treasure Chief Executive OfficerB Boyes Non–Executive director Chairman (resigned 16 december 2008)A Neale Executive director and Chief Operating Officer (resigned 31 August /2008)

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remuneration report

Key Management Personnel 2009

NAME POSITIONA de vos Chief Financial Officer/ Company SecretaryA voisin Former Chief Financial OfficerL Heurlin Executive (Metals Finance Africa)G Parker Executive (Metals Finance Africa)

key management personnel are those directly accountable and responsible for the operational management and strategic direction of the company and the consolidated entity.

details of the nature and amount of each element of the remuneration of directors and key Management Personnel of the Company during the financial year are:

SHORT–TERM POST– TERMINATION EMPLOyEE BENEFITS EMPLOyMENT BENEFITSkEy MANAGEMENT NON–MONETARy SUPERANNUATION SEvERANCEPersonnel Year salarY&Fees Bonus BeneFits BeneFits PaYments total $ $ $ $ $ $

dIRECTORSNon–executive DirectorsG Hill 2009 84,753 – – – – 84,753 2008 54,955 – – – – 54,955W Eades1 2009 47,917 – – 4,313 – 52,230 2008 – – – – – –FormerB Boyes2 2009 53,970 – – – – 53,970 2008 60,450 – – – – 60,450A Neale 3 2009 – – – – – – 2008 216,155 – – 9,068 309,501 534,724Executive DirectorT Treasure 2009 178,000 – – 94,500 – 272,500 2008 222,912 – – 17,257 – 240,169Executives (Other)A de vos 2009 145,000 – – 18,500 – 163,500 2008 60,500 – – 5,446 – 65,946A voisin 2009 40,134 – – – – 40,134 2008 125,483 – – 4,946 83,216 213,645L Heurlin 2009 190,000 – – 17,100 – 207,100 2008 156,500 – – 10,505 – 167,005G Parker 2009 125,771 – – – – 125,771 2008 53,124 – – – – 53,124

total 2009 865,545 – – 134,413 – 999,958 2008 950,079 – – 47,222 392,717 1,390,018

1 W Eades was appointed as Director on 22 September 2008.2 B Boyes resigned as Director on 16 December 2008.3 A Neale resigned as Director on 31 August 2008.

The key Management Personnel are also the five most highly paid Executive Officers of the consolidated entity for the year ended 31 August 2009.

The amounts disclosed are the same for the Company and the Consolidated Entity.

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Auditor’s Independence Declaration

As lead auditor for the audit of Metals Finance Limited for the year ended 31 August 2009, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Metals Finance Limited and the entities it controlled during the year.

PKF

Albert LootsPartner

Dated at Brisbane this 27th day of October 2009.

Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.auPKF | ABN 83 236 985 726Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | AustraliaGPO Box 1078 | Brisbane | Queensland 4001

The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Liability limited by a scheme approved under Professional Standards Legislation.

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income statementIncome Statment for the Year Ended 31 August 2009

NotE CoNSolIdAtEd ENtItY CompANY 2009 2008 2009 2008 $ $ $ $

REStAtEd* REStAtEd*

Consulting revenue 643,882 137,563 289,827 809,400

Employee expenses** (1,213,330) (1,452,789) (1,005,258) (1,228,887)

Project costs (98,285) (71,061) (98,285) (41,514)

depreciation and amortisation expense (123,440) (141,933) (101,855) (41,591)

Foreign exchange gain/(loss) (223,353) 1,466,755 (222,567) 1,295,407

Finance costs (805,732) (920,918) (805,732) (904,827)

General administration and operating expenses (1,211,043) (3,828,458) (766,790) (1,313,225)

Impairment of receivables from controlled entities – – (3,148,848) –

Impairment of property, plant and equipment (121,131) – – –

resultsfromoperatingactivities (3,152,432) (4,810,841) (5,859,508) (1,425,237)

Other Income

Interest received 1,557,139 963,279 582,772 1,008,863

Gain/(loss) on investment (24,299) 5,747 (24,299) 5,747

Rental income 1,671 – – –

1,534,511 969,026 558,473 1,014,610

lossbeforeincometaxbenefit (1,617,921) (3,841,815) (5,301,035) (410,627)

incometaxbenefit 2 540,488 – – –lossafterincometax (1,077,433) (3,841,815) (5,301,035) (410,627)

earningspershare: Basic loss per share (cents per share) 3(a) 1.47 6.21

diluted loss per share (cents per share) 3(a) 1.47 6.21

* – See Change in Functional Currency – Note 1(a)

** – Includes Canadian severance packages for 2008 and 2009

The Income Statements are to be read in conjunction with the Notes to the Financial Statements.

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balance sheetBalance Sheet as at 31 August 2009


REStAtEd* REStAtEd*

CURRENT ASSETS:

Cash and cash equivalents 4 8,225,139 13,066,288 8,161,914 12,868,155

Trade and other receivables 5 636,264 439,114 56,027 874,435

Other 6 3,163 14,014 – 10,314

totalCurrentassets 8,864,566 13,519,416 8,217,941 13,752,904

NON–CURRENT ASSETS:

Trade and other receivables 5 5,119,320 148,068 6,510,927 8,436,995

Property, plant and equipment 7 580,443 750,343 39,857 68,951

deferred development costs 8 – 3,318,718 – –

Other financial assets 9 4,322,200 24,354 4,322,450 24,548

totalnon–Currentassets 10,021,963 4,241,483 10,873,234 8,530,494totalassets 18,886,529 17,760,899 19,091,175 22,283,398

CURRENT LIABILITIES:

Trade and other payables 10 302,793 885,984 252,668 946,672

Interest bearing loans and borrowings 11 548,855 540,375 – –

totalCurrentliabilities 851,648 1,426,359 252,668 946,672

NON–CURRENT LIABILITIES:

Interest bearing loans and borrowings 11 2,687,836 2,252,586 2,670,127 2,229,565

totalnon–Currentliabilities 2,687,836 2,252,586 2,670,127 2,229,565totalliabilities 3,539,484 3,678,945 2,922,795 3,176,237netassets 15,347,045 14,081,954 16,168,380 19,107,161

EqUITy:

Contributed equity 12 20,511,496 20,407,177 20,511,496 20,407,177

Reserves 13 2,304,507 66,302 2,332,674 74,739

Equity component of convertible notes 1,571,630 1,571,630 1,571,630 1,571,630

Accumulated losses (9,040,588) (7,963,155) (8,247,420) (2,946,385)

totalequity 15,347,045 14,081,954 16,168,380 19,107,161

* – See Change in Functional Currency – Note 1(a)

The Balance Sheets are to be read in conjunction with the Notes to the Financial Statements.

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statement of changes in equityStatement of Changes in Equity for the Year Ended 31 August 2009

CoNSolIdAtEd ShARE CApItAl RESERvES CoNvERtIBlE ACCumulAtEd totAl

$ $ NotES loSSES $

$ $

Balanceat1september2007* 3,816,894 74,739 – (4,121,340) (229,707)

Issue of share capital 18,856,258 – – – 18,856,258

Share issue costs (2,265,975) – – – (2,265,975)

Movement in reserves – (8,437) – – (8,437)

Equity component of Con Notes – – 1,571,630 – 1,571,630

Loss for the period – – – (3,841,815) (3,841,815)

Balanceat31august2008* 20,407,177 66,302 1,571,630 (7,963,155) 14,081,954

Balanceat1september2008 20,407,177 66,302 1,571,630 (7,963,155) 14,081,954

Issue of share capital – – – – –

Adjustments to share issue costs 104,319 – – – 104,319

Movement during the period – 2,238,205 – – 2,238,205

Equity component of Con Notes – – – – –

Profit/(loss) for the period – – – (1,077,433) (1,077,433)

Balanceat31august2009 20,511,496 2,304,507 1,571,630 (9,040,588) 15,347,045

pARENt ShARE CApItAl RESERvES CoNvERtIBlE ACCumulAtEd totAl

$ $ NotES loSSES $

$ $

Balanceat1september2007* 3,816,894 74,739 – (2,535,758) 1,355,875

Issue of share capital 18,856,258 – – – 18,856,258

Share issue costs (2,265,975) – – – (2,265,975)

Movement in reserves – – – – –

Equity component of Con Notes – – 1,571,630 – 1,571,630

Loss for the period – – – (410,627) (410,627)

Balanceat31august2008* 20,407,177 74,739 1,571,630 (2,946,385) 19,107,161

Balanceat1september2008 20,407,177 74,739 1,571,630 (2,946,385) 19,107,161

Issue of share capital – – – – –

Adjustments to share issue costs 104,319 – – – 104,319

Movement during the period – 2,257,935 – – 2,257,935

Equity component of Con Notes – – – – –

Profit/(loss) for the period – – – (5,301,035) (5,301,035)

Balanceat31august2009 20,511,496 2,332,674 1,571,630 (8,247,420) 16,168,380

* – Restated – see Change in Functional Currency – Note 1(a)

The Statements of Changes in Equity are to be read in conjunction with the Notes to the Financial Statements

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cash flow statementCash Flow Statement for the Year Ended 31 August 2009


REStAtEd* REStAtEd*

CASH FLOWS FROM OPERATING ACTIvITIES:

Cash receipts in the course of operations 311,471 137,563 320,478 –

Interest received 723,118 985,971 652,428 883,176

Cash payments in the course of operations (2,955,039) (3,539,153) (2,934,088) (712,085)

Finance costs paid (273,295) (619,722) (273,295) (603,631)

netCashProvidedBy/(usedin)operatingactivities 16 (2,193,745) (3,035,341) (2,234,477) (432,540)

CASH FLOWS FROM INvESTING ACTIvITIES:

Payments for property plant and equipment (9,046) (785,472) (7,136) (69,387)

Payments for deferred development expenditure (668,733) (3,170,420) – –

Payments for investments (2,064,265) – (2,064,265) –

Proceeds from sale of investments – – – –

netCashProvidedBy/(usedin)investingactivities (2,742,044) (3,955,892) (2,071,401) (69,387)

CASH FLOWS FROM FINANCING ACTIvITIES:

Proceeds/ from the issue of shares 104,320 19,653,000 104,320 19,653,000

Share issues expenses – (3,302,717) – (3,302,719)

Proceeds from issue of convertible notes – 3,500,000 – 3,500,000

Repayment of shareholder loan – (580,450) – (580,450)

Proceeds/ (repayments) of loans (4,367) 152,584 – –

Principal repayment – finance leases (5,313) (3,542) – –

Funds issued to subsidiaries – – (504,683) (6,370,263)

netCashProvidedBy/(usedin)Financingactivities 94,640 19,418,875 (400,363) 12,899,568

Net increase / (decrease) in cash and cash equivalents (4,841,149) 12,427,642 (4,706,241) 12,397,641

Cash and cash equivalents at beginning of financial year 13,066,288 638,646 12,868,155 470,514

CashandCashequivalentsatendofFinancialYear 4 8,225,139 13,066,288 8,161,914 12,868,155

* – Restated – see Change in Functional Currency – Note 1(a)

The Cash Flow Statements are to be read in conjunction with the Notes to the Financial Statements

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notes to the financial statementsNotes to the Financial Statements for the Year Ended 31 August 2009

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICES

Metals Finance Limited (the “Company”) is a publicly traded company on the Australian Stock Exchange (symbol: MFC) with principal operations in metals recovery and production. The Company became a resident company of Australia on 15 May 2009 and changed its name from Metals Finance Corp. to Metals Finance Limited on the same date (ACN 127 131 604). This was as resolved at the Company’s Annual General Meeting that was held on 16 december 2008. The Company is proceeding with its plan to move the domicile of the Company to Australia, through lodgement of the appropriate application with the Australian Securities and Investments Commission (ASIC). This application is to put into effect a change in the country of incorporation of Metals Finance Corp. from Canada to Australia, in accordance with notices that were provided to Shareholders in November 2008 and a resolution passed at the Company’s Annual General Meeting that was held on 16 december 2008. The Company was initially incorporated on September 2, 2003 under the Business Corporations Act (British Columbia, Canada). The company was also then registered as a Foreign Company with the Australian Securities and Investments Commission.

The Financial Report of the Consolidated Entity was authorised for issue by the directors on 27th October 2009.

(A) BASIS OF PREPARATION The financial report is a general–purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards (including Australian Accounting Standards). Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements and notes of Metals Finance Limited and the consolidated entity comply with International Financial Reporting Standards (IFRS). The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

applicationofaasB1:‘First–timeadoptionofaustralian equivalentstointernationalFinancialreporting standards(‘aiFrs’).

This financial report is the first Metals Finance Limited financial report to be prepared in accordance with AIFRS’s. AASB1: ‘First–time adoption of Australian Equivalents to International Financial Reporting Standards’ has been applied in preparing these financial statements. Financial statements of Metals Finance Limited up until 31 August 2008 had been prepared in accordance with

Canadian Generally Accepted Accounting Principles (‘CGAAP’). CGAAP differs in certain respects from AIFRS. When preparing the Metals Finance Limited financial report for the year ended 31 August 2009 management has amended required accounting and valuation methods applied in previous CGAAP financial statements to comply with AIFRS. The comparative figures were restated to comply with AIFRS.

Reconciliations and descriptions of the effect of transition from previous CGAAP to AIFRS on the consolidated entity’s equity and its net income are provided in Note 23. Changeinfunctionalandpresentationcurrency

All amounts are presented in Australian dollars and rounded to the nearest dollar, unless otherwise noted.

From 1 September 2008 the Company re–located its registered office and operations of Metals Finance Limited from vancouver, Canada to its current location at yatala, queensland. This re–location took place with the intention for future transactions to be made in Australian dollars as all operational and managerial decision making processes of the Company are now carried out in Australia.

Consequently the functional and presentation currency of Metals Finance Limited has changed from Canadian dollars to Australian dollars effective 1 September 2008. For reporting purposes the comparative figures in this financial report have been restated to Australian dollars.

Criticalaccountingestimatesandjudgments

The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the consolidated entity.

Key estimates – impairment

The consolidated entity assesses impairment at each reporting date by evaluating conditions specific to the consolidated entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. value–in–use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

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(B) PRINCIPLES OF CONSOLIdATION Subsidiaries A controlled entity is any entity Metals Finance Limited has the power to control the financial and operating policies so as to obtain benefits from its activities.

Associated and jointly controlled entities (equity accounted investees)

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the group holds between 20 and 50 percent of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Associated and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long–term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Jointly controlled operations and assets The interest of the Group in unincorporated joint ventures and jointly controlled assets are brought to account by recognising in its financial statements the assets it controls, the liabilities it incurs, the expenses it incurs and its share of income that it earns from the sale of goods or services by the joint venture.

(C) FOREIGN CURRENCIES

Items included in the financial statements of each of the Company entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency.

Foreign currency transactions are translated into the 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.

(d) REvENUE RECOGNITION

Revenues are recognised at the fair value of the consideration received or receivable, net of the amount of Goods and Services Tax (‘GST’). Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

Interest Revenue Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Rendering of Services Consulting revenue is recognised as it accrues.

Other Revenue All other classes of revenue are recognised as they accrue.

(E) TAxES

The income tax expense or benefit for the period is the tax payable on the current periods taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. 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 profit or taxable profit 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

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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.

(F) GOOdS ANd SERvICES TAx (GST)

Revenues, expenses, and assets are recognised net of the amount of GST, except where the GST incurred on a purchase of goods or services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable, and except for receivables and payables which are stated inclusive of GST.

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

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. Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority.

(G) LEASES

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Finance leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Company are capitalised at the present value of the minimum lease payments. A lease liability of equal value is also recognised. Minimum lease payments are allocated between

interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and recognised directly in net profit.

(H) CASH ANd CASH EqUIvALENTS

For purposes of the Cash Flow Statement, cash and cash equivalents includes cash on hand, deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(I) RECEIvABLES

All trade receivables are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. debts which are known to be uncollectible are written off. A provision of doubtful receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the assets carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

The carrying amounts of the loans are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the loan is impaired to its recoverable amount. The recoverable amount of the receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. (J) INvESTMENTS ANd OTHER FINANCIAL ASSETS

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

(i) Financial Assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading which are acquired

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principally for the purpose of selling in the short term with the intention of making a profit. derivatives are also categorised as held for trading unless they are designated as hedges.

(ii) Loans and receivables Loans and receivables are non–derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as noncurrent assets. Such assets are carried at amortised cost using the effective rate interest method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iii) Held–to–maturity investments

Held–to–maturity investments are non–derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity.

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

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

Available–for–sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held– to–maturity investment are carried at amortised cost using the effective interest method. Gains or losses

arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including interest and dividend income, are presented in the income statement within other income or other expenses in the period in which they arise.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available–for–sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes, in the carrying amount of the security. The translation differences are recognised in profit and loss and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non–monetary securities classified as available–for–sale are recognised in equity.

When securities classified as available–for–sale are sold or impaired, the accumulated fair value adjustments recognised in equity 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 financial asset is not active (and for unlisted securities), the Company established fair value by using valuation techniques. These include the use of recent arms’ length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity–specific inputs.

The Company assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available–for–sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available–for–sale financial assets, the cumulative loss – measured as the difference between the acquisition costs and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in the income statement.

(k) dEFERREd dEvELOPMENT ExPENdITURE

development costs incurred subsequent to the determination of the feasibility of mining operations are deferred until the property to which they relate is placed into production, sold, allowed to lapse or abandoned. These costs are amortised over the estimated useful life of the property following commencement of commercial production according to the units of production used.

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(L) PROPERTy, PLANT ANd EqUIPMENT

Plant and Equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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

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

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful life to the Company commencing from the time the asset is held ready for use. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

Property and equipment 5 – 10 years Computer equipment 3 years Laboratory equipment 5 years Motor vehicles 5 years Pilot plant 2 years

Maintenance and repairs

Plant of the consolidated entity is required to be overhauled on a regular basis. This is managed as part of an ongoing cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and amortised as noted above.

Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred.

The cost of plant and equipment constructed by the consolidated entity includes the cost of all materials used in construction, direct labour on the project, borrowing costs incurred during construction and an appropriate proportion of directly attributable variable and fixed overheads.

(M) TRAdE & 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. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accruals basis. Trade account payables are usually settled on a 30 day basis.

(N) BORROWINGS

All loans and convertible notes are measured at the principal amount net of transaction costs incurred. Costs in relation to the convertible notes issued are amortised on a straight line basis over the period from issue of the notes until the redemption date of the notes. Interest is charged as an expense as it accrues.

(O) CONTRIBUTEd EqUITy

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(P) EMPLOyEE BENEFITS

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non–monetary benefits, annual leave and any vesting sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non–accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the

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provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Share–based payments

The Company has issued options to executives and employees as part of their remuneration. The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

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

The fair value of the options granted excludes the impact of any non–market vesting conditions (for example, profitability and sales growth targets). Non–market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

(iv) Employee benefit on–costs

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

(q) EARNINGS/LOSS PER SHARE Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of the ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

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

(R) CAPITAL MANAGEMENT

Management controls the capital of the Company in order to provide capital growth to shareholders and ensure the Company can fund its operations and continue as a going concern. The Company’s capital includes ordinary share capital, the equity portion of convertible notes, reserves and retained losses. There are no externally imposed capital requirements. Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management of share issues.

There have been no changes in the strategy adopted by management to control the capital of the group since the prior year.

(S) COMPARATIvES

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

(M) IMPAIRMENT OF ASSETS

Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had

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

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

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available–for–sale financial asset previously recognised in equity is transferred to profit or loss. Any impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. For available–for–sale financial assets that are equity securities, the reversal is recognised directly in equity.

Non–Financial Assets The carrying amounts of the consolidated entity’s non– financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives recoverable amount is estimated at each reporting date.

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

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

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

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

(T) NEW STANdARdS ANd INTERPRETATIONS NOT yET AdOPTEd

The following standards, amendments to standards and interpretations have been identified as those which may impact the Consolidated Entity in the period of initial application. They are available for early adoption at 31 August 2009, but have not been applied in preparing these Financial Statements:

• AASB 123 ‘Borrowing Costs’ (Revised) and amending standard AASB 2007–6 ‘Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, 101, 107, 111, 116, 138, Interpretations 1 & 12]’. These standards are applicable to annual reporting periods beginning on or after 1 January 2009. These standards eliminate the option of expensing borrowing costs relating to qualifying assets, instead requiring capitalisation. This will not affect the Consolidated Entity as only eligible borrowing costs will be capitalised with regard to qualifying assets.

• AASB 101 ‘Presentation of Financial Statements’ and amending standard AASB 2007–8 ‘Amendments to Australian Accounting Standards arising from AASB 101’. These standards are applicable to annual reporting periods beginning or after 1 January 2009. AASB 101 introduces the notion of the ‘complete set of financial statements’ and prescribes several changes to the presentation of the financial statements, including the requirement to disclose owner changes in equity separately from non–owner changes in equity. Presentation requirements for restatements or reclassifications of items in the financial statements have been introduced, along with changes to the presentation requirements for dividends and changes to the titles of the

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financial statements. Also introduced is a statement of comprehensive income. • AASB 3 ‘Business Combinations’ (Revised) and amending standard AASB 2008–3: ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASB 1, 2, 4, 5, 7, 101, 107, 112, 114, 116, 121, 128, 131, 132, 133, 134, 136, 137, 138 & 139 and Interpretations 9 & 107]’. These standards are applicable to annual reporting periods beginning on or after 1 July 2009. The revised standard introduces a number of changes in accounting for business combinations that will impact the amount of goodwill recognised, the results in the period that the acquisition occurs, and the future revenues reported. • AASB 127 ‘Consolidated and Separate Financial Statements’ (Revised) and AASB 2008–3: ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASB 1, 2, 4, 5, 7, 101, 107, 112, 114, 116, 121, 128, 131, 132, 133, 134, 136, 137, 138 & 139 and Interpretations 9 & 107]’. These standards are applicable to annual reporting periods beginning on or after 1 July 2009. This standard allows a change in the ownership interest of a subsidiary (that does not result in a loss of control) to be accounting for as an equity transaction and will give no impact on goodwill nor will it give rise to a gain or loss. • AASB 8 ‘Operating Segments’ and AASB 2007–3: ‘Amendments to Australian Accounting Standards arising from AASB 8’ [AASB 5, 6,102, 107, 119, 127, 134, 136, 1023, & 1038] are applicable to annual reporting periods beginning in or after 1 January 2009. Application of these standards will not affect any of the amounts recognised in the Financial Statements, but may impact the type of information disclosed in relation to the Consolidated Entity’s segment reporting. • AASB 2008–5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 7, 101, 102, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 & 1038]’ results from the International Accounting Standards Board’s annual improvements project. The annual improvements project provides a vehicle for making non–urgent but necessary amendments to IFRSs. The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting. The likely effect of these changes is in relation to the IAS40 amendment which includes investment property under

construction within the scope of the standard, and will also allow investment property under construction to be measured at cost if fair value cannot be measured reliably until such time as the fair value becomes reliably measureable or construction is completed (which comes earlier). The Consolidated Entity has yet to determine the potential effect of this standard. • AASB 2008–7 ‘Amendments to accounting for the cost of an investment in subsidiary, jointly controlled entity or associate’ [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136] no longer requires entities to deduct dividends out of pre–acquisition profits from the cost of an investment in a subsidiary, jointly controlled entity, or associate. The investor entity must recognise these dividends as income. AASB 136 ‘Impairment of Assets’ now includes recognising a dividend from a subsidiary, jointly controlled entity or associate as an impairment indicator in some circumstances. These standards are applicable to annual reporting periods beginning on or after 1 July 2009. Adoption of the revised AASB 2008–7 is not expected to impact the Consolidated Entity. • AASB 2009–2 ‘Amendments to Australian Accounting Standards – Improving disclosures about Financial Instruments’ [AASB 4, AASB 7, AASB 1023 & AASB 1038]. The amendments to AASB 7 require enhanced disclosures about fair value measurements and liquidity risk. This standard is applicable to annual reporting periods beginning on or after 1 January 2009.

The Consolidated Entity has no plans to adopt accounting policy options with effect from 1 September 2008. Application of the amending standards will not affect any of the amounts recognised in the Financial Statements and is expected to only impact disclosures contained within the Financial Report.

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CONSOLIdATEd ENTITy COMPANy 2009 2008 2009 2008 $ $ $ $

2. INCOME TAx

(a)incometaxexpense Current tax: Current tax year movement – – – – (Over) / under provisions – – – – deferred tax expense from temporary difference: Current tax year movement – – – – (Over) / under provisions – – – – incometaxexpense – – – –

(b)reconciliationofincometaxexpensetolossBeforeincometax

Loss before income tax expense (1,617,921) (3,841,815) (5,301,035) (410,627) Tax at the Australian tax rate of 30% (485,376) (1,152,545) (1,590,311) (123,188) Other adjustments and the effect of different foreign exchange rates 266,936 – 571,386 – Tax losses not recognised 218,440 1,152,545 1,018,925 123,188 R&d tax concession (540,488) – – – incometaxexpense/(Benefit) (540,488) – – –

(c)unrecognisedDeferredtaxassets

theBalanceComprisestemporaryDifferencesattributableto: Tax losses not brought to account 2,407,209 1,780,273 1,562,704 991,318 At 31 August 2009 (amounts are all stated in Australian dollar) the Company had South African losses of $590,918 (2008: 1,310,351) and Australian losses of $7,472,505 (2008: $5,382,219) which may be carried forward and used to reduce certain taxable income in future years. The Australian and South African losses carry forward indefinitely. No tax benefit has been recognised at reporting date as the directors of the Company believe it is too uncertain to determine whether sufficient taxable income will be generated in future periods to utilise these tax losses.

3. EARNINGS PER SHARE

(a)BasicandDilutedearningspershare

Basic and diluted loss per share 1.47 cents 6.21 cents (b)WeightedaveragenumberofsharesusedastheDenominator NUMBER OF SHARES 2009 2008 Weighted average number of ordinary shares outstanding during the year used in 73,109,576 61,818,620

calculation of basic and diluted earnings per share NUMBER OF SECURITIES 2009 2008

Number of options excluded from the diluted earnings per share 9,000,000 9,000,000

calculation because they are anti-dilutive

Number of convertible notes excluded from diluted earnings per 7,000,000 7,000,000

share calculation because they are anti–dilutive

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CONSOLIdATEd ENTITy COMPANy 2009 2008 2009 2008

$ $ $ $

4. CASH ANd CASH EqUIvALENTS

Cash on hand – 110 – 110

Cash at bank 8,225,139 13,066,178 8,161,914 12,868,045

totalCashandCashequivalents 8,225,139 13,066,288 8,161,914 12,868,155

5. TRAdE ANd OTHER RECEIvABLES

Current: Trade receivables 39,749 246,155 – 748,748

Other receivables 596,515 192,959 56,027 125,687

totalCurrentreceivables 636,264 439,114 56,027 874,435

non–Current: Receivable from Palabora Mining Company 4,958,404 – – –

due from controlled entities – – 9,498,859 8,288,927

Allowance for impairment – controlled entities – – (3,148,848) –

due from related parties 160,916 148,068 160,916 148,068

totalnon–Currentreceivables 5,119,320 148,068 6,510,927 8,436,995 (a) FairValueandCreditrisk

due to the short–term nature of these receivables, their carrying value is assumed to approximate their fair value. For the fair values of

trade and other receivables refer to Note 20(d).

(b) ageingandimpairmentloss

Other receivables are non–interest bearing and are generally on 30–60 day terms. A provision for impairment loss is recognised when

there is objective evidence that an individual receivable is impaired. All receivables are within their standard terms and are not considered

impaired (2008: All receivables were within their standard terms and were not considered impaired).

The receivable from the Palabora Mining Company Limited (‘PMC’) is interest bearing (currently at 10.5%, based on the variable prime

overdraft lending rate of the South African bank, Standard Bank of South Africa Limited) through a joint venture agreement with PMC

(refer note 8). At 31 August 2009 the receivable is not past due or considered impaired.

Amounts due from controlled entities consist of two loans receivable from Metals Finance Australia and Metals Finance Africa. An

allowance for impairment has been recognised in relation to the amounts receivable from Metals Finance Australia as there is objective

evidence that the receivable is impaired. The amount due from Metals Finance Africa is not past due and is not considered impaired. The

maximum exposure to credit risk is the carrying value.

Trade receivables as disclosed below are generally aged on 30 day terms. A provision for impairment loss is recognised when there is

objective evidence that an individual trade receivable is impaired. Indicators of impairment include where there is objective evidence of

significant financial difficulties, debtor bankruptcy, financial reorganisation or default in payment. All impairment losses have

been provided for.

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$ $ $ $

The ageing of trade receivables at the reporting date was:

tradereceivablesageing 0–30 days 39,749 246,155 – 551,047

31–60 PdNI* – – – 183,081

31–60 CI* – – – –

61–90 PdNI* – – – 14,620

61–90 CI* – – – –

+ 91 days PdNI * – – – –

+ 91 days CI * – – – –

total 39,749 246,155 – 748,748

* Past Due Not Impaired (‘PDNI’)

* Considered Impaired (‘CI’)

Trade receivables past due but not considered to be impaired at 31 August 2009 are $Nil for the Consolidated Entity (2008: $197,701) and $nil in

the Company (2008: $nil).

There was no impairment or movement in the provision for doubtful debts of trade receivables for the Consolidated Entity for the current or

prior period.

All trade receivables are subject to normal terms of trade which provide for settlement within 30 days or are subject to a contractual settlement

date within 12 months of year end.

6. OTHER ASSETS

Current: Prepaid assets 3,163 3,700 – –

deposits – 10,314 – 10,314

BalanceatendofYear 3,163 14,014 – 10,314

7. PROPERTy, PLANT ANd EqUIPMENT

Leasehold improvements

At cost 42,905 41,163 42,905 41,163

Accumulated amortisation (28,036) (6,601) (28,036) (6,601)

totalleaseholdimprovements 14,869 34,562 14,869 34,562 Plant and equipment

At cost 733,467 726,121 47,639 42,245

Accumulated depreciation (46,762) (10,340) (22,651) (7,856)

Allowance for impairment1 (121,131) – – –

totallandandBuildings 565,574 715,781 24,988 34,389totalProperty,Plantandequipment 580,443 750,343 39,857 68,951

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$ $ $ $

movementsDuringtheYearleaseholdimprovements: Balance at beginning of year 34,562 8,624 34,562 8,624

Additions 1,742 35,867 1,742 35,867

depreciation (21,435) (9,929) (21,435) (9,929)

BalanceatendofYear 14,869 34,562 14,869 34,562

Plantandequipment: Balance at beginning of year 715,781 76,334 34,389 32,530

Additions 7,303 771,451 5,394 33,521

depreciation (36,379) (132,004) (14,795) (31,662)

Impairment1 (121,131) – – –BalanceatendofYear 565,574 715,781 24,988 34,389

1 During the year ended 31 August 2008 the Company halted development of the Lucky Break project due to uncertainty over the projects feasibility (refer Note 8). All capitalised development costs were written off in the 31 August 2008 year. During the 31 August 2008 year the Company had also acquired plant to develop the Lucky Break project and this has been stored since the project was halted. This plant was tested for impairment at 31 August 2009 and an impairment loss of $121,131 was recognised.

8. dEFERREd dEvELOPMENT COSTS

totalDeferredDevelopmentCosts 4,958,404 3,318,718 – –

movementsDuringtheYear Balance at beginning of year 3,318,718 139,852 – – Rental – 1,524 – – Travel 12,972 28,798 – – Supplies 13,504 10,873 – – Consulting 447,296 389,574 – – Interest 972,041 – – – Equipment (under development) 193,873 2,869,730 – –

Write–off of deferred costs – (121,633) – –

Transfer of deferred development costs to receivables1 (4,958,404) –

BalanceatendofYear – 3,318,718 – –

Recoverability of the carrying amount of deferred development costs is dependent on the successful development and commercial exploitation

of the assets.

Palabora Project

Metals Finance Africa Pty Ltd “the Company” entered into a joint venture agreement dated September 5, 2006 (“Joint venture Agreement”) with

Palabora Mining Company Limited (“PMC”) to assess and if warranted, install a new nickel recovery circuit at the Palabora Mining Company

copper refinery in the Republic of South Africa. The Joint venture Agreement was originally with Muva Metals (PTy) Limited and was subsequently

assigned to Metals Finance Africa Pty Ltd June 23 2007.

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Under the terms of the original Joint Venture Agreement:

(i) At the date of the Joint venture Agreement, the Company had a 60% interest and PMC held a 40% interest. The Company was responsible

for funding the Final Evaluation Period and the participants made a decision to proceed to the development and Operational Phase in

April 2007. The Company is responsible for implementation and funding of the commercial treatment facility.

(ii) PMC is responsible for ensuring supply of Electrolyte Bleed Stream to the operating plant and is also responsible for certain supplies.

(iii) The Company is also responsible for funding any operational deficits. The Company is entitled to recover its funding of the project (Capex

Account balance) from operating cash flows. The Company retains ownership of capital property until 100% of capital costs are recovered

at which point the capital property is transferred to PMC.

(iv) Liabilities of the participants to each other and third parties are several in proportion to their respective joint venture interests and is

neither joint nor joint and several. An Addendum to the Joint venture Agreement was signed by PMC and Metals Finance Africa Pty Ltd

on 13 February 2009 varying the terms of the agreement.

Under the terms of the amended Joint Venture Agreement:

(i) Ownership of the Operational Plant vests with PMC and the amount accumulated in the Capex Account are owing to the Company

from PMC.

(ii) PMC has also incurred Capital costs in the construction of the plant. These capital amounts shall be included in the total capital costs to

be repaid before sharing in the proceeds of the net cash flow available for distribution. The allocation of the surplus of the net cash flow

for the repayment of the two Capex accounts will be on a pro rata basis of the Capex Account to PMC and the Company.

(iii) As owner of the Operational Plant, PMC will be entitled to claim the full wear and tear allowances. As a result of the new agreement the

deferred development costs that have been capitalised in Metals Finance Africa Pty Ltd’s accounts have been transferred to a receivable

from PMC.

As a result of the new agreement the deferred development costs that have been capitalised in Metals Finance Africa Pty Ltd’s accounts have

been treated as a sale at the captalised value and transferred to a receivable from PMC.

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9. OTHER FINANCIAL ASSETS


$ $ $ $

Investments in controlled entities – – 250 250

Other investments – held for trading – 24,354 – 24,298

Other investments – available for sale 4,322,200 – 4,322,200 –

totalotherFinancialassets 4,322,200 24,354 4,322,450 24,548

(a)Company

Significant investment in subsidiaries:

NAME FORMATION / CLASS OF SHARE INTEREST HELd % 1

INCORPORATION 2009 2008

Metals Finance Australia Australia Ordinary 100 100 Metals Finance Africa Australia Ordinary 50 50

All companies have a 31 August balance date.

1 Percentage of voting power is in proportion to ownership

(b)Consolidatedentity

The parent entity within the Consolidated Entity is Metals Finance Limited. The ultimate parent entity in Australia is Metals Finance Limited.

10. TRAdE ANd OTHER PAyABLES


$ $ $ $

Current: Trade payables 68,034 72,545 – 41,008

Other creditors and accruals 234,759 813,439 252,668 905,664

totalCurrenttradeandotherPayables 302,793 885,984 252,668 946,672

Trade payables are usually due within 30 days. No interest is charged on the balances paid outside normal terms.

(a)FairValue

The carrying amounts of payables approximate fair values.

(b)securedamountsPayable

None of the payables are secured.

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11. INTEREST BEARING LOANS ANd BORROWINGS


$ $ $ $

Current: Loan from related party – unsecured 548,855 540,375 – –non–Current: Convertible notes 3,500,000 3,500,000 3,500,000 3,500,000

Amount classified as equity (1,571,630) (1,571,630) (1,571,630) (1,571,630)

Accreted interest 741,757 301,195 741,757 301,195

Carrying amount of the liability at 31 August 2,670,127 2,229,565 2,670,127 2,229,565

Finance lease liabilities – secured 17,709 23,021 – –

totalnon–CurrentinterestBearingloansandBorrowings 2,687,836 2,252,586 2,670,127 2,229,565

Facilities utilised at balance date:

Loan from related party 548,855 540,375 – –

Convertible notes 4,241,757 3,801,195 4,241,757 3,801,195

Finance lease facility 17,709 23,021 – –

4,808,321 4,364,591 4,241,757 3,801,195

Facilities not utilised at balance date:

Loan from related party – – – –

Convertible notes – – – –

Finance lease facility – – – –

– – – –

(a)restrictionsastouseorWithdrawal

There are no restrictions on use or withdrawal of any facilities.

(b)loansfromrelatedParties

Amounts due to the Met–Solve related party is unsecured and bears interest at 6% per annum and is repayable upon agreement with the joint

venture partner. The amount has arisen as a result of advances from the joint venture partner to the Met–Solve Joint venture for start up costs.

Amounts due to the MFAf related party is unsecured, bears interest at LIBOR and is repayable on a fixed ratio of the joint ventures surplus. Should

the joint venture not attain any surpluses or should the Company exit the joint venture, no amounts will be repayable.

(c)Financeleaseliability(Wholly–secured)

The finance lease liability is secured over the leased asset being a motor vehicle. The lease expires in November 2012. The effective interest rates

is 9.5%.

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(d)Convertiblenotes

In October 2007, the Company completed a financing agreement for cash proceeds. The financing consisted of 12% per annum

unsecured convertible notes maturing 16 October 2010 with four places. The notes are redeemable at the option of the Company within

the first year and are convertible to common shares at the option of the holder after 180 days and prior to the maturity date. The

conversion ratio is $0.50 per share. Upon either conversion or redemption a share option is to be granted to the holder for an additional

$0.50 per share which is exercisable for two years from the issue of the option. The conversion and option feature of the notes has a fair

value of $1,571,630, which was determined using a Black–Scholes valuation model upon the issue of the notes.

The fair value of the conversion feature of the notes has been recorded as an equity component of the notes financing, reducing the amount assigned

to the debt component.

(e)DefaultsandBreaches

during the current and prior period, there were no defaults or breaches on any of the loans.

12. CONTRIBUTEd EqUITy

COMPANy 2009 2008

issuedCapital–numberofshares 73,109,576 73,109,576

ValueofissuedCapital $20,511,496 $20,407,177

movementincontributedequityduringtheyear:

$ $ SHARE CAPITAL MOvEMENTS – CONSOLIdATEd ANd PARENT 2009 SHARES 2009 2008 SHARES 2008

Fully paid ordinary shares at 1 September 73,109,576 20,407,177 31,215,576 3,816,894

Exercise of warrants1 – – 90,000 13,500

Issued as broker commission2 – – 600,000 240,000

Private placement3 – – 9,625,000 3,850,000

Initial public offering4 – – 31,579,000 15,789,500

Effect of change in functional and presentation currency

(refer Note 1 (a) – – – (1,036,742)

Share issue costs – 104,319 – (2,265,975)

Total fully paid ordinary shares at 31 August 73,109,576 20,511,496 73,109,576 20,407,177

1 During the year ended 31 August 2008 the Company issued 90,000 shares on the exercise of warrants for gross proceeds of $13,500.

2 In connection with the private placement (below), the Company issued 600,000 common shares with a market value of $240,000 as a broker commission.

3 During the year ended 31 August 2008 the Company completed a private placement at $0.40 per share issuing 9,625,000 shares for gross proceeds of $3,850,000.

4 During the year ended 31 August 2008 the Company completed an IPO at $0.50 per share, issuing 31,579,000 shares for gross proceeds of $15,789,000.

(a)termsandConditions

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at Share Holders’

Meetings. In the event of winding up of the Company, ordinary share holders rank after all creditors and are fully entitled to any proceeds

of liquidation.

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(b)Capitalmanagement

Management controls the capital of the Company in order to provide capital growth to shareholders and ensure the Company can fund its

operations and continue as a going concern. The Company’s capital includes ordinary share capital, the equity portion of convertible notes,

reserves and retained losses. There are no externally imposed capital requirements. Management effectively manages the Company’s capital by

assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses

include the management of share issues.

There have been no changes in the strategy adopted by management to control the capital of the group since the prior year.

(c)Warrants

The Company had the following warrants outstanding at year end:

COMPANy 2009 2008

numberofwarrantsoutstanding 3,900,000 3,900,000

exerciseprice $ 0.265 $ 0.265

expirydate 6 March 2010 6 March 2010

(d)options

The Company grants incentive stock options for the purchase of common shares of the Company to its officers, directors and consultants. The

exercise price and vesting terms of the stock options is determined by the Board of directors of the Company at the time of the grant.

COMPANy 2009 2008

numberofoptionsoutstanding 5,100,000 5,100,000

exerciseprice $ 0.265 $ 0.265

during the year ended 31 August 2007 3,600,000 options were issued which expire on 3 February 2010 and 1,500,000 options which expire on 6

March 2010. All options were fully vested at the date of the grant.

The fair value of the options granted in the year ended 31 August 2007 has been determined using the Black–Scholes option pricing model using

the following assumptions

Risk–free rate 4.25%

Expected life 3 years

Expected volatility 23%

Expected dividends –

No options were granted or exercised during the year ended 31 August 2009 (2008: nil).

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13. RESERvES


$ $ $ $

Foreign exchange translation reserve (28,167) (8,437) – –

Share based payments reserve 74,739 74,739 74,739 74,739

Investment revaluation reserve 2,257,935 – 2,257,935 –

totalreserves 2,304,507 66,302 2,332,674 74,739

Balance at beginning of year 66,302 74,739 74,739 74,739

Share–based payments – – – –

Foreign currency translation (19,730) (8,437) – –

Investment valuation gain/ (loss) recognised 2,257,935 – 2,257,935 –

2,304,507 66,302 2,332,674 74,739

(c)natureandpurposeofreserves

Share based payments reserve

The share based payment reserve is used to record the value of share based payments provided to employees, including key management

personnel, as part of their remuneration.

Foreign exchange translation reserve

The foreign exchange translation reserve comprise all foreign currency differences arising from the translation of the financial statements of

foreign operations.

Investment revaluation reserve

The investment revaluation reserve comprises the cumulative net change in the fair value of Available–for–Sale financial assets until the investment

is derecognised or impaired.

14. COMMITMENTS

(a)operatingleaseCommitments


$ $ $ $

Future minimum lease payments:

Within one year 29,769 149,426 89,595 149,426

Later than one year and no later than five years 13,423 126,474 28,000 126,474

43,192 275,900 117,595 275,900

Operating lease commitments relate to the rental of office premises in Burnaby, British Columbia and yatala, queensland.

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(b)FinanceleasePaymentCommitments


$ $ $ $

Future minimum lease payments:

Within one year – – – –

Later than one year and no later than five years 18,967 28,138 – –

18,967 28,138 – –

Less: Future lease finance charges not provided for in the

Financial Statements (1,258) (5,117) – –

17,709 23,021 – –

Present value of minimum lease payments:

Current (Note 11) – – – –

Non–current (Note 11) 17,709 23,021 – –

totalleaseliability 17,709 23,021 – –

15. CONTINGENT LIABILITIES

The consolidated entity has no known contingent assets or contingent liabilities at 31 August 2009.

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16. NOTES TO THE CASH FLOW STATEMENT

reconciliationofnetCashProvidedBy/(usedin)operatingactivitiestooperatingProfitafterincometax


$ $ $ $

Operating profit after income tax (1,077,434) (3,841,815) (5,301,035) (410,627)

Add / (less) non–cash items:

depreciation / amortisation 123,440 141,933 101,855 41,591

Write–off of deferred development costs – 148,298 – –

Impairment of receivables from controlled entities – – 3,148,848 –

Impairment of property, plant and equipment 121,131

Gain/loss on investments 24,299 18,438 24,299 18,668

Movement in interest payable 532,437 301,195 532,437 301,195

Movement in interest receivable (834,021) 22,692 69,656 (125,687)

Intercompany revenue – – – –

Movement in foreign currency reserve (19,730) (8,437) – –

Change in assets and liabilities:

(Increase) / decrease in trade receivables (334,082) – 30,650 (809,399)

(Increase) / decrease in other receivables – – – –

(Increase) / decrease in other assets 10,851 191,636 10,314 (4,756)

Increase / (decrease) in accounts payable (4,511) 67,829 (41,006) 185,010

Increase / (decrease) in other payables and accruals (736,125) (77,110) (810,495) 371,465

netCashProvidedBy/(usedin)operatingactivities (2,193,745) (3,035,341) (2,234,477) (432,540)

Non–cash transactions

In the 2008 financial year there was a share issue of 600,000 fully paid ordinary shares for the payment of broker commission on issue

of shares.

17. kEy MANAGEMENT PERSONNEL dISCLOSURES

(a)DirectorsThe following persons were directors and key management personnel of the Company during the year:

• G Hill (Chairman, Non–Executive director);

• W Eades (Non–Executive director); appointed 22 September 2009

• B Boyes (Non–Executive director); resigned 16 december 2008

• A Neale (Non–Executive director); resigned 31 August 2008

• T Treasure (Executive director and Chief Executive Officer);

• A de vos (Chief Financial Officer and Company Secretary);

• A voisin (Former CFO);

• L Heurlin (Executive);

• G Parker (Executive).

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(b)KeymanagementPersonnelCompensation

key management personnel are those directly accountable and responsible for the operational management and strategic direction of the

company and the consolidated entity. The following table provides the details of all the key management personnel (including directors) and the

nature and amount of the elements of their remuneration for the year ended 31 August 2009:

SHORT–TERM POST– TERMINATION EMPLOyEE BENEFITS EMPLOyMENT BENEFITSkEy MANAGEMENT NON–MONETARy SUPERANNUATION SEvERANCEPersonnel Year salarY&Fees Bonus BeneFits BeneFits PaYments total $ $ $ $ $ $

dIRECTORS Non–executive Directors G Hill 2009 84,753 – – – – 84,753 2008 54,955 – – – – 54,955 W Eades1 2009 47,917 – – 4,313 – 52,230 2008 – – – – – – Former B Boyes2 2009 53,970 – – – – 53,970 2008 60,450 – – – – 60,450 A Neale3 2009 – – – – – – 2008 216,155 – – 9,068 309,501 534,724 Executive Director T Treasure 2009 178,000 – – 94,500 – 272,500 2008 222,912 – – 17,257 – 240,169 Executives (Other) A de vos 2009 145,000 – – 18,500 – 163,500 2008 60,500 – – 5,446 – 65,946 A voisin 2009 40,134 – – – – 40,134 2008 125,483 – – 4,946 83,216 213,645 L Heurlin 2009 190,000 – – 17,100 – 207,100 2008 156,500 – – 10,505 – 167,005 G Parker 2009 125,771 – – – – 125,771 2008 53,124 – – – – 53,124total 2009 865,545 – – 134,413 – 999,9582008 950,079 – – 47,222 392,717 1,390,018

1 W Eades was appointed as Director on 22 September 20082 B Boyes resigned as Director on 16 December 2008

3 A Neale resigned as Director on 31 August 2008.

The key Management Personnel are also the five most highly paid Executive Officers of the consolidated entity for the year ended 31

August 2009.

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(c)loanstoKeymanagementPersonnel

There were no loans to key management personnel during the year.

(d)shareHoldingsofKeymanagementPersonnelat31august2009

HELd AT RECEIvEd ON HELd AT

dIRECTORS 1 SEPTEMBER 2008 PURCHASEd ExERCISE OF SALES OTHER 31 AUGUST 2009

OPTIONS

dIRECTORS

G Hill2 500,000 4,404,350 – – – 4,904,350

W Eades – – – – – –

B Boyes 600,000 – – – (600,000)1 –

A Neale 2,568,750 – – – (2,568,750)1 –

T Treasure2 2,464,125 244,062 – – – 2,708,187

ExECUTIvES

A de vos 610,000 – – – – 610,000

A voisin 90,000 – – – – 90,000

L Heurlin – – – – – –

G Parker – – – – – –

1 Number of securities at commencement and / or cessation of employment.2 Held directly and indirectly

(e)optionHoldingsofKeymanagementPersonnelat31august2009

HELd AT ISSUEd AS OPTIONS NET CHANGE HELd AT TOTAL vESTEd ANd

dIRECTORS 1 SEPTEMBER 2008 REMUNERATION ExERCISEd OTHER 31 ExERCISABLE

AUGUST 2009

dIRECTORS

G Hill 600,000 – – – 600,000 600,000

W Eades – – – – – –

B Boyes 600,000 – – (600,000)1 – –

A Neale 1,500,000 – – (1,500,000)1 – –

T Treasure 1,500,000 – – – 1,500,000 1,500,000

ExECUTIvES

A de vos – – – – – –

A voisin 300,000 – – – – 300,000

L Heurlin 300,000 – – – – 300,000

G Parker – – – – – –

1 Number of options at commencement and / or cessation of employment.

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18. RELATEd PARTIES

(a) transactionswithrelatedentities

(i) Management Services – Karton Investments Pty Ltd

karton Investments Pty. Ltd. (“karton”), a company controlled by the CEO (T Treasure), provides consulting services to the Company. The

cost of these services, aggregating $24,000 ($51,326 in 2008) was charged to selling, general and administrative expenses. These

transactions are in the normal course of operations and are measured at the exchange amount of consideration established and agreed

to by the related parties.

(ii) Capital Raising Services – Pitt Capital Partners Pty Ltd

Companies which share a common director were paid $665,844 in 2008 for services during the year ended August 31, 2008, including

commissions for raising of funds and advisory services relating to the management of the Company’s IPO. The cost of these services was

based on normal market rates for the services provided.

(iii) Controlled Entities

details of interests in controlled entities are set out in Note 9. details of dealings with these entities are set out below.

Loans

Interest is not charged on loans between entities within the Consolidated Entity and there are no fixed terms for repayment. As at reporting date

the following amounts were owed to the Company by controlled entities:

COMPANy 2009 2008

Metals Finance Australia 1,056,693 3,667,432

Metals Finance Africa 5,293,318 4,621,495

6,350,011 8,288,927

Loan to Metals Finance Australia

Funds used for exploration and evaluation and development expenditure during the period. The outstanding balance is unsecured and

interest free.

details of movements in the loan are as follows:

CONSOLIdATEd PARENT ENTITy 2009 2008 2009 2008

$ $ $ $

Balance at beginning of yeaR – – 3,667,432 2,936,048

Loans advanced – – 538,109 731,384

Loan repayments made – – – –

Interest charged – – – –

Provision for impairment – – (3,148,848) –

BalanceatendofYear – – 1,056,693 3,667,432

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Loan to Metals Finance Africa

Funds used for exploration and evaluation and development expenditure during the period. The outstanding balance is unsecured and

interest bearing.

details of movements in the loan are as follows:

CONSOLIdATEd PARENT ENTITy 2009 2008 2009 2008

$ $ $ $

Balance at beginning of year – – 4,621,495 525,406

Loans advanced – – 641,801 4,010,364

Loan repayments made – – – –

Interest charged – – 30,022 85,725

BalanceatendofYear – – 5,293,318 4,621,495

(vi) Balances with Related Parties

The aggregate amounts payable or provided for, to related parties at balance date are as follows:

CONSOLIdATEd ENTITy PARENT ENTITy 2009 2008 2009 2008

$ $ $ $

interestBearingloansandBorrowings: Loan from Joint venture Partners 548,855 540,375 – –

tradeandotherreceivables due from related parties 160,916 148,068 160,916 148,068

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19. AUdITOR’S REMUNERATION


$ $ $ $

auditoftheConsolidatedentityPKFCharteredaccountants: Audit and review of Financial Reports 40,000 – 40,000 –

40,000 – 40,000 –

auditoftheConsolidatedentityKPmG Audit and review of Financial Reports – 126,946 – 126,946

– 126,946 – 126,946

non–auditservices:PKFCharteredaccountants: Audit of Canadian GAAP to AIFRS conversion 5,000 – 5,000 –

Other assurance services 2,190 – – –

Taxation services 9,115 – – –

16,305 – 5,000 –

non–auditservices:KPmG due diligence services – 3,847 – 3,847

Taxation services – 4,822 – 4,822

– 8,669 – 8,669

20. FINANCIAL RISk MANAGEMENT OBJECTIvES ANd POLICIES

The consolidated entity’s principal financial instruments comprise deposits with banks, accounts receivable and payable, loans to subsidiaries,

convertible notes and finance leases. The main purpose of these financial instruments is to raise cash for the consolidated entity’s operations.

The Consolidated Entity’s policy is to manage its finance costs using a mix of fixed and variable rate debt. Borrowings are carried at amortised

cost and it is acknowledged that fair value exposure is a by–product of the Consolidated Entity’s attempt to manage its cash flow volatility arising

from interest rate changes.

The main risks arising from the Consolidated Entity’s financial instruments are interest rate risk, foreign currency risk, price risk, credit risk and

liquidity risk. The Consolidated Entity uses different methods to measure and manage different types of risks to which it is exposed. These include

monitoring levels of exposure to interest rate risk and assessments of market forecasts for interest rate prices. Ageing analyses and monitoring

of specific credit allowances are undertaken to manage credit risk, and liquidity risk is monitored through the development of future rolling cash

flow forecasts.

Primary responsibility for identification and control of financial risks rests with the directors of Metals Finance Limited, the Company. They review

and agree to policies for managing each of the risks identified below, including limits for approved instruments, transaction values, tenor and

counterparties with whom the Consolidated Entity transacts. The Consolidated Entity does not enter into financial transactions for the purpose

of short–term trading.

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(a)interestraterisk

Interest rate risk is the risk that changes in interest rates will affect the Consolidated Entity’s income or the value of its obligations, and arises on

floating debt rate. The Consolidated Entities’ exposure to market interest rates relates primarily to long–term debt obligations. The level of debt

is disclosed in Note 11.

At balance date, the Consolidated Entity had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk

that are not designated in cash flow hedges:


$ $ $ $

Financialassets: Cash assets 8,225,139 13,066,288 8,161,914 12,868,155

Receivable from Palabora Mining Company 4,958,404 – – –

due from controlled entities – – 5,293,317 4,621,494

13,183,543 13,066,288 13,455,231 17,489,649

Financialliabilities: Loans from joint venture partners 548,855 540,375 – –

548,855 540,375 – –

Interest rates over the 12 month period were analysed and a sensitivity determined to show the effect on profit and equity after tax if the interest

rates at reporting date had been 100 basis points higher or lower, with all other variables held constant. This level of sensitivity was considered

reasonable given the current level of both short–term and long–term Australian interest rates. The following sensitivity analysis is based on the

interest rate risk exposures in existence at the balance sheet date.

At 31 August 2009, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity

would have been affected as follows:

Judgements of reasonably possible movements:

POST TAx PROFIT EqUITy HIGHER/(LOWER) HIGHER/(LOWER) 2009 2008 2009 2008 $ $ $ $

Consolidatedentity +1.00% (100 basis points) 126,347 125,259 126,347 125,259

–1.00% (100 basis points) (126,347) (125,259) (126,347) (125,259)

Company +1.00% (100 basis points) 134,552 174,896 134,552 174,896

–1.00% (100 basis points) (134,552) (174,896) (134,552) (174,896)

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(b)ForeignCurrencyrisk

Foreign currency risk arises as a result of having assets/cash flows denominated in a currency other than the home currency in which they are

reported. At 31 August 2009, the Consolidated Entity had the following exposure to foreign currency:


$ $ $ $

Financialassets: Cash and cash equivalents 4,071 170,035 – –

Trade and other receivables 39,749 – 5,293,317 4,621,494

Receivable from Palabora Mining Company 4,958,404 – – –

Other financial assets – – – –

5,002,224 170,035 5,293,317 4,621,494

Financialliabilities: Trade and other payables 21,222 70,591 – –

Loan from Joint venture Partners 548,855 540,375 – –

570,077 610,966 – –

Exchange rates over the 12 month period were analysed and a sensitivity determined to show the effect on profit and equity after tax if the

exchange rates at reporting date had been 10% basis higher or lower, with all other variables held constant. The following sensitivity analysis is

based on the foreign currency risk exposures in existence at the balance sheet date:


POST TAx PROFIT EqUITy HIGHER/(LOWER) HIGHER/(LOWER) 2009 2008 2009 2008

$ $ $ $

Consolidatedentity + 10.00% 443,214 44,093 443,214 44,093

– 10.00% (443,214) (44,093) (443,214) (44,093)

Company + 10.00% 529,332 462,149 529,332 462,149

– 10.00% (529,332) (462,149) (529,332) (462,149)

(c)Creditrisk

Credit risk is the risk of financial loss to the Consolidated Entity if a customer or counterparty to a financial instrument fails to meet

contractual obligations.

Credit risk arises from the financial assets of the Consolidated Entity, which comprise cash and cash equivalents and trade and other receivables.

The Consolidated Entity’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying

amount of these instruments. Exposure at balance date is addressed in each applicable note.

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In addition, receivable balances are monitored on an ongoing basis with the result that the Consolidated Entity’s exposure to bad debts is

not significant.

At 31 August 2009 the consolidated entity had a concentration of credit risk relating to cash deposits totaling $8,225,139 (2008: $13,066,288).

The consolidated entity also had a concentration of credit risk in relation to a receivable from Palabora Mining Company amounting to $4,958,404

(2008: $nil)

The Consolidated Entity had no other concentrations of credit risk with any single counterparty or group of counterparties.

(d)liquidityrisk

The Consolidated Entity’s objective is to maintain a balance between continuity of funding and flexibility through the use of convertible notes,

related party loans and finance leases.

The table below reflects the contractual maturity of fixed and floating rate financial liabilities. Cash flows for financial liabilities without fixed

amount or timing are based on the conditions existing at 31 August 2009. The amounts disclosed represent undiscounted cash flows.

The remaining contractual maturities of the financial liabilities are:


$ $ $ $

6 months or less 302,793 885,984 252,668 946,672

6–12 months 548,855 540,375 – –

1–2 years 4,241,757 – 4,241,757 –

2–5 years 18,967 3,829,333 – 3,801,195

Over 5 years – – – –

5,112,372 5,255,692 4,494,425 4,747,867

Contractual maturity analysis of financial liabilities:

6–12 2009 ≤ 6 MONTHS MONTHS 1–2 yEARS 2–5 yEARS 5+ yEARS TOTAL $ $ $ $ $ $

ConsolidatedentityFinancialliabilities: Payables 302,793 – – – – 302,793

Loan from Joint venture

Partners – 548,855 – – – 548,855

Convertible notes – – 4,241,757 – – 4,241,757

Finance leases – – – 18,967 – 18,967

302,793 548,855 4,241,757 18,967 – 5,112,372

CompanyFinancialliabilities: Payables 252,668 – – – – 252,668

Convertible notes – – 4,241,757 – – 4,241,757

252,668 – 4,241,757 – – 4,494,425

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6–12 2008 ≤ 6 MONTHS MONTHS 1–2 yEARS 2–5 yEARS 5+ yEARS TOTAL

$ $ $ $ $ $

ConsolidatedentityFinancialliabilities: Payables 885,984 – – – – 885,984

Loan from Joint venture

Partners – 540,375 – – – 540,375

Convertible notes – – – 3,801,195 – 3,801,195

Finance leases – – – 28,138 – 28,138

885,984 540,375 – 3,829,333 – 5,255,692CompanyFinancialliabilities: Payables 946,672 – – – – 946,672

Convertible notes – – – 3,801,195 – 3,801,195

946,672 – – 3,801,195 – 4,747,867

(e)Pricerisk

The Consolidated Entity’s exposure to equity securities in the current period arose from an investment in one listed company, Bass Metals Ltd.

The Consolidated Entity actively monitors the underlying investment in the context of its overall strategic and financial objectives. At 31 August

2009, the Consolidated Entity had the following exposure to price risk:


$ $ $ $

Held for Trading: Marketable Securities – 24,354 – 24,298

Available–for–Sale Investments 4,322,200 – 4,322,200 –

4,322,200 24,354 4,322,200 24,298

At 31 August 2009, the movement in equity securities price risk, as illustrated in the table below, with all other variables held constant, post–tax

profit and equity would have been affected as follows:


POST TAx PROFIT EqUITy HIGHER/(LOWER) HIGHER/(LOWER) 2009 2008 2009 2008

$ $ $ $

Consolidatedentity + 10.00% – 2,435 432,220 2,435

–10.00% – (2,435) (432,220) (2,435)

Company + 10.00% – 2,430 432,220 2,430

–10.00% – (2,430) (432,220) (2,430)

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(f)FairValue

The carrying amount of the Consolidated Entity’s and Company’s Financial Assets and Financial Liabilities approximate their fair value.

Fair value of the Financial Liabilities is calculated based on present value of future principal and interest cash flows, discounted at the market

rate of interest at the reporting date. For interest bearing loans and borrowings, the market rate of interest is determined by reference to similar

liabilities in the same industry and with a similar risk rating, and for finance leases, by reference to similar finance leases at reporting date.

21. SEGMENT INFORMATION

The Consolidated Entity operates primarily in three operating locations, Canada, Australia and South Africa, although the closure of the Canadian

office had an effect on the recording period revenue and expenses which has been included for disclosure purposes.

Geographical information is as follows:

CANAdA AUSTRALIA SOUTH AFRICA CONSOLIdATEd 2009 2009 2009 2009

$ $ $ $

revenue: Revenue from outside the Consolidated Entity – 791,542 1,411,151 2,202,693 Other unallocated revenue – –revenuefromordinaryactivities 2,202,693result: Segment result – (2,337,353) 719,433 (1,617,920) Profit from ordinary activities before income tax (1,617,920) Income tax benefit 540,488netloss – (1,077,432)

depreciation and amortisation – 117,177 6,263 123,440

assets: Segment assets – 13,858,168 5,028,361 18,886,529 Unallocated corporate assets –Consolidatedtotalassets 18,886,529

liabilities: Segment liabilities – 2,965,728 556,127 3,521,855 Unallocated corporate liabilities – –Consolidatedtotalliabilities 3,521,855

Acquisition of property, plant and equipment 7,502 – 1,543 9,045

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CANAdA AUSTRALIA SOUTH AFRICA CONSOLIdATEd 2008 2008 2008 2008

$ $ $ $

revenue: Revenue from outside the Consolidated Entity 1,075,176 16,899 14,514 1,106,589 Other unallocated revenue – – – –revenuefromordinaryactivities 1,106,589

result: Segment result (410,627) (2,857,110) (574,078) (3,841,815) Profit from ordinary activities before income tax expense (3,841,815) Income tax expense –netProfit (3,841,815)

depreciation and amortisation 41,591 97,889 2,453 141,933

assets: Segment assets 13,558,903 681,462 3,520,534 17,760,899 Unallocated corporate assets –Consolidatedtotalassets 17,760,899

liabilities: Segment liabilities 3,176,237 15,607 487,101 3,678,945 Unallocated corporate liabilities – – – –Consolidatedtotalliabilities 3,678,945 Acquisition of property, plant and equipment 780,755 – 26,563 807,318

22. SUBSEqUENT EvENTS

Metals Finance Limited appointed as from 7 October 2009 two new independent non-executive directors, Richard Stacy Anthon (Rick Anthon)

and Michael John Gunn (Mike Gunn).

Subsequent to year end the share price of Bass Metals Limited (ASx code: BSM) increased from 20 cents a share at 31 August 2009 to

approximately 31 cents a share at the date these accounts are approved. This would result in a material increase in value of the Company’s

investment by approx $2,377,210. The investment is classified as an ‘available-for-sale’ financial instrument and movements in the value of the

investment are taken directly to equity.

There has not arisen in the interval between the end of the financial year and the date of this Report other than the appointment of two new

directors and the increase in the Bass Metals financial instrument, any item, transaction or event of a material and unusual nature likely, in the

opinion of the directors of the Company, to affect significantly the operations of the Consolidated Entity, the results of those operations, or the

state of affairs of the Consolidated Entity, in future financial years.

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23. IMPACT OF AdOPTING AUSTRALIAN EqUIvALENTS TO INTERNATIONAL FINANCIAL REPORTING STANdARdS (‘AIFRS’)

AASB 128: Investments in Associates

The Met-Solve Laboratories Inc (“Met-Solve”) was previously treated as a joint venture and accounted for using the proportionate consolidation method whereby the Company’s proportionate share of the assets and liabilities and the related revenues and expenses are included in the consolidated financial statements. The investment in Met-Solve will not be treated as a joint venture under AIFRS as there is no “joint control” as defined by ‘AASB 131 Interest in Joint ventures’. Under AFIRS the Met-Solve investment will be treated as a Associate and accounted for using the Equity Method as prescribed by AASB 128. Under the Equity Method the investment in an associate is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the profit or loss of the investee is recognised in the investor’s profit or loss. distributions received from an investee reduce the carrying amount of the investment. The effect of this change on equity, retained earnings and profits is immaterial.

AASB 127 Consolidated and Separate Financial Statements:

Under CGAAP Metals Finance Africa (Pty) Ltd (“MFA”) had been determined to be a ‘variable interest entity’ and was therefore fully consolidated. While the ‘variable interest entity’ concept is not present under AIFRS it has been determined that Metals Finance Corp. has the power to govern the financial and operating policies of MFA so as to obtain benefits from its activities and therefore has ‘control’ over MFA as defined by AASB 127. As a result MFA has been fully consolidated in these financial statements and there is no material change to equity retained earnings or profits.

AASB 132 Financial Instruments – Presentation and AASB 139 Financial Instruments - Recognition and Measurement:

Effective 1 September 2007, the Company adopted CICA Handbook Section 3955, Financial Instruments – Recognition and Measurement and Section 3861 Financial Instruments – disclosure and Presentation. As a result the recognition and measurement of the Company’s investment in stock options (classified as held-for-trading) and the recognition and measurement of the Company’s convertible notes (considered a compound financial instrument with the carrying amount allocated to its equity and liability components) were treated in accordance with AIFRS.

Reconciliation of total equity, retained earnings, profit after tax and cash flow statement presented under CGAAP to that under AIFRSs

There were no material impacts of adopting AIFRSs on the total equity, retained earnings, profit after tax or the cash flow statementas reported under Canadian Generally Accepted Accounting Principles.

24. CORRECTION OF ERROR

An error in the valuation of the options attached to the convertible notes on issue resulted in the equity portion of the notes being overstated by $568,540 and the liability portion being understated by the same amount.

This error has been corrected by restating each of the affected financial statement line items for the prior year, as described above.

25. dIvIdENdS ANd FRANkING CREdITS

There were no dividends paid or recommended during the financial year. There were no franking credits available to the shareholders of the consolidated entity.

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directors’ declaration

The directors of Metals Finance Limited declare that:

(a) in the directors’ opinion the financial statements and notes on pages 14 to 41, and the remuneration disclosures that are contained in the Remuneration Report in the directors’ Report, set out on pages 10 to 12 , are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company and Consolidated Entity’s financial position as at 31 August 2009 and of their performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.

(b) the Financial Report also complies with International Financial Reporting Standards as disclosed in Note 1; and (c) the remuneration disclosures that are contained in the Remuneration Report in the directors’ Report comply with Australian Accounting Standard AASB 124 ‘Related Party disclosures,’ the Corporations Act 2001 and the Corporations Regulations 2001; and

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

The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer for the financial year ended 31 August2009, required by Section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

dIRECTORdated at Brisbane, 27th October 2009

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Auditor’s Opinion

In our opinion:

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

(i) giving a true and fair view of the Company’s and the Consolidated Entity’s financial position as at 31 August 2009 and of their performance for the year ended on that date; and

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

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

Report on the Remuneration Report

We have audited the Remuneration Report included on pages 17 to 19 of the directors’ report for the year ended 31 August 2009. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Metals Finance Limited for the period ended 31 August 2009, complies with section 300A of the Corporations Acts 2001.

PKF

Albert LootsPartner


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Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.auPKF | ABN 83 236 985 726Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | AustraliaGPO Box 1078 | Brisbane | Queensland 4001

The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Liability limited by a scheme approved under Professional Standards Legislation

INDEPENDENT AUDITOR’S REPORT

To the members of Metals Finance Limited

Report on the Financial Report

We have audited the accompanying financial report of Metals Finance Limited, which comprises the balance sheet as at 31 August 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration for both Metals Finance Limited and the consolidated entity. The consolidated entity comprises Metals Finance Limited and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the Metals Finance Limited are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian Equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies withInternational Financial Reporting Standards.

Auditor’s Responsibility

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

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

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

Independence

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



Auditor’s Opinion

In our opinion:

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

(i) giving a true and fair view of the Company’s and the Consolidated Entity’s financial position as at 31 August 2009 and of their performance for the year ended on that date; and

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

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

Report on the Remuneration Report

We have audited the Remuneration Report included on pages 17 to 19 of the directors’ report for the year ended 31 August 2009. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Metals Finance Limited for the period ended 31 August 2009, complies with section 300A of the Corporations Acts 2001.

PKF

Albert LootsPartner


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The information set out below was prepared as at 27 October 2009.

(A) CLASS OF SHARES ANd vOTING RIGHTS

There are currently 550 holders of Ordinary shares of the Company. The voting rights attaching to the Ordinary shares setout in article 4 and 10 of the Company’s Constitution are:

(a) on a show of hands, each natural person present at a General Meeting who is a voting member or a proxy (other than a person who is present only as one of two proxies appointed by the same member), representative or attorney appointed by a voting member has one vote; and

(b) on a poll, each natural person present at a General Meeting has the number of votes calculated as the aggregate of the following; (i) the number of fully paid shares held by the person; (ii) the number of fully paid shares in respect of which voting members holding those shares have appointed the person as proxy, representative or attorney.

(B) dISTRIBUTION OF SHAREHOLdERS

CATEGORy NUMBER OF NUMBER OF SHARES PERCENTAGE OF SHAREHOLdERS TOTAL SHARES

1 - 1,000 8 780 0.001 % 1,001 - 5,000 61 247,427 0.338 % 5,001 - 10,000 88 818,325 1.119 % 10,001 - 100,000 283 12,703,568 17.376 % 100,001 and over 110 59,339,476 81.165 % 550 73,109,576 100%

The number of shareholders holding less than a marketable parcel as at 27 October 2009 is 8. They hold a total of 780 shares.

(C) SUBSTANTIAL SHAREHOLdERS

The name and number of shares held by substantial shareholders listed in the Company’s register of substantial shareholders advised to the Australian Securities Exchange are:

SHAREHOLdER ORdINARy SHARES ANd %

ProtoresourCes&inVestmentsltD 4,215,672 5.766% HFtnomineesPtYltD 4,204,350 5.751%

shareholder information

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shareholder information

(d) LARGEST TWENTy SHAREHOLdERS

NAME NUMBER OF PERCENTAGE OF SHARES HELd TOTAL SHARES %

1. PROTO RESOURCES & INvESTMENTS LTd 4,215,672 5.766 % 2. H F T NOMINEES PTy LTd 4,204,350 5.751 % 3. HSBC CUSTOdy NOMINEES (AUSTRALIA) LIMITEd 3,173,375 4.341 % 4. RyAHEd PTy LTd 2,600,000 3.556 % 5. ECLECTIC INvESTMENTS PTy LIMITEd 1,900,000 2.599 % 6. MR ANdREW NEALE 1,786,125 2.443 % 7. MR PATRICk ANTHONy TREASURE 1,762,500 2.411 % 8. BLUMOS S A 1,500,000 2.052 % 9. MR GEOFFREy LORd & MRS NANETTE LORd & MR RONALd PECk 1,500,000 2.052 % 10. MARLEy HOLdINGS PTy LTd 1,500,000 2.052 % 11. MERRILL LyNCH (AUSTRALIA) NOMINEES PTy LIMITEd 1,440,000 1.970 % 12. MESUTA PTy LTd 1,434,627 1.962 % 13. SvEN FOLkE INGEMAR HEURLIN 1,200,000 1.641 % 14. MR JAMES P FORREST 1,112,375 1.522 % 15. CARMANT PTy LTd 961,166 1.315 % 16. MR PETER JOUGHIN 900,000 1.231 % 17. NATIONAL NOMINEES LIMITEd 886,050 1.212 % 18. MR RICHARd BARTON FORREST & MRS ANNE FORREST 875,573 1.198 % 19. SUSAN kENNEdy 875,572 1.198 % 20. ANZ NOMINEES LIMITEd 800,000 1.094 %

The total number of shares on issue at

(E) ON-MARkET BUy BACk

There is no current on-market buy back.

(F) SECURITIES ExCHANGE

The Company’s Ordinary shares are listed on the Australian Securities Exchange and trade under the ASx code: MFC. The Company’s home exchange is Brisbane.

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1. INTROdUCTION

The Board of directors (“the Board”) of Metals Finance Limited is responsible for the corporate governance practices of the consolidated entity. Metals Finance Limited and its controlled entities are referred to in these policies as “the Group”. The Board guides and monitors the business and affairs of Metals Finance Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

2. OUR APPROACH TO CORPORATE GOvERNANCE

Our approach to corporate governance is based on a set of values and principles that are paramount in our everyday business activities to ensure creation of value for all our stakeholders. This approach includes a commitment to the highest standards of corporate governance.

We have taken into account the revised “Corporate Governance Principles and Recommendations published in August 2007 by the ASx Corporate Governance Council.

The Company’s corporate governance practices have been posted on our website as is required by the ASx revised Corporate Governance Principles and Recommendations – 2nd Edition.

The Board believes that each company’s Corporate Governance policies should be tailored to account for the size and structure of the company, risks associated with the company’s operations and the company’s inherent strengths and weaknesses. The ASx concurs with this view and allows companies to explain deviations from the ASx Corporate Governance Council’s recommendations.

3. THE BOARd OF dIRECTORS

The Metals Finance Limited Board is responsible to shareholders for the Group’s overall corporate governance practices, and is responsible for the direction and oversight of the Company’s businesses on behalf of the shareholders.

(a)CompositionoftheBoard

The Company’s Constitution provides that the number of directors shall not be less than three, with a broad range of expertise both nationally and internationally.

There are currently five directors on the Board.

The specific principle or recommendation issued by ASx recommends that a majority of the Board should be ‘independent’. An independent director is a non-executive director who:

(a) is not a substantial shareholder of the Company or an Officer of, or otherwise associated, directly or indirectly, with a substantial shareholder of the Company;

(b) has not, within the last three years, been employed in an executive capacity by the Company or another group member, or been a director after ceasing to hold any such employment;

(c) not a principal of a professional adviser to the Company or another group member, or an employee materially associated with the service provided;

(d) is not a significant supplier or customer of the Company or another group member, or an officer of or otherwise associated, directly or indirectly, with a significant supplier or customer;

(e) has no significant contractual relationship with the Company or another group member other than as a director;

(f) is free from any interest and any business or other relationship, which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company; and

(g) has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company.

The Board has reviewed the independence of each director based on the above criteria. At the date of this annual report, Geoffrey Hill (Chairman) is considered not to be independent and Warren Eades (non-executive director) is considered to be independent. Both of the new members of the board, Rick Anthon and Mike Gunn are considered to be independent.

details of the professional experience and qualifications of each director is set out in the directors’ Report.

ASX CGC’s principal 2.1

(b)Boardroleandresponsibility

The Board’s responsibilities include:

• reviewing and determining the Group’s strategic direction and operational policies; • establishing goals for management and monitoring the achievement of these goals; • reviewing and approving the Group’s Business Plan; • appointing and remunerating the Chief Executive Officer; • approving all significant business transactions including acquisitions, divestments. • monitoring business risk exposures and risk management systems; • approving and monitoring financial and other external reporting;

corporate governance

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• approving changes to the Group’s capital structure; • reporting to shareholders; and • promoting ethical conduct.

The Board has delegated to management responsibility for:

• strategy – developing and implementing corporate strategies and making recommendations on significant corporate strategic initiatives • senior management selection – making recommendations for the appointment of senior management, determining terms of appointment, evaluating performance and maintaining succession plans for some senior management roles • financial performance – developing our annual budget and managing day to day operations within the budget • risk management – maintaining effective risk management frameworks • continuous disclosure – keeping the board and market fully informed about material developments • corporate responsibility – managing day to day operations in accordance with standards for social, ethical and environmental practices.

The Corporate Governance Charter of Metals Finance Limited is available on the Company’s website.


(c)BoardCharter

The Board has adopted a charter which is reviewed regularly and amended from time to time as the Board may consider appropriate to give formal recognition to the matters outlined above. This charter sets out various other matters that are important for effective corporate governance including:

• a detailed definition of ‘Independence’; • a framework for the identification and selection of candidates for appointment to the Board; • a framework for individual performance review and evaluation; • proper training to be made available to directors both at the time of their appointment and on an on-going basis; • general procedures for meetings of the Board and its committees; • a code of ethics and values; • dealings in securities formalised in a detailed code for securities transactions designed to ensure fair and transparent trading by directors and senior management and their associates; and • communications with Shareholders and the market.

These initiatives, together with the other matters provided for in the Board’s charter, are designed to give effect to good corporate governance and to build a culture of best practice in Metals Finance Limited’s own internal practices and in its dealings with others.

(d)non-executivedirectors

The Company’s non-executive directors will receive only fees for their services and the reimbursement of reasonable expenses. The fees are competitively set to attract and retain appropriately qualified and experienced directors.

The directors’ fees available to non-executive directors have been set at a maximum of $275,000 per annum.

(e)Bestpracticecommitment

The Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives, as outlined in this section, which are designed to achieve this objective. Metals Finance Limited’s corporate governance charter is intended to ‘institutionalise’ good corporate governance and, generally, to build a culture of best practice both in the Company’s own internal practices and in its dealings with others.

The following are tangible demonstrations of the Company’s corporate governance commitment:

• independentprofessionaladvice With the prior approval of the Chairman, which may not be unreasonably withheld or delayed, each director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations or undertakings in order to fulfil their duties and responsibilities as directors. Any costs incurred are to be borne by the Company.

• Codeofethicsandvalues The Company has developed and adopted a detailed code of ethics and values to guide directors in the performance of their duties.

• Codeofconductfortransactionsinsecurities

The Company has developed and adopted a formal code to regulate dealings in securities by directors and senior management and their associates. This is designed to ensure fair and transparent trading in accordance with both the law and best practice.

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• Charter The code of ethics and values and the code of conduct for transactions in securities both form part of the Company’s corporate governance charter which has been formally adopted and can be inspected on its website.


4. BOARd COMMITTEES

(a)auditandriskmanagementcommittee

The purpose of this committee is to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of Metals Finance Limited.

The specific principle or recommendation issued by ASx recommend that an Audit and Risk Management Committee (“ARM Committee”) consist of at least three directors, all of whom are non-executive directors, and a majority of whom are independent.

The members of the Company’s ARM Committee are Geoff Hill (Chairman) and Warren Eades (non-executive director). The focus of the ARM Committee is risk management and internal and external financial reporting. Other matters for which the committee is responsible for are:

• internal control framework including management information systems; • corporate risk assessment and compliance with internal controls; • management processes supporting external reporting; • review of financial statements and other financial information distributed externally; • review of the effectiveness of the external audit function; • review of the performance and independence of the external auditors; • review of the external audit function to ensure prompt remedial action by management, where appropriate, in relation to any deficiency in or breakdown of controls; • review of the effectiveness and independence of the internal audit function; • assessing the adequacy of external reporting for the needs of shareholders; and • monitoring compliance with the Company’s code of ethics.

Meetings are held at least two times each year. The Committee invites the external auditors to attend each of its meetings along with the Chief Executive Officer and Chief Financial Officer.

ASX CGC’s principal 4.1 and 4.2

(b)remunerationcommittee

The specific principle or recommendation issued by ASx recommends the establishment of a formal remuneration committee to ensure that remuneration policies for senior management and non-executive directors are designed to meet the needs of the Company and enhance corporate and individual performance.

The remuneration policy adopted by the Committee is as follows:

executivedirectors&seniorexecutives

The Company’s remuneration policy aims to ensure that remuneration rates across the Company are competitive so that the Company is able to attract, motivate and retain high quality employees and achieve levels of performance necessary to create sustained growth and shareholder value.

The senior executive remuneration contains a high percentage of performance based pay which is aligned to the financial performance of the Company. Non-Executive directors are paid on their agreed remuneration and contains no bonus component. The Board oversees the process of setting kPI’s for each senior executive and monitors the performance of senior executives against those objectives.

ASX CGC’s principal 1.2, 1.3 and 8.1

(c)nominationscommittee

The specific principle or recommendation issued by ASx recommends the establishment of a separate nominations committee to assist the Board and make recommendations to it in relation to the appointmnt of new directors (both executive and non-executive) and senior management. Should a requirement to appoint a non-executive director arise the selection will be conducted by the Chairman in conjunction with other Board members to ensure the new appointee brings the necessary skills to the Board.

5. AUdIT GOvERNANCE ANd INdEPENdENCE

(a)approachtoauditgovernance

The Board is committed to three core principles:

• That our financial reports present a true and fair view • That our accounting methods are comprehensive and comply with applicable accounting standards • That the external auditor is independent and serves stakeholder interests.


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(b)engagementandrotationoftheexternalauditor

Our independent external auditor is PkF Chartered Accountants. Their policy is that lead audit partners are to serve for a period of 5 years in accordance with the Corporations Act. The present PkF audit partner is Albert Loots who assumed responsibility in 2009.

(c)Certificationanddiscussionswiththeexternalauditoronindependence

The ARM committee requires the external auditor to confirm every six months that they have maintained their independence and havecomplied with the independence standards required by Australian regulators and professional bodies.

6. COMPLIANCE WITH ASx CORPORATE GOvERNANCE GUIdELINES ANd BEST PRACTICE RECOMMENdATIONS

The ASx document, ‘Corporate Governance Principles and Recommendation – 2nd edition (‘Guidelines’) applying to listed entities was published in August 2007 by the ASx Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia’s capital markets and preserving stakeholder confidence.

The Board has assessed the Company’s current practice against the Guidelines and outlines its assessment below:

(a)Principle1-laysolidfoundationsformanagementandoversight

The role of the Board and delegation to management have been formalised as described above in this section and will continue to be refined, in accordance with the Guidelines, in light of practical experience gained in operating as a listed company. Evaluation of senior executive’s performance is conducted regularly throughout the year to ensure Company strategic targets are met. The Board considers that Metals Finance Limited complies with the Guidelines in this area.

(b)Principle2-structuretheBoardtoaddvalue

The current Board consists of four non-executive directors and one executive director. Together the directors have a broad range ofexperience, expertise, skills, qualifications and contacts relevant to the business of the Company.

The Board does comprise a majority of Independent directors. In addition, the Board has adopted the following measures to ensure that independent judgment is achieved and maintained in respect of its decision-making processes:

• directors are entitled to seek independent professional advice at the company’s expense, subject to the approval of the Chairman; • directors having a conflict of interest in relation to a particular

item of business must absent themselves from the Board Meeting before commencement of discussion on the topic; and • Non-executive directors confer on a needs basis without management in attendance

The effectiveness of the Board as a whole and of its Committees is assessed against the accountabilities set down in the Company’s Corporate Governance Charter and each of the Committees’ Terms of Reference. Matters considered in the assessment include:

• the effectiveness of discussion and debate at Board and Committee meetings • the effectiveness of the Board’s (and Committees’) processes and relationship with management • the quality and timeliness of meeting agendas, Board and Committee papers and secretariat support • the composition of the Board, and each Committee, focusing on the blend of skills and experience.

The performance of individual directors is assessed against a range of criteria including the ability of the director to:

• consistently take the perspective of creating shareholder value • contribute to the development of strategy • understand the major risks affecting the business • provide clear direction to management • contribute to Board cohesion • commit the time required to fulfill the role • listen to and respect the ideas of fellow directors and members of management

The review of the performance of the Board, its committees and individual directors is conducted by the Chairman each year utilising the services of external consultants when deemed appropriate.

(c)Principle3-Promoteethicalandresponsibledecision-making

ourprincipalfordoingbusinessandcodeofconduct

The Board encourages the highest standards of ethical conduct by all directors and employees of the group. The Board has adopted a Code of Ethics that sets out the principles and standards with which all Group officers and employees are expected to comply in the performance of their respective functions. Officers and employees are expected to:

• comply with the law;• act honestly and with integrity;• reduce the opportunity for situations to arise which result in divided loyalties or conflicts of interest;• use Metals Finance Limited’s assets responsibly and in the best interests of Metals Finance Limited shareholders; and• be responsible and accountable for their actions.

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Policies for reporting unethical practices and legal obligations are contained in the Company’s Corporate Governance Charter available on the website. Senior management immediately investigates possible failures to comply with the principles of ethical and responsible conduct, employing the use of third party expertise where necessary. The appropriate level of disciplinary action is applied where departures from these principles are confirmed.


Guidelinesfortradinginsecurities

The Company has developed specific written guidelines that prohibit directors and executives (and their respective associates) from acquiring, selling or otherwise trading in the Company’s shares if they possess material price-sensitive information which is not in the public domain.

Pursuant to these guidelines, no person may deal in securities while they are in possession of price-sensitive information.

The Company’s policy is that trading in Metals Finance Limited’s securities is permitted, as set out below

(i) sellingofshares during the four week period after ASx announcement of half- yearly and yearly profits and AGM.

(ii) Buyingofshares Employees are able to purchase shares throughout the year except for six week periods running up to ASx announcement of half-yearly and yearly profits. Staff will be notified of these timeframes.

(iii) Pricesensitiveinformation Both the above are subject to the person not being in possession of price sensitive information and the buying not being for short term or speculative gain.

(iv) tradinglimits In no circumstances should any person sell more than $50,000 worth of securities unless prior to entering into discussions they have written approval from the Chairman as to the form and timing of the sale and the management of its public disclosure.


(d)Principle4-safeguardintegrityinfinancialreporting

Metals Finance Limited’s Chief Executive Officer and Chief Financial Officer report in writing to the ARM Committee that the consolidated financial statements of Metals Finance Limited and its controlled entities for each half and full financial year present a true and fair view, in all material respects, of the Group’s financial condition and operational results and are in accordance with accounting standards. The ARM Committee operates throughout the year with the primary objective to assist the Board of directors in fulfilling the Board’s responsibilities relating to the accounting, reporting and financial risk management practices of the company. In fulfilling this objective, the ARM Committee meets at least four times each year. The main duties and responsibilities of the committee include:

• review and consideration of statutory compliance matters; • review of the annual and half-yearly financial reports; • recommend to the Board nominations for appointment as external auditors; • review the scope of the audit, the level of audit fees and the performance of the external auditors; • liaison with external auditors, review of audit planning and consideration of audit results; and • evaluation of the adequacy and effectiveness of the company’s administrative, operating and accounting policies and controls through active communication with operating management and the external auditors.

The Audit and Risk Management Committee (with its own charter) complies with the Guidelines. The charter is contained in the Company’s Corporate Governance Charter available on the website.

(e)Principle5-maketimelyandbalanceddisclosure

documented procedures are in place to identify matters that are likely to have a material effect on the price of the Company’s securities and to ensure those matters are notified to the ASx in accordance with the Company’s Listing Rule disclosure requirements. The Company Secretary is accountable for the compliance with ASx Listing Rules. The Managing director Officer and Chief Financial Officer are responsible for monitoring the Company’s activities in light of its continuous disclosure policy and where necessary discussing disclosure obligations with the Board.

The Company Secretary is responsible for all communications with the ASx. All communications with external stakeholders in respect of sensitive company information is subject to the relevant safeguarding and confidentiality procedures. These communications are undertaken in light of continuous disclosure requirements of the ASx and the broad principles of ensuring the market is fully informed of price sensitive information.



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(f)Principle6-respecttherightsofshareholders

The Group encourages communication with shareholders and other stakeholders in an open, regular and timely manner so that the market has sufficient information to make informed investment decisions on the operations and results of the Group. A communications policy is currently being completed and will be available on the Company’s website when completed.

Mechanisms employed include:

• regular shareholder communications such as Half-yearly Reports, and the Full Financial Report; • financial results presentations at the Company’s Annual General Meeting (“AGM”); • shareholder access to communications through the use of information technology such as the Metals Finance Limited website; and • utilising Registries Limited, the Group’s share registry service provider.

The Board encourages full participation of shareholders at the AGM to ensure a high level of accountability and understanding of the Group’s strategy and goals. The Company encourages the Group’s external auditor to attend the AGM.

(g)Principle7-recogniseandmanagerisk

(i) approachtoriskmanagement We approach risk management by identifying, assessing and managing risks that affect our business. This approach enables the risks to be balanced against appropriate rewards and reflects our values, objectives and strategies. We have established policies for the oversight and management of our material business risks. A summary of the policy is available on the Company’s website.

(ii) riskfactors The following represent the key risks that management considers most likely to impact the Group’s future profitability:

Creditrisk The risks arising from changes in credit quality and the ability of our customers to meet their rental obligations.

liquidityrisk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

operationalrisk The risk of loss resulting from inadequate or failed internal processes, people and systems and from external events.

These may include: • Fraud • Employment practices and workplace safety • Business disruption and system failures • damage/theft to rental assets

marketrisk The risk to earnings from changes in market factors, such as interest rate.

Compliancerisk

The risk of failing to comply with our obligations under the law and the failure to meet of ethical standards


(iii) responsibility The Board is responsible for oversight of the Group’s risk management and control framework. The Audit and Risk Management (ARM) Committee assists the Board in fulfilling its responsibilities in this regard by reviewing the financial and reporting aspects of the Group’s risk management and control framework. The Group has implemented a policy framework designed to ensure that the Group’s risks are identified and that controls are adequate, in place and functioning effectively.

This framework incorporates the maintenance of comprehensive policies, procedures and guidelines that encompass the Group’s activities. It addresses areas such as, occupational health and safety, environmental management, trade practices, IT disaster recovery and business continuity planning. Responsibility for control and risk management is delegated to the appropriate level of management within the Group with the Chief Executive Officer and Chief Financial Officer having ultimate responsibility to the Board for the Group’s risk management and internal control activities. Arrangements put in place by the Board to monitor risk management include:

• regular monthly reporting to the Board in respect of operations and the financial position of the Group; • reports by the Chairman of the ARM Committee and circulation to the Board of the minutes of each meeting held by the ARM Committee; • presentations made to the Board throughout the year by appropriate members of the Group’s management team (and/or independent advisers, where necessary) on

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the nature of particular risks and details of the measures which are either in place or can be adopted to manage or mitigate the risk; and • any director may request that operational and project audits be undertaken by management.

Prior to signing the Group’s annual financial statements, Metals Finance Limited’s Chief Executive Officer and Chief Financial Officer report in writing to the ARM Committee that: • the statement given in accordance with Council’s best practice recommendation 7.2 and 7.3 is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and • the company’s risk management and internal compliance and control framework is operating efficiently and effectively in relation to financial risks.

CeoandCFocertification

In accordance with S295A of the Corporations Act, the chief executive officer and chief financial officer have provided a written statement to the board that:

• Their view provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the board • The Company’s risk management and internal compliance and control system is operating effectively in all material respects.


(h)Principle8-remuneratefairlyandresponsible

The Company’s polices relating to directors’ and Senior Executives’ remuneration are set out in the remuneration report.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the nature and amount of executive directors’ and officers’ emoluments are linked to the Company’s financial and operational performance.

The expected outcomes of the remuneration structure are:

• Retention and motivation of key executives; • Attraction of quality management to the Company; and • Performance incentives which allow executives to share the rewards of the success of the Group.

In relation to the payment of bonuses and options the Board, having regard to the overall performance of Metals Finance Limited and the performance of the employee during the period, exercises discretion.



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In accordance with section 259A of the Corporations Act 2001, the Managing director and Chief Financial Officer have provided adeclaration to the Board that:

• In their view provided in the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and • The Company’s risk management and internal compliance and control system is operating effectively in all material respects.

It is noted that the assurance from the Managing director and Chief Financial Officer can only be reasonable and not absolute due to the level of judgement required the limitations of sampling and the difficulty in designing systems to detect all weaknesses in internal control procedures.

The table below contains each of the ASx Best Practice Recommendations. The Company has compiled relevant corporate governance documentation, such as charters, codes of conduct, and policies, which have been placed on the Company’s website at www.metalsfinance.com under the heading “Corporate Governance”.

asXBestPracticerecommendations

Where the Company has complied with a recommendation during the reporting period, this is indicated with a “yes” in the appropriate column and the policy is contained in the Company’s Corporate Governance Charter available on the Company’s website at www.metalsinance.com. Where the Company considered it was not appropriate to comply with a particular recommendation, this is indicated with a “No” and the Company’s reasons are set out in the corresponding note at the end of the table.

PRINCIPLE BEST PRACTICE RECOMMENdATION COMPLIANCE NOTE NO yES OR NO

Principle1–laysolidfoundationsformanagement andoversight

Companies should establish and disclose the respective roles and responsibilities of board and management 1.1 Companies should establish the functions reserved to the board and those yes delegated to senior executives and disclose those functions. 1.2 Companies should disclose the process for evaluating the performance of No 1 senior executives. 1.3 Companies should provide the information indicated in the Guide to reporting yes on Principle 1.

Principle2–structuretheboardtoaddvalue

Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.

2.1 A majority of the board should be independent directors yes 2.2 The chair should be an independent director. No 2 2.3 The roles of chair and chief executive officer should not be exercised by the yes same individual. 2.4 The board should establish a nomination committee No 3 2.5 Companies should disclose the process for evaluating the performance of the No 4 board, its committees and individual directors. 2.6 Companies should provide the information indicated in the yes Guide to reporting on Principle 2.

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Principle3–Promoteethicalandresponsibledecisionmaking

Companies should actively promote ethical and responsible decision-making

3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to: 3.1.1 • The practices necessary to maintain confidence in the company’s integrity yes 3.1.2 • The practices necessary to take into account their legal obligations yes and the reasonable expectations of their stakeholders 3.1.3 • The responsibility and accountability of individuals for reporting and yes investigating reports of unethical practices. 3.2 Companies should establish a policy concerning trading in company yes securities by directors, senior executives and employees, and disclose the policy or a summary of that policy 3.3 Companies should provide the information indicated in the Guide to reporting yes on Principle 3.

Principle4–safeguardintegrityinfinancialreporting

Companies should have a structure to independently verify and safeguard the integrity of their financial reporting

4.1 The board should establish an audit committee yes 4.2 The audit committee should be structured so that it: 4.2.1 • Consists only of non-executive directors yes 4.2.2 • Consists of a majority of independent directors No 5 4.2.3 • Is chaired by an independent chair, who is not chair of the board No 5 4.2.4 • Has at least three members No 5 4.3 The audit committee should have a formal charter. yes 4.4 Companies should provide the information indicated in the Guide to reporting yes on Principle 4.

Principle5–maketimelyandbalanceddisclosure

Companies should promote timely and balanced disclosure of all material matters concerning the company

5.1 Companies should establish written policies designed to ensure compliance yes with ASx Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies 5.2 Companies should provide the information indicated in the Guide to reporting yes on Principle 5.

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Principle6–respecttherightsofshareholders

Companies should respect the rights of shareholders and facilitate the effective exercise of those rights

6.1 Companies should design a communications policy for promoting effective yes communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

6.2 Companies should provide the information indicated in the Guide to reporting on yes Principle 6

Principle7–recogniseandmanagerisk

Companies should establish a sound system of risk oversight and management and internal control

7.1 Companies should establish policies for the oversight and management of yes material business risks and disclose a summary of those policies 7.2 The board should require management to design and implement the risk yes management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks 7.3 The board should disclose whether it has received assurance from the chief yes executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks 7.4 Companies should provide the information indicated in the Guide to reporting yes on Principle 7.

Principle8–remuneratefairlyandresponsibly

Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear

8.1 The board should establish a remuneration committee yes 8.2 Companies should clearly distinguish the structure of non-executive directors’ yes remuneration from that of executive directors and senior executives.8.3 Companies should provide the information indicated in the Guide to yes reporting on Principle 8.

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NOTES TO AREAS OF NON-COMPLIANCE

1. Currently, the company being small with only a few employees in Australia is in the process of analysing and implementing a performance evaluation and criteria method which will be disclosed in due course. 2. Currently, the Company has three independent directors and two directors (the Chairman and CEO) that are not considered to be independent The Board considers that its structure has been, and continues to be, appropriate in the context of the Company’s recent history. The Company considers that each of the non-independent directors possess skills and experience suitable for building the Company. Furthermore, the Board considers that in the current phase of the Company’s growth, the Company’s shareholders are better served by directors who have a vested interest in the Company. Nonetheless, the Board takes the responsibilities of best practice in corporate governance seriously and has in the past and will in the future consider the appointment of independent directors if deemed appropriate depending on the scope and scale of its operations.

3. As at the date of this report, the Company does not have a Nomination Committee of the Board of directors. The Board has not established a separate nomination committee, however, the responsibilities of a nomination committee are carried out by the full Board. It is noted the Board has adopted a Nomination Committee Charter. Given the present size of the Company, the whole Board acts as a nomination committee, if required. The Board believes no efficiencies or other benefits could be gained by establishing a separate Nomination Committee. The Board will re-consider establishing a separate Nomination Committee as the Company’s operations grow. There is no formal policy on the selection of directors as this is done on a case by case basis by the Board acting as the Nomination Committee.

4. Currently, the company being small with only a few directors in Australia is in the process of analysing and implementing a performance evaluation and criteria method which will be disclosed in due course. during the reporting period, board performance evaluations of the current board have not been conducted, as an evaluation criteria is yet to be agreed upon.

5. The Chairman of the Company is also Chairman of the audit committee as he is deemed to be the only available nonexecutive director with the appropriate accounting experience to undertake the position. With the appointment of two additional non-executive directors it is the intention that the audit committee will be restructured to comply with the recommended best practice policy of the ASx regarding principle 4.

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ACN 127 131 604

Unit 32, 28 Burnside RoadYatala Queensland 4207

PO Box 689Ormeau Queensland 4208

Australia

Tel: +61 7 3807 4166Fax: +61 7 3807 3801

[email protected]

Documents

corporate directory - pamcoal.com Annual Report 2009.pdf · corporate directory ... which will be held in Brisbane at the Marriot Hotel in eagle street on ... corp. to Metals Finance