2009 - Andromeda Metals · 2019. 6. 27. · John den Dryver Non Executive Director Keith Yates Non...

20092009

Annual Report

Adelaide Resources

Limited

Adelaide Resources Limited2

Directors

Paul Dowd Non Executive Chairman Chris Drown Managing Director John Horan Non Executive Director and Company Secretary John den Dryver Non Executive Director Keith Yates Non Executive Director Andrew Brown Non Executive Director

Registered and Principal Office

69 King William RoadUnley, South Australia 5061

Contact Details

Phone: +61 8 8271 0600 Fax: +61 8 8271 0033 Postal: PO Box 1210, Unley BC, SA 5061 Email: [email protected] Website: www.adelaideresources.com.au

Share Registry

Computershare Investor Services Pty LimitedLevel 5, 115 Grenfell StreetAdelaide, South Australia 5000GPO Box 1903, Adelaide SA 5000Enquiries (within Australia) 1300 134 685Enquiries (outside Australia) +61 3 9415 4617

Auditors

Deloitte Touche Tohmatsu11 Waymouth StreetAdelaide, South Australia 5000

Solicitors

Kelly & Co. Lawyers Level 17, Westpac House 91 King William Street Adelaide, South Australia 5000

Bankers

BankSA97 King William StreetAdelaide, South Australia 5000

Stock Exchange Listing

Australian Stock Exchange LimitedHome Exchange: AdelaideASX code: ADN

ABN / ACN

75 061 503 375 / 061 503 375

The Company

Company ProfileAdelaide Resources Limited is a minerals exploration company based in Adelaide, South Australia.

The company has six directors who are all highly experienced in the minerals business. The Chairman, Paul J Dowd, and John den Dryver are mining engineers with substantial expertise in corporate management, feasibility studies and mine development. Managing Director, Chris Drown, and Keith Yates are both exploration geologists, while John Horan and Andrew Brown have extensive corporate and financial backgrounds at board level and in financing mining and minerals exploration.

A small staff is employed to manage exploration and administrative functions together with contract geologists and technicians to conduct field activities.

Since its public listing in 1996, Adelaide Resources’ exploration projects have been located in South Australia and the Northern Territory. The company’s current projects, located largely in the Gawler Craton SA, and the Tennant Creek area NT, involve the search for gold, copper, and uranium.

The company’s goal is to grow shareholder wealth through the discovery and development of mineral deposits.

2009 Annual Report 1

Highlights left

Company Profile left

Chairman’s Letter 2

Project Locations 2

Review of Operations 4

Schedule of Tenements 16

Corporate Governance 17

Statutory Reports 25

Directors’ Report 26

Auditor’s Independence Declaration 36

Income Statement 37

Balance Sheet 38

Statement of Recognised Income

and Expense 39

Consolidated Cash Flow Statement 40

Notes to Financial Statements 41

Directors’ Declaration 65

Independent Audit Report 66

Shareholder Information 68

Contents

Highlights

· Distribution of Iron Road

Limited securities successfully

unlocks significant value and

places this value directly in the

hands of shareholders.

· Sale of the Company’s

Eucla Basin Assets to Iluka

Resources Limited successfully

negotiated with proceeds of

$5 million in cash enabling

the company to continue an

active exploration program.

· Realignment of company

growth strategy following

Iron Road and Eucla Basin

divestments - strong forward

focus on gold, copper and

uranium.

· Highly significant exploration

results achieved at the Rover

Project with substantial copper

intersections at Rover 4, and

high grade copper-gold

intersections reported very

close to Adelaide Resources’

tenement by a neighbouring

explorer.

· Active South Australian

uranium exploration effort with

funding largely met by joint

venturers.


Chairman’s Letter

Dear Shareholder,

It gives me great pleasure to report to you on the activities of Adelaide Resources Limited for the past year.

The 2008-09 financial year was one of challenging economic conditions and often negative equity markets occasioned by the global financial crisis. I am pleased to report that, despite these difficult conditions, Adelaide Resources is well positioned as we look to continue to grow shareholder wealth in the future.

As a shareholder in a Junior Explorer, you would

have had no expectation of your company

providing you with a dividend – indeed only

companies achieving profit can provide a

dividend. Nevertheless, while it continues to create

value from its prospective exploration assets, your

company has provided a return to shareholders

that if maximised in your hands, provided a reward

greater than many dividends. During the year the

company completed a pro-rata, in-specie, return

of capital to shareholders through the distribution

of Iron Road Limited shares and options it acquired

through the divestment of the Warramboo Iron

Project.

On 2 December 2008, Iron Road

Limited shares and options

were distributed to Adelaide

Resources’ shareholders

who were registered on 24

November.

Iron Road has performed

strongly in recent times and your

Board of Directors is delighted

that the Iron Road transaction

has achieved its goal of

unlocking significant value, to

a maximum of 27 cents per

Adelaide Resources share, for

the company’s shareholders.

In October 2008, Adelaide Resources announced

it had negotiated to sell its Eucla Basin assets,

including its share in the Colona Joint Venture, to

joint venturer Iluka Resources Limited. The decision

was taken after Iluka announced that it would

not proceed to a bankable feasibility study and

development of the Tripitaka deposit, located

partly on Colona Joint Venture tenements.

Consideration for the sale of the Eucla Basin assets

was $5 million, received in November 2008 at the

time when capital markets were at their most dire.

The Eucla asset sale placed the company in a

sound financial position allowing it to continue its

active exploration effort on behalf of shareholders.

Following the sale the company’s Board of Directors

revised its strategy for growth and resolved to

concentrate future efforts on the search for gold,

copper and uranium deposits.

NorthernTerritory

SouthAustralia

Victoria

ROVER

Gold/Copper

MOONTA

Copper/Gold/Uranium

ProjectLocations

CORROBINNIE

Uranium

CLEVE

Uranium

ANABAMA

Copper/Gold

GLENROY

Gold

Queensland

YALANDA

Uranium

EYRE PENINSULA

Gold/Uranium/Copper

332009 Annual Report

Chairman’s Letter

This revised strategy is now starting to bear fruit,

with a welcome positive reaction in the share price

of Adelaide Resources.

Management have long-held the view that the

extent and the quality of tenements within the

famously rich Tennant Creek District, in the Northern

Territory, provided a great opportunity for Adelaide

Resources and their passion and diligence is now

being rewarded. Exploration of the Rover Project,

located near Tennant Creek, has delivered highly

encouraging results with the announcement,

made after year end, of a substantial copper

intersection at the Rover 4 prospect. In the recent

past your directors have confirmed management’s

view that exploration in this highly gold-copper

prospective region has been steadily undergoing a

renaissance. We now take the view that the Rover/

Tennant Creek district represents one of the most

exciting destinations for gold-copper exploration

in Australia. We intend to continue a robust

exploration effort at Rover in the year ahead.

Another “exploration hotspot” has emerged on the

Yorke Peninsula of South Australia, where Adelaide

Resources holds the key Moonta-Wallaroo Project.

Competitor drilling at a prospect southeast of

Moonta-Wallaroo has delivered very attractive

copper intersections, while a comprehensive

review of historic exploration data from Adelaide

Resources’ Moonta-Wallaroo Project confirms the

presence of numerous copper-gold targets. We

look forward to exploring the best ranked of these

in 2010.

Rover has become a clear focus for the company

however we cannot ignore the high prospectivity

of our assets on the Yorke and Eyre Peninsulas.

Therefore, to maintain our focus and yet preserve

shareholders’ interests in these promising districts,

we have devised a strategy to facilitate a uranium

search effort principally funded by third parties.

Joint Venturer, Quasar Resources Pty Ltd, continues

to return encouraging results in the search for

sediment hosted uranium deposits in ancient river

systems on Eyre Peninsula. A second joint venture,

with Southern Uranium Limited and announced

after year end, will explore for uranium deposits on

the Yalanda Hill tenements located on the eastern

Eyre Peninsula of South Australia.

Most commodity prices were adversely affected by

the global financial crisis, but they retreated from

all-time high prices and remained at depressed

levels for only a brief period. The two commodities

of main focus for your company – gold and copper,

have enjoyed buoyant prices more recently and

in the opinion of your Directors, the ensuing year

may see further improvement in what are currently

attractive commodity prices.

While the past year has presented many

challenges, I am pleased that your company has

created significant value for shareholders, while

continuing to apply its talents to add further value

to its prospective asset base. It enters the new year

in a solid financial position, with a tight commodity

focus, and with a portfolio of highly regarded

exploration projects.

I look forward to bringing you news of further

positive developments in the coming year as we

pursue our goal of increasing shareholder wealth.

Paul J. Dowd

Chairman


Introduction

Direct exploration expenditure for the year totalled

$1.506 million with additional contributions of $0.895

million from joint venturers holding or earning an

interest in certain joint ventures.

Corporately, the company completed two

important transactions during the year. It

completed the distribution of securities in Iron Road

Limited to shareholders and sold its interest in the

Colona Joint Venture, including a minority interest

in the Tripitaka zircon deposit, to Iluka Resources

Limited. These transactions leave the company

as a well funded and focussed gold, copper and

uranium explorer.

Exploration completed at the flagship Rover Gold-

Copper Project, located near Tennant Creek in the

Northern Territory, included detailed geophysical

surveying and drilling. A number of highly promising

copper and gold intersections were achieved at

the Rover 4 prospect. Westgold Resources Limited,

which is also exploring the Rover Field, announced

spectacular gold and copper intersections from

its Rover 1 prospect, with some mineralised zones

persisting to within a few metres from Adelaide

Resources’ tenements.

A re-evaluation of historical exploration data from

the Moonta Copper-Gold Project, located on the

Yorke Peninsula in South Australia, has identified

numerous copper-gold targets. Exploration to

advance the highest ranked of these targets is

planned, with drilling scheduled for early 2010.

Uranium exploration was conducted through a

joint venture with Quasar Resources Pty Ltd, with

programs of airborne electromagnetic surveying and

drilling completed. A drilling program exploring for

unconformity style uranium was conducted at the

Cleve Project, while a new joint venture with Southern

Uranium Limited to explore for uranium at Yalanda Hill

in South Australia was announced after year end.

Review of Operations

Forward Strategy

To achieve the goal of growing shareholder

wealth, Adelaide Resources’ directors have

formulated a company strategy comprising

the following key principles:

· The company will maintain a strong

commodity focus on gold, with copper

and uranium remaining as important, but

secondary, target metals. Directors believe

the outlook for gold is very positive and

is a commodity well suited to Adelaide

Resources. Copper’s properties ensure

that it will remain a vital metal, and it

occurs naturally with gold in several of

the company’s key projects. Uranium is

considered to have a strong future albeit

under a more burdensome regulatory

regime. The company’s current portfolio

of properties is well matched to this

commodity focus, however it will continue

to actively pursue new gold project

opportunities.

· The company remains in a sound financial

position allowing it to conduct financially

prudent programs of work that can deliver

value to shareholders. The company will

continue to complete exploration programs

that are both “meaningful and measured”.

· The company will continue its successful

strategy of using joint ventures to leverage

the value of its equity funds, particularly

with respect to its search for uranium.

Directors will also consider third party

involvement on any of the company’s

properties if the resulting deal delivers

greater opportunities for shareholders than

could be achieved through self funding.


Corporate Transactions

In-Specie distribution of Iron Road Limited securities to Shareholders

In February 2008, Adelaide Resources announced it had

vended its Warramboo Iron Project to Iron Road Limited

for a consideration of 21 million Iron Road shares. Iron

Road Limited (IRD) was admitted to the Official List of the

Australian Securities Exchange on 10 June 2008.

On 8 August 2008 Iron Road announced a rights issue with

its shareholders able to purchase options to acquire further

shares in Iron Road. Adelaide Resources purchased its full

entitlement of 10.5 million options. The Iron Road Limited

Options (IRDO) have an exercise price 20 cents and are also

tradable on the ASX.

Following shareholder approval and the receipt of favourable rulings from the Australian Taxation

Office, Adelaide Resources distributed approximately 99% of its Iron Road Limited shares and options,

free of all costs, to its shareholders by way of a pro-rata in-specie return of capital.

Shareholders registered on 24 November 2008 received two Iron Road shares and one Iron Road

option for every eight Adelaide Resources shares held. The return of capital was completed on 2

December 2008, with shareholders then able to exercise their own authority in respect of their Iron

Road holdings.

The transaction has been a resounding success in unlocking value for Adelaide Resources

shareholders. Iron Road Limited has conducted well-conceived and highly competent exploration

programs at Warramboo, and on 7 August 2009 released its maiden JORC compliant resource

estimate for part of the deposit.

The share price of both Iron Road Limited shares and options has performed strongly in recent months.

The value unlocked for Adelaide Resources shareholders who participated in the distribution ranges

up to the equivalent of 27.1 cents per Adelaide Resources share.

Eucla Basin (Colona Joint Venture) asset sale

On 11 November 2008 Adelaide Resources announced it had completed the sale of its Eucla Basin

assets, including its minority share in the Colona Joint Venture, to joint venturer Iluka Resources Limited.

Consideration for the sale was $5 million in cash clear of all costs.

The decision to sell the mineral sand assets was strongly influenced by a number of factors, principal

of which were decisions taken by Iluka to develop its larger 100% owned Jacinth – Ambrosia project

and consequently not to progress to a definitive feasibility study of the Tripitaka zircon deposit, part of

which was located on Colona Joint Venture tenements.

The injection of cash into Adelaide Resources, at a time when global economic conditions were very

poor, allowed the company to position itself as a focussed gold-copper and uranium explorer and to

continue solid exploration efforts on its remaining projects on behalf of shareholders.


Managing Director Chris Drown outside the Warramboo Post Office

6 Adelaide Resources Limited6

�KunayungkuOutstation

ELA 27292EL 7739

10 kilometres

Alice Springs

Darwin

Tennant Creek

ROVER PROJECT

�Tennant Creek

ST

UA

RT

HIG

HW

AY

Figure 1. Rover Project Locality

ADN tenementsEL 25512

Rover 4Prospect

Access track (approx. 85km)

Northern TerritoryLocation


Rover – Gold/CopperAdelaide Resources holds a commanding ground

position in the Rover Field located 75 km south west

of Tennant Creek. The company’s wholly owned

Rover Project tenements secure the majority of the

area where “Tennant Creek style” iron-oxide hosted

gold-copper systems are confirmed to be present.

The 287 sq km project comprises two granted

exploration licences and one exploration licence

application (Figure 1). The project tenements were

acquired in 2005 from Newmont Gold Exploration

Pty Limited. In consideration for the purchase,

Newmont was granted a net smelter return royalty

on gold production ranging between 1.5% and

2.5% scaled to cumulative production and to the

prevailing gold price. Where the product is other

than gold, the royalty is 1.5%.

By foregoing the royalty, Newmont could

alternatively exercise a once only right to buy

back a 70% interest in the project on pre-agreed

terms in the event that 2 million or more ounces of

gold are discovered. The buy back right cannot

be triggered by the establishment of resources of

copper or other metals. In February 2009, Newmont

assigned its royalty/buy back interest to Franco-

Nevada Australia Pty Ltd.

Several of the historically mined gold and copper

ore bodies at Tennant Creek were of exceptional

grade and deposits of “Tennant Creek” style

represent very attractive exploration targets.

Geologists have long believed that the Rover

Field was conceptually prospective for deposits

with grade characteristics similar to the Tennant

Creek Field. Exploration completed by Adelaide

Resources and neighbouring explorer Westgold

Resources Limited at Rover has provided strong

empirical support for this concept.

The Rover Project remains a key part of the

company’s portfolio and offers the opportunity

of discovering a new mining district under cover.

It will remain the clear focus of the company’s

exploration activities in the year ahead.

Exploration Program

Exploration during the year comprised programs of

diamond drilling and detailed geophysical surveys,

including airborne magnetics and ground based

gravity surveying. Ground based activities required

the completion of site clearance surveys by the

Traditional Aboriginal Owners of the project area.

Geophysics

As the gold and copper prospective rocks in the

Rover Field are buried beneath barren cover

sediments, exploration is required to be largely

geophysically driven. Typical Tennant Creek/Rover

gold and copper deposits are hosted in dense,

often magnetite dominant, ironstone bodies. The

ironstones are in turn contained in generally non-

magnetic and less dense sediments. The physical

contrasts between the ironstone bodies and their

host sediments enables their potential detection

through the application of magnetic and gravity

geophysical surveys.

72009 Annual Report 7Review of Operations

In 2008, a helicopter-borne high resolution

magnetic survey was flown over almost the entire

Rover Project, with a total of 5710 line kilometres

flown on 50 metre spaced north-south lines

(Figure 2).

The helimag data has provided survey coverage of

all of the numerous magnetic anomalies present in

the Rover Project. The quality of the helimag data

is such that drillholes can be designed without the

requirement to first complete ground magnetic

surveys offering a new degree of flexibility in the

ongoing exploration program at Rover.

In 2009 a gravity survey was completed and

covered the majority of the area of the project

considered to be of highest prospectivity. In

total, 4607 gravity stations were read with stations

positioned using a 500 metre by 250 metre pattern

for regional coverage, reducing to a 200 metre by

100 metre detailed pattern over prospects.

Drilling

Diamond drilling was underway to test a number

of prospects at Rover, with a total of eight holes

completed for 3350 metres at the time of reporting.

Targets tested are shown on Figure 2 and include

3 holes at Rover 4, and single holes at each of

Rover 2, Rover 27, Rover 11 East, Rover 20 and

Rover 1 North.

The drillholes at Rover 2, Rover 27 and Rover 1 North

were completed in collaboration with the Northern

Territory Government as part of its “Bringing Forward

Discovery’ geophysical and drilling exploration

initiative, with the Government contributing

$100,000 towards the drilling costs.

Rover 4 Prospect

All three holes testing the Rover 4 prospect

have intersected significant intervals of

copper mineralisation, with encouraging gold

mineralisation also encountered in one hole.

Drillhole R4ARD20 was drilled in the eastern part

of the prospect (Figure 3). It intersected a long

interval of low grade copper and gold. A promising

interval of 9 metres at 1.57% Cu and 1.09g/t Au

commenced 228 metres downhole, while an

interval of 4 metres at 0.69% Cu and 2.29 g/t Au

was intersected from 310 metres.

R4ARD21 tested the prospect west of all previous

drilling (Figures 3 and 4). Magnetite-dominant

ironstone, containing significant copper sulphide

mineralisation, was intersected between 306 metres

and 352 metres downhole. This 46 metre interval

assays 1.24% copper. Sub-intervals of better grade

within the 46 metre zone include 23 metres at 1.63%

Cu from 306 metres, including 10 metres at 2.31%

Cu; and 3 metres at 2.73% Cu from 349 metres.

R1N

EL 7739ELA 27292

EL 25512

R2

R20

R1

R27

Prospect

R11ER4

TennantCreek

Magnetic Image

Adelaide

Resources

Tenements

Figure 2. Rover Project Helimag Survey

5 kilometres

8 Adelaide Resources Limited8Review of Operations

The magnetite-dominant nature of the host rock in

R4ARD21 is considered significant. This rock type is

closely analogous to the magnetite-rich lodes that

form the host to gold and copper mineralisation in

the Tennant Creek Field.

Drillhole R4ARD24 was drilled to follow-up the

magnetite-hosted copper intersection in R4ARD21,

and was drilled on the same section as the earlier

hole. R4ARD24 did not intersect any magnetite

but none the less encountered significant copper

mineralisation including 25 metres at 1.05% Cu from

295 metes downhole.

Table 1 lists all significant intersections returned from

the three Rover 4 drillholes.

The positive results from Rover 4 are an exciting

development for the Rover Project and the

company was undertaking follow-up drilling at the

time of reporting.

Other targets

Drill hole R11ARD19 tested the Rover 11 East target,

intersecting a magnetite-bearing lode. Copper

sulphides are visible throughout the lode with assay

results not yet at hand.

Drillholes at Rover 2 and Rover 27 both intersected

magnetite-bearing volcanic rocks at the respective

target depths which almost certainly account for

Table 1: Significant copper intersections - Rover 4 Prospect

Drillhole Name Easting Northing Dip Azimuth Final

DepthFrom (m)

To (m)

Interval (m)

Cu %

Au g/t

R4ARD20 360586 7789955 -62 176 426.3 219 220 1 1.17 0.06 228 236 9 1.57 1.09 including 235 236 1 6.32 0.63 258 260 2 0.5 2.16 264 265 1 1.32 0.02 310 314 4 0.69 2.30 including 311 312 1 1.58 5.83

R4ARD21 360300 7790155 -61 173 441.24 306 352 46 1.24 0.14 including 306 316 10 2.31 0.10 and 318 322 4 1.70 0.08 and 327 329 2 1.60 0.01 and 341 344 3 1.44 0.28 and 349 352 3 2.73 0.49 365 366 1 1.18 0.34 372 373 1 1.07 0.30 384 385 1 1.67 0.55

R4ARD24 360300 7789745 -62 355 549 287 288 1 1.13 0.03 295 320 25 1.05 0.05 including 295 304 9 1.66 0.02 377 378 1 3.60 0.11 383 384 1 0.10 1.32 394 395 1 0.34 1.18

Assays based on 1 metre cut half core samples of oriented NQ2 core. Core recovery for reported intervals is very high.

Cu determined by mixed acid digest followed by ICP-OES, Cu over 1% determined by AAS.

Au determined by nominal 50gm fire assay and AAS. Standards introduced at ratio of 1 in 20.

Intersections are downhole lengths with grades weighted for S.G. True widths are not known.

92009 Annual Report 9Review of Operations

the magnetic anomalies tested. Careful logging

and study of the core from these two prospects

is required to determine if any further work is

warranted.

The Rover 1 North target is a magnetic anomaly

located about 900 metres northwest of the Rover

1 prospect where Westgold Resources Limited

have discovered high grade gold and copper

mineralisation. Drillhole R1NARD22 intersected a

promising sequence of highly altered sediments

interpreted to belong to the Warramunga Group

which hosts all known mineralisation in the Rover

and Tennant Creek Fields.

Drilling of a fourth regional magnetic anomaly,

Rover 20, failed to intersect the likely source of the

magnetic anomaly.

Of potentially great significance to Adelaide

Resources were drill results announced after year

end by Westgold Resources Limited from its Rover

1 prospect, located immediately south of the

boundary of one of Adelaide Resources’ tenements

(Figure 2). High grade gold and copper is present

at Rover 1 with some of Westgold’s drill intersections

persisting to within a few metres of the tenement

boundary. There is clear potential for part of the

Rover 1 deposit to fall on Adelaide Resources’

ground.

The company intends to conduct an aggressive

exploration program at Rover in 2010.

441.24m

7790100mN7790000mN7789900mN

R4ARD24 R4ARD21

549.1m

Cover rocks

Host

sediments

35m @ 0.45%Cu( lterationComplex a )

50 metres

R4ARD25

25m @ 1.05%Cu( lterationComplex a )

46m @ 1.24%Cu(Magnetite ironstone)

360200mE 360600mE

7790000m

N7789000m

N

Section360300mE

100m

200m

300m

400m

EL 7739 EL 25512

2009 drillhole

Previous drillhole trace150 metres

Contours of

Total Magnetic Intensity

Hole inprogress

R4ARD21

R4ARD20(new assays)

R4ARD24(new assays)

Figure 4. Rover 4 Cross Section 360300mE

Figure 3. Rover 4 Drillhole Locations


The Moonta region of the

Yorke Peninsula has been an

area of geological importance

for South Australia since 1861

when copper and gold were

first discovered there, and the

company’s Moonta Project

is a key asset. It is located

within the Olympic Copper-

Gold Province that hosts the

Prominent Hill and Olympic

Dam deposits, and also

exciting exploration prospects

such as Rex Minerals Limited’s

Hillside copper discovery,

located south of Adelaide

Resources’ tenement.

A detailed review of historical

exploration data from Moonta

has identified numerous gold-

copper targets (Figure 5), the highest ranked

of which are scheduled for exploration in late

2009/early 2010.

Exemplary of the highly ranked targets is the

Paskeville anomaly, located in the east of the

project tenement. The Paskeville anomaly is a large

(3.5 x 1.2km), coherent undrilled gold in calcrete

anomaly, with coincident anomalous copper and

silver. Planned work includes infill geochemical

sampling and bedrock RAB/aircore drilling.

The Willamulka Prospect, located in the northeast

of the project, represents a more advanced

target. Willamulka is a 2.3km long gold and

copper in calcrete anomaly tested by very limited

drilling (Figure 6). While only a modest number

of holes have been drilled in the past, significant

intersections of copper and gold, including

15 metres at 1.1% Cu from 8 metres, and a deeper

intersection of 10 metres at 0.50 g/t Au from

46 metres in the same drill hole, indicate that the

prospect has significant remaining potential.

5 kilometres

Melton

Willamulka

Paskeville

Moonta Porphyry

Joint Venture area

Gold/Copper anomaly

Moonta Project

EL 3733

Wallaroo

Kadina

Paskeville

MoontaCunliffeYelta

EL 3733

Figure 5. Moonta Project – Gold/Copper anomalies

Moonta – Gold/Copper

Previous drilling

Figure 6.

Willamulka Prospect –showing gold anomalyand previous drilling

Adelaide Resources holds 100

percent equity in the majority of

Exploration Licence 3733. That part

of the tenement subject to the

Moonta Porphyry Joint Venture,

with Breakaway Resources Limited,

is owned 90 percent by Adelaide

Resources. The company has an

option to acquire Breakaway’s

residual 10 percent interest.


The company holds a substantial ground

position on the Eyre Peninsula of South

Australia (Figure 7). That part of the tenement

package not subject to the Corrobinnie

Palaeochannel Uranium Joint Venture totals

3860 sq km. The area is prospective for gold,

uranium and copper deposits.

The project includes the Barns, Baggy Green

and White Tank gold discoveries, while

numerous other gold prospects and targets

remain to be evaluated. The company has

also discovered uranium mineralisation at the

Ulysses and KO11S prospects.

The Empire copper target (Figure 8) has one

of the highest magnitude copper

geochemical anomalies in the Gawler

Craton. Previous drilling at Empire has failed

to discover the source of the geochemical

anomaly but has returned encouraging

signs that mineralisation may be present

in the area, including the presence of

hydrothermally altered rocks with anomalous

copper, gold and silver values.

During the year a 72.8 line kilometre airborne

electromagnetic (EM) survey was flown over the

Empire prospect to explore for bedrock conductive

features that could signal the location of the

mineralised source to the geochemical anomaly.

Interpretation of the airborne EM survey data

has confirmed that bedrock conductors may be

present in the vicinity of the geochemical anomaly.

The EM feature of most interest (Target 1) has not

yet been drill tested.

Adelaide Resources has determined to pursue

joint venture or alternative funding arrangements

to progress this large project, and discussions with

potential joint venturers were underway at the time

of reporting.

Eyre Peninsula – Gold/Copper/Uranium

Lake

Acraman

Poochera

Wudinna

Kimba

30 kilometres

Lake

Gairdner

Adelaide Resources 100%

(Quasar earning 60%

of Palaeochannel U)

Prospect/anomaly

Adelaide Resources

Tenements


(option to acquire 100%)


Barns/White Tank

Empire

BaggyGreen

Figure 7. Eyre Peninsula Project

Ulysses KO11S

Figure 8. Empire Prospect – RepTEM image

Target 2

Target 1

Calcrete anomaly

(Copper)

Adelaide Resources drillhole

Historic drillhole1000 Metres



An application for a new EPM (Exploration Permit

Minerals) was lodged in May with Queensland’s

Department of Mines and Energy covering

prospective ground on the northern margin of the

Drummond Basin (Figure 9). The application marks

the start of an initiative to build a new gold project

in this prospective region.

Exploration Licence 3816, located south of Olary

in South Australia (Figure 10), is prospective for

hydrothermal granite related copper-gold deposits.

The Blue Rose prospect, owned by a competitor

in an adjacent tenement, has returned drill

intersections such as 46 metres at 2.2% Cu and

0.8 g/t Au from shallow depths in weathered rock.

In 2007 Adelaide Resources

discovered copper mineralisation

at a prospect named Dark Horse.

Intersections included 40 metres

at 0.2% Cu, including 6 metres at

0.57% Cu and 0.25% Zn. Surficial

gossanous material at Dark Horse

can be traced for over 3 kilometres

suggesting a sizable sulphide-

bearing system is present.

During the year the company

completed a trial surface

geochemistry survey at Dark

Horse utilising a portable XRF

analytical instrument. The survey

identified some copper anomalous

samples, however was hampered

by the relatively high minimum

detection limit of the XRF instrument, and by the

likely presence of transported cover materials

in some areas of the prospect which mask any

geochemical response.

The company is seeking to attract a joint venturer

to continue exploration of the Anabama Project.

Glenroy – Gold Anabama – Copper

LOLWORTH -

RAVENSWOOD BLOCK

DRUMMOND

BASIN

ANAKIE INLIER

TownsvilleChartersTowers

Cairns

Brisbane

MountIsa

Longreach

Mackay

LakeDalrymple

EPMA 18090 "Glenroy"

Pajingo Field

Vera-Nancy

MileLimeyDamBreccia

Hill

Two

QueenslandLocation

GLENROY

Gold prospect

15 kilometres

Figure 9. Glenroy tenement location

The ground secured has potential to host

epithermal gold-silver mineralisation of a style

similar to the Vera-Nancy deposit, located west

of Glenroy and close to the northern limit of the

Drummond Basin.

Previous exploration completed on the Glenroy

tenement recorded widespread gold anomalism

associated with well developed epithermal veining,

alteration and brecciation.

The company has commenced construction of

a geological database for the region including

Glenroy. Granting of the tenement is anticipated

sometime in the first half of 2010 after which on

ground exploration activities can commence.

Barrier

Highway

Figure 10.

Anabama Project location

“Wadnaminga HS”“Devonborough Downs HS”

“Taltabooka HS”

“Eringa Park HS”

“Wiawera HS”

Blue RoseProspect

Olary

EL 3816 (Olary)

10 kilometres

Dark Horse


This joint venture with Quasar Resources Pty

Ltd is exploring for uranium hosted in three

Tertiary palaeochannel systems within Adelaide

Resources’ Eyre Peninsula tenement holding

(Figure 11). The joint venture agreement

allows Quasar to earn a 60% interest in 5265

sq km of cover sediments containing the

palaeochannels, and 60% interest over minerals

in the basement in a smaller area, by spending

$3 million over a four year period commencing

1 January 2007. Quasar is required to spend at

least $750,000 per year on exploration.

Quasar is an affiliate of Heathgate Resources

Pty Ltd which operates the Beverley in-situ

leach uranium mine in South Australia, and

discovered the impressive Four Mile uranium

deposit in 2005.

During the year the joint venture flew a 1667

line kilometre airborne electro-magnetic (EM)

survey over the Narlaby Palaeochannel. The

survey data delineates the architecture of the

Narlaby palaeochannel which stands out as a

northwest trending conductivity feature.

A 55 hole, 3469 metre, drilling program

was conducted in the Narlaby channel in late

December 2008, with drill traverse locations

positioned following review of data from the

airborne EM survey (Figure 12).

The drilling program showed that an unbound

radiogenic zone, first identified in drillholes

completed in the Joint Venture’s 2007 drilling

program, extends at least 600 metres to the north

west.

The radiogenic anomaly was seen in two adjacent

2008 holes, PD062 and PD063, which intersected

maximum values of 104 and 97 ppm eU3O8

respectively. 2007 drillholes, PD020 and PD023,

drilled on a traverse located 600 metres south east

of the recent holes, intersected maximum values of

115 and 128 ppm eU3O8. (eU3O8 is an estimate of

uranium oxide concentration based upon gamma

log data).

At the time of reporting, an aircore drilling program

had just commenced to search for uranium in the

Thurlga palaeochannel. The significant extent of the

Thurlga palaeochannel has only been recognised in

the last few years and it has remained unexplored

for uranium until now. The drilling program will

determine the oxidation state of channel fill

sediments and drill samples will be submitted for

analysis to determine if uranium is present.

Corrobinnie Palaeochannel – Uranium

Lake

Acraman

Poochera

Wudinna

Kimba

30 kilometresYANINEE

NARLABY

THURLGA

Lake

Gairdner


(Quasar earning 60%

of Palaeochannel U)

Adelaide Resources

Tenements

Tertiary Palaeochannel

Figure 11. Corrobinnie Palaeochannel Project

Quasar earning 60%

of entirety

AEM SurveyArea

AEM Image

10 kilometres

45m RL

SeeFig.8

Empire

Prospect

Figure 12. Location of AEM Survey

New tributary

2007 drill traverse2008 drill traverse



On 10 September 2009 the company announced

that wholly owned subsidiary Eyre Energy Pty Ltd

had formed the Yalanda Hill Joint Venture with

Southern Uranium Limited (ASX Code: SNU). The

Joint Venture will explore principally for uranium

on EL 3473 and adjacent Exploration Licence

Applications 116/09 and 144/09 (Figure 13).

The main terms of the Yalanda Hill Joint Venture are

as follows:

· The initial joint venture interests shall be Eyre

Energy 60%, Southern Uranium 40%.

· Southern Uranium can increase its equity to 60%

through the expenditure of $250,000 over two

years.

· Once Southern Uranium

has earned 60% equity,

each party may contribute

to ongoing expenditure in

accordance with its equity, or

else elect to dilute.

· Southern Uranium will act as

Joint Venture Manager and

will plan and execute all

exploration programs.

· Southern Uranium may

withdraw from the Joint

Venture prior to spending

$250,000 as long as it has

met minimum statutory

expenditure requirements.

Upon withdrawal, Eyre

Energy would acquire 100%

of the three Joint Venture

tenements.

· If a party’s equity falls below 5% it will be

deemed to have withdrawn from the Joint

Venture.

The Joint Venture includes provisions for one party

to sole fund feasibility studies, and potentially also

mine development, in the event the other party

does not wish to participate.

Previous exploration in the Yalanda Hill area has

identified significant uranium potential. Adelaide

Resources prospected and rock chip sampled

a number of coincident uranium and thorium

anomalies evident in an airborne radiometric

survey flown in the 1990s. This work confirmed the

widespread presence of uranium in the area, with

assays on individual rock chip samples ranging up

to a maximum of 0.23% uranium.

Southern Uranium has been actively exploring

on tenements adjacent to the Yalanda Hill Joint

Venture licences, and is the first exploration

company to apply systematic soil geochemistry

to search for uranium in the district. Southern

Uranium’s geochemical approach has proven

highly promising with the identification of numerous

uranium anomalies, some of which may persist onto

the Yalanda Hill Joint Venture tenements.

Yalanda Hill Joint Venture – Uranium

The Joint Venture is planning an initial program

of blanket multi-element soil geochemistry,

complemented by gravity surveys. Exploration

will commence on granted Exploration Licence

3473 and progress to the exploration licence

applications once granted.

Figure 13. Location of the Yalanda Hill Joint Venture

Yalanda Hill

Joint Venture Area

Southern Uranium

Tenements 100%

Adelaide Resources

Tenement

Uranium soil

geochemical anomaly

Uranium channel

radiometric anomaly

15 kilometres

Kimba

EL 3473

ELA 116/09

ELA

144/09

ELA 144/09

ELA 144/09


During the year a 45 hole, 1332 metre, RAB/aircore

drilling program was completed to search for

unconformity style uranium mineralisation on the

Cleve tenement, located on south-eastern Eyre

Peninsula in South Australia.

Drillholes were completed on six 500-metre spaced

traverses with holes nominally spaced 150 metres

apart along traverses at a conceptual target

called “Target B” (see Figure 14). At Target B, a

fault is interpreted to displace potential basement

host lithologies beneath unconformably overlying

conglomerates and sandstones.

The drilling program proved the validity of the

conceptual model confirming the presence of

the unconformity and of potentially attractive

host rocks including iron formations and graphite-

bearing schist in the basement.

Analysis of the drill samples returned weakly

anomalous uranium in two holes, with the best

result being 1 metre at 54.1 ppm uranium (60.5 ppm

U3O8) from a downhole depth of 8 metres in hole

CL001. The uranium anomaly in CL001 occurs at

the interpreted unconformity between overlying

quartz pebble conglomerate and basement iron

formation.

The company is seeking a joint venturer to explore

other uranium and gold targets present on the

tenement.

In late 2008 the company commenced an initiative

to identify projects for possible acquisition to

complement its existing property portfolio and

to maintain a pipeline of high quality exploration

properties.

The company is seeking a high quality gold

project located either in Australia or overseas. In

its search, the company is guided by the principle

that any new project must significantly improve

the company’s portfolio of properties, and ideally

will expose shareholders to a potential future mine

development.

To date numerous opportunities have been

assessed. The majority of these properties have

been located in Australia, with a small number of

overseas projects also reviewed.

The generative initiative has so far resulted in the

pegging of the 100% owned Glenroy property

located in Queensland, which is described

elsewhere in this report. The generative effort is

planned to continue in 2009/10.

Cleve – Uranium Property Generation

1000 metres

Cleve

T1

T2

T3

T4

T5

T6

PACE funded drillhole

Target B

PotentialHost Sequence

Fault

Fault

CL001

Magnetic image

Figure 14.

Location of 2009 PACEDrilling Program, Cleve

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Chris Drown, who is a Member of The Australasian Institute of Mining and Metallurgy and who consults to the company on a full time basis. Mr Drown has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Drown consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Adelaide Resources Limited161616 Adelaide Resources Limited

Schedule of Tenements

* These tenements were transferred to Eyre Energy Pty Ltd on 1 July 2007. EL = Exploration Licence - Granted ELA = Exploration Licence - Application SELA = Substitute Exploration Licence - Application EPMA = Exploration Permit Minerals - Application

Project Tenement Area km2 Registered holder or applicant Nature of Company’s Interest %

South Australia

Eyre Peninsula Uranium Joint Venture*

EL 3296 42 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)

EL 3501 (Part) 768 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)

EL 3546 792 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)





EL 3833 (Part) 1281 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)






Eyre Peninsula Project*

EL 3473 425 Eyre Energy Pty Ltd and Olliver Geological Services

90 - option to acquire 100 from Olliver Geological Services Pty Ltd

EL 3501 (Part) 286 Eyre Energy Pty Ltd 100

EL 3564 220 Eyre Energy Pty Ltd 100


EL 3834 232 Eyre Energy Pty Ltd and Olliver Geological Services

90 - option to acquire 100 from Olliver Geological Services Pty Ltd



Moonta Project*


EL 3733 106 Eyre Energy Pty Ltd 90 - option to acquire 100 from Breakaway Resources Limited

Anabama Project EL 3816 176 Adelaide Exploration Pty Ltd 100

Northern Territory

Rover Project

EL 7739 242 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)

EL 25512 6 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)

ELA 27292 39 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)

SELA 27372 248 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)

Queensland

Drummond Basin Project EPMA 18090 196 Adelaide Exploration Pty Ltd 100

as at 30 June 2009


CorporateGovernance

BOARD OF DIRECTORS

The Board of Directors has responsibility for the

overall corporate governance of the company

including strategic direction, establishment of goals

for management, and monitoring the achievement

of those goals.

The directors are aware of their duties and

responsibilities and subscribe to the Code of

Conduct of the Australian Institute of Company

Directors (see www.companydirectors.com.au).

They recognise that their primary responsibility is to

the owners of the company, its shareholders, while

simultaneously having regard for the interests of

all stakeholders of the company and the broader

community.

The Board’s primary role is the protection and

enhancement of long term shareholder value.

The Board’s policy is to review its performance

and composition on a regular basis to ensure that

there is an appropriate balance of experience

and skills to match the size, scope and nature of

the company’s activities. When a vacancy arises,

for whatever reason, or where it is considered the

Board would benefit from the appointment of a

director with particular skills and experience, the

Board’s policy is to select potential candidates,

with advice from an external consultant if

necessary. The most suitable candidate is then

appointed, subject to election at the next general

meeting of shareholders.

The Board currently aims to meet at least every two

months. In addition, strategy meetings and special

meetings are held at such other times as may be

necessary to address specific significant matters

that may arise.

The directors consider, on an ongoing basis, how

management information is presented to them and

whether such information is sufficient to enable

them to discharge their duties as directors of the

company.

Remuneration

The Board of Directors recognises that the

performance of the company depends on the

quality of its directors and other key management

personnel and, therefore, it must attract, motivate

and retain appropriately qualified industry

personnel.

The remuneration of executive and non

executive directors is reviewed by the Board with

the exclusion of the director concerned. The

remuneration of management and employees

is reviewed by the Board and approved by the

managing director.

Remuneration levels are determined by the

Board on an individual basis, at reasonable but

competitive market rates, with the size of the

company making individual assessment more

appropriate than formal remuneration policies.

The Board’s policy for non executive directors is

to set remuneration at a level which provides the

company with the ability to attract and retain

directors of the highest calibre, whilst incurring a

cost which is appropriate at the prevailing stage of

the company’s development.

The Board endeavours to reward the managing

director with a level and mix of remuneration

commensurate with his position and responsibilities

Adelaide Resources Limited has consistently

supported the principles of effective corporate

governance since the company’s inception

and is committed to adopting the highest

standards of performance and accountability,

commensurate with the size of the company

and its available resources.

The following statement outlines the principal

governance practices which the company

currently has established.


within the company. This is designed to align the

interests of the managing director with those of

shareholders; to link reward with the strategic goals

and performance of the company; and to ensure

that the total remuneration is competitive by

market standards.

The remuneration of directors and other key

management personnel is not dependent on the

satisfaction of a performance condition when

granting options. In determining share options

to be granted to directors or key management

personnel, the pricing of the options is not

dependent upon the satisfaction of a performance

condition.

Options issued to directors are issued only after

shareholder approval, and with an exercise

price above the prevailing market price of the

company’s shares at the date of issue. Options

issued to other key management personnel are

issued with the exercise price being not less than

that calculated in accordance with the rules of

the shareholder approved Employee Share Option

Plan.

The directors have decided that the exclusion

of performance conditions is appropriate, after

consideration of comparable industry practice.

Independent external advice on remuneration

matters is sought whenever it is deemed necessary.

Independent Professional Advice

Directors have the right, in connection with their

duties and responsibilities, to seek independent

professional advice at the company’s expense.

Prior written approval of the chairman is required,

which approval will not be unreasonably withheld.

Committees

The Board has established an audit committee

of two non executive, independent directors,

and may increase the size of this committee, and

establish other committees, at the appropriate time

in the company’s development.

The company does not have formally constituted

nomination or remuneration committees. It is not

of a size, nor is its affairs of such complexity, to

justify formation of a range of separate or special

committees.

The Board as a whole addresses the governance

aspects of the full scope of the company’s

activities to ensure that it adheres to appropriate

ethical standards. Currently all matters which

might properly be dealt with by certain special

committees are subject to regular scrutiny at full

Board meetings.

SECURITIES TRADING

The company has a Securities Trading Policy

which prohibits trading in its securities by directors,

employees, contractors, or their close associates

during defined periods related to the date of

an announcement to the Australian Securities

Exchange of any price sensitive information.

This policy also requires directors, employees,

contractors and their close associates not to

trade in the company’s securities when they are in

possession of any relevant information that could

affect the company’s share price and which is not

available to the investing public.

Corporate Governance


SHAREHOLDERS

The Board places a high priority on communicating

effectively with the company’s shareholders,

and has a shareholder communication policy

particularly for disclosure of information on

important corporate activities or proposals.

This disclosure is through regular shareholder

communications, including the annual report

(mailed to shareholders when requested),

quarterly reports mailed to shareholders, the

company’s website and the distribution of specific

announcements covering major transactions or

events. Directors believe these arrangements are

both effective and, importantly, flexible enough to

meet shareholders’ needs and expectations.

Shareholders are encouraged to exercise their right

to vote, either by attending shareholders’ meetings,

or by lodging a proxy. The company’s external

auditors and legal advisors attend all shareholders’

meetings.

CONTINUOUS DISCLOSURE

The Board is acutely aware of the continuous

disclosure regime and the company has a

Continuous Disclosure Policy to address all

necessary disclosure issues and adequate

corporate compliance.

The Policy, and accompanying procedures,

covers the continuous disclosure requirements

of the Australian Securities Exchange and the

Australian Securities and Investments Commission

in accordance with the Corporations Act 2001.

It also includes the company’s procedures on

information disclosure to external parties including

stockbrokers, analysts, the media and importantly,

its shareholders.

BUSINESS RISK

Management of the company’s risk is a high priority

for the Board of directors.

The directors recognise that mineral exploration is

an inherently risky business and that the operational

strategies adopted should, notwithstanding,

be directed towards increasing the net worth of the

company.

Although the company does not have formalised

policies on risk management, the Board is aware of

its responsibility for identifying areas of significant

business risk and for ensuring that arrangements are

in place to adequately manage these risks. This

issue is regularly reviewed at Board meetings and

risk management culture is encouraged amongst

employees and contractors.

Determined areas of risk which are regularly

considered include:

• performanceandfundingofexploration

activities

• budgetcontrolandassetprotection

• internalcomplianceandcontrolsystems

• statusofmineraltenements

• landaccessandnativetitleconsiderations

• compliancewithgovernmentlawsand

regulations

• occupationalhealthandsafety,andthe

environment

• continuousdisclosureobligations

The Board, with the assistance of its external

auditors, has instigated internal procedures

designed to provide reasonable assurance as to

the effectiveness and efficiency of operations, the

reliability of financial reporting, and compliance

with relevant laws and regulations.

Additionally, the Board receives regular advice

from the managing director and the designated

chief financial officer on internal control and risk

management, and a declaration from them in

accordance with section 295A of the Corporations

Act on the integrity of the company’s financial

statements.



EXTERNAL AUDITORS

The company uses the services of a major audit

firm, Deloitte Touche Tohmatsu. The auditors attend

all shareholder meetings and have access to the

company’s directors at all times. Rotation of the

external audit engagement partner occurs every

five years.

CODE OF CONDUCT

The Board has established a Corporate Code of

Conduct whereby all directors, employees and

contractors are expected to observe the highest

ethical standards and act with the utmost integrity

and objectivity in their dealings with other parties.

They are expected to strive at all times to enhance

the reputation and performance of the company,

particularly in the communities in which it operates.

INDIGENOUS PEOPLE

The company has an Indigenous Peoples Policy

aimed at fostering a trusting, respectful and co-

operative relationship with indigenous people who

may have interests in areas where the company

operates. In striving for this objective it endeavours

to generate frank and open communication with

indigenous people and their advisors.

ENVIRONMENT

The company recognises the importance of sound

environmental practice. It has an Environmental

Policy which promotes environmental awareness

by all of its employees and contractors, with the

objective of achieving the highest standards of

environmental management by complying with

and, where possible, exceeding government

requirements.

The Policy encourages transparency in regard to

environmental performance and a commitment to

continuous improvement of practices.

WEBSITE INFORMATION

A copy of the company’s Corporate Governance

Statement in the Annual Report, together with

the company’s policies on continuous disclosure,

share trading, shareholder communication, the

environment, and indigenous people, is listed on

the company’s website.

The company’s code of conduct and its audit

committee charter are also disclosed on the

website.

Interested parties may refer to the website or,

alternatively, request the same information by

contacting the company.

Website: www.adelaideresources.com.au.



THE CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS

The Board continues to review its corporate governance practices in light of the Australian Securities

Exchange (ASX) Corporate Governance Council’s Principles and Recommendations.

The following table sets out the company’s present position with regard to the adoption of these Principles.

(A = Adopted, N/A = Not Adopted)

ASX Principle Status Reference / Comment

Principle 1 : Lay solid foundations for management and oversight1.1 Companies should establish the functions

reserved to the board and those delegated to senior executives and disclose those functions.

A Matters reserved to the board are included on the company’s website.

1.2 Companies should disclose the process for evaluating the performance of senior executives.

A The process of evaluating the performance of senior executives is disclosed in the Corporate Governance Statement in the company’s annual report and on the website.

1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.

A

Principle 2 : Structure the board to add value2.1 A majority of the board should be

independent directors.N/A The board comprises six directors, two of

whom are independent (including the chairman).

2.2 The chair should be an independent director. A

2.3 The roles of chair and chief executive officer should not be exercised by the same individual.

A The position(s) of chairman and managing director are held by separate persons.

2.4 The board should establish a nomination committee.

N/A The board has no formal nomination committee. Acting in its ordinary capacity from time to time as required, the board carries out the process of determining the need for screening and appointing new directors. In view of its size and the resources available to the company, it is not considered that a separate nomination committee would add any substance to the process.

2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.

A. The process for the performance evaluation of the board and individual directors is disclosed in the Corporate Governance Statement in the company’s annual report and on its website. Additionally, the chairman has implemented an annual review process whereby each director assesses the performance of individual directors and of the board as a whole.


A The skills and experience of directors are set out in the company’s annual report and on its website.



Principle 3 : Promote ethical and responsible decision-making3.1 Companies should establish a code of

conduct and disclose the code or a summary of the code as to:

• the practices necessary to maintain confidence in the company’s integrity.

• the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders.

• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

A The company has formulated a code of conduct which can be viewed on the company’s website.

3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.

A The company has formulated a securities trading policy which can be viewed on the company’s website.


A

Principle 4 : Safeguard integrity in financial reporting4.1 The board should establish an audit

committee.A

4.2 The audit committee should be structured so that it:

• consists only of non executive directors

• consists of a majority of independent directors

• is chaired by an independent chair, who is not chair of the board

• has at least three members.

A

ü

ü

ü

N/A

The company has a functional two-member committee at present. This may be increased to three members if deemed appropriate by the board, given the size of the company and the nature of any expanding activity.

4.3 The audit committee should have a formal charter.

A The company has formulated an audit committee charter which can be viewed on the company’s website.


A

Principle 5 : Make timely and balanced disclosure5.1 Companies should establish written policies

designed to ensure compliance 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.

A The company has instigated internal procedures designed to provide reasonable assurance as to the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with relevant laws and regulations. The board is acutely aware of the continuous disclosure regime and there are strong informal systems in place to ensure compliance, underpinned by experience.





A The board receives regular updates on the status of the company’s activities and any new or proposed activities. Disclosure is reviewed as a routine agenda item at each board meeting.

Principle 6 : Respect the rights of shareholders6.1 Companies should design a communications

policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

A In line with adherence to continuous disclosure requirements of ASX, all shareholders are kept informed of major developments affecting the company. This disclosure is through regular shareholder communications including annual reports, half-yearly reports, quarterly reports, the company website and the distribution of specific releases covering major transactions and events or other price sensitive information.


A The company has formulated a shareholder communication policy as part of the Corporate Governance Statement which can be viewed on the company’s website.

Principle 7 : Recognise and manage risk7.1 Companies should establish policies for the

oversight and management of material business risks and disclose a summary of those policies.

A While the company does not have formalised policies on risk management, the board recognises its responsibility for identifying areas of significant business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors. Determined areas of risk which are regularly considered include:

• Performance and funding of exploration activities

• Budget control and asset protection

• Status of mineral tenements

• Land access and native title considerations

• Compliance with government laws and regulations

• Safety and the environment

• Continuous disclosure obligations

• Sovereign risk

• Share market conditions

• Economic risk




7.2 The board should require management to design and implement the risk 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.

N/A While the company does not have formalised policies on risk management, it recognises its responsibility for identifying areas of significant business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors.

Management is currently refining the company’s risk management and internal control system for review by the audit committee prior to implementation by the board.

7.3 The board should disclose whether it has received assurance from the chief 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.

A


N/A

Principle 8 : Remunerate fairly and responsibly8.1 The board should establish a remuneration

committee.N/A The board does not have a formalised

remuneration committee. Remuneration matters are dealt with by the full board and are noted in the Corporate Governance Statement in the company’s annual report and on its website.

8.2 Companies should clearly distinguish the structure of non executive directors’ remuneration from that of executive directors and senior executives.

A


A Refer to the remuneration report in the company’s annual report.




Directors’ Report 26

Auditor’s Independence Declaration 36

Income Statement 37

Balance Sheet 38

Statement of Recognised Income

and Expense 39

Consolidated Cash Flow Statement 40

Notes to Financial Statements 41

Directors’ Declaration 65

Independent Audit Report 66

StatutoryReports


Page 1

Directors’ Report

The directors present this directors’ report and the attached annual financial report of Adelaide Resources Limited for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The names and details of the directors of the company during or since the end of the financial year are:

Paul J Dowd BSc (Eng), FAusIMM – Chairman

Paul Dowd is a mining engineer and has a professional mining career spanning more than 40 years, primarily in the private sector, but also in the public sector as head of the Victorian Mines and Petroleum Departments during the Kennett State Government.

In 2006 he resigned from the position of managing director of Newmont Australia Limited and vice president Australia and New Zealand Operations. Prior to the merger with Newmont and Franco-Nevada, he was group executive – operations for Normandy Mining Limited with responsibility for the group’s global managed mining interests, including eight Australian operations and four spread over Africa, Europe and Asia.

Mr Dowd is the managing director of Phoenix Copper Limited, chairman of the Board of RESA (the South Australian Resources & Engineering Skills Alliance), chairman of RESIC (the Resources Sector Infrastructure Council of South Australia), a non executive director of OZ Minerals Limited, a non executive director of Northgate Minerals Corporation (Canada) and its wholly owned Australian subsidiaries. He is a council member of the Parsons Brinkerhoff Australia Pacific Advisory Board. He also serves as an advisory councillor for SAMPEG – South Australian Minerals and Petroleum Expert Group, and is a member of advisory councils of CSIRO (MRSAC) and the University of Queensland – Sustainable Minerals Institute.

Mr Dowd is also a commissioner for the SA Training and Skills Commission (TaSC) and an advisory member – Aboriginal Workforce Development Inter-Ministerial Committee, Government of South Australia.

Christopher G Drown BSc (Hons), MAusIMM, MAICD – Managing Director

Chris Drown is a geologist with over 20 years experience in the Australian exploration and mining industry. He is a member of the Australasian Institute of Mining and Metallurgy, a member of the Australian Institute of Company Directors, and a member of the Geological Society of Australia.

A graduate of the University of Tasmania, Mr Drown worked in underground nickel mines at Western Mining Corporation Limited’s Kambalda operations in Western Australia, and filled mining geology roles at Aberfoyle Resources Limited’s Hellyer lead-zinc-silver deposit in western Tasmania.

In 1991, he moved from mine geology into exploration searching for base metal and gold deposits in the Northern Territory and South Australia.

Mr Drown was appointed exploration manager of Adelaide Resources shortly after it listed on the Australian Securities Exchange (ASX) and has since played a major role in the company’s activities. In March 2005 he accepted an invitation to join the Board of Adelaide Resources as an executive director and in November 2007 was appointed Managing Director.

John P Horan FCPA, FCIS – Non Executive Director and Company Secretary

John Horan is a Fellow of the Australian Society of Certified Practising Accountants, a Fellow of the Chartered Institute of Secretaries in Australia, a Member of the Finance and Treasury Association Limited, and a Member of the Australian Mining and Petroleum Law Association. He has many years experience in the financial, corporate, technical and management areas of the mining industry.

Mr Horan has been chairman and a director of a number of listed mining and exploration companies on the Australian Securities Exchange (ASX), the Alternative Investment Market (AIM) on the London Stock Exchange, the Toronto Stock Exchange (TSX) in Canada and the Port Moresby Stock Exchange (POMSoX) in Papua New Guinea. He is currently the chairman of Marengo Mining Limited (listed on ASX, TSX and POMSoX).

From 1987 until June 1993, Mr Horan was the finance director of Homestake Gold of Australia Limited, now Barrick Gold Corporation, one of Australia’s largest gold producers. He first joined Homestake in 1978 and was responsible for financial, commercial and corporate management functions prior to 1987


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when he played a substantial role in the float of the Australian subsidiary. He also fulfilled key responsibilities in subsequent very large debt and equity capital raisings.

From the early 1960s until the second half of the 1970s he held various financial, accounting, corporate administrative and management positions in Poseidon Limited and CRA Limited, following initial technical experience in CRA’s mining operations at Broken Hill.

John J den Dryver BE (Mining), MSc, FAusIMM – Non Executive Director (Chairman of Audit Committee)

John den Dryver is a mining engineer with some 30 years experience in operational and corporate management as well as extensive experience in mining project studies and implementation.

In 1982, Mr den Dryver joined the junior explorer North Flinders Mines Limited as the company’s mining engineer to become part of the small team that discovered the Granites gold mine in the Tanami Desert in the Northern Territory. He was executive director of North Flinders from 1988 to 1997.

In 1997, after Normandy Mining Limited gained control of North Flinders, Mr den Dryver joined Normandy as executive general manager – technical, leading a team of specialist geologists, mining engineers and metallurgists.

In 2003 he set up his own mining consultancy business and is currently a non executive director of Helix Resources Limited.

Keith R Yates BSc (Hons), FAusIMM – Non Executive Director

Keith Yates is a geologist with over 40 years experience in mineral exploration and mine development for a range of metals throughout Australia and in the Pacific and South-East Asia. He has lived in South Australia for over 30 years during which time he has accumulated a substantial knowledge of the geology and mineral potential of the Gawler Craton.

As a founding director of Adelaide Resources Limited, Mr Yates was the executive chairman from its public listing in 1996 until his retirement in 2007.

During his career he has held board and exploration management positions with a number of Australian mining companies and as senior geologist with an international mining group. In the 1980s he held senior positions with the Poseidon Limited group of companies including executive director of Australian Development Limited and director of Kalgoorlie Lake View Pty Ltd. In this period he was closely associated with the discovery of the rich White Devil gold mine at Tennant Creek, Northern Territory.

Mr Yates is chairman of the South Australian Resources Industry Development Board, a member of the South Australian Mining & Petroleum Experts Group, a member of the South Australian National Parks and Wildlife Council, and a past chairman of the Adelaide Branch of the Australasian Institute of Mining and Metallurgy.

Andrew J Brown BA Econ (Hons) – Non Executive Director (appointed 30 April 2009)

Andrew Brown has an honours degree majoring in economics and econometrics from the University of Manchester, England. He has 29 years’ experience in the Australian equity market as a stockbroker, corporate investor, company director and funds manager including working in London and New York. Mr Brown’s particular expertise is in the analysis of financial services companies.

In 1987, Mr Brown joined Natcorp Holdings Limited as investment manager, responsible for provision of detailed analysis pertaining to potential listed company acquisitions and investments.

From late 1988 until April 1994, Mr Brown returned to stockbroking with Baring Securities (Australia) Limited, later joining County NatWest Securities Australia Limited and ANZ McCaughan Securities. During this period, he was a highly rated banking and insurance analyst, as well as, latterly focusing on smaller company research.

In 1994 he joined AMP Investments Australia’s Separately Managed Portfolio (SMP) team, helping to manage over $2 billion of Australian equity investments.

In September 1997, he joined Rothschild Australia Asset Management Limited as head of equities and was responsible for a $5 billion domestic portfolio. He helped engineer significant equity process and cultural change, resulting in a major improvement in investment performance until the middle of 2002.


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Mr Brown is currently the largest shareholder and managing director of Tidewater Investments Limited, an ASX listed investment company specialising in “microcaps” and financial services, and which also manages funds for outside parties.

He is executive director of the Cheviot Kirribilly Vineyard Property Group, chairman of Equities and Freeholds Limited and is a non executive director of Cheviot Bridge Limited and Fat Prophets Australia Fund Limited.

Directorships of other listed companies

Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year, and since year’s end, are as follows:

Name Company Period of Directorship

P J Dowd Phoenix Copper Limited Since 2007 Northgate Minerals Corporation Since 2008 OZ Minerals Limited Since 2009 Buka Gold Limited From 2006 to 2009 Regis Resources Ltd From 2006 to 2009 J P Horan Marengo Mining Limited Since 2003 Golden China Resources Corporation From 2006 to 2007 Michelago Limited From 1995 to 2006 J J den Dryver Helix Resources Limited Since 2004

Intrepid Mines Limited (Formerly NuStar Mining Corporation) From 2003 to 2007

A J Brown Aequs Capital Limited From 2005 to 2008 Cheviot Bridge Limited Since 2003 Cheviot Kirribilly Vineyard Property (Group) Since 2008 Enerji Limited From 2007 to 2008 Equities and Freeholds Limited Since 2007 Fat Prophets Australia Fund Limited Since 2005 Mariner Wealth Management Limited From 2005 to 2006 Retail Star Limited From 2004 to 2006 Signature Brands Limited From 2004 to 2006 Snowball Group Limited From 2003 to 2007 Tidewater Investments Limited Since 2003

Principal Activities The principal continuing activity of the consolidated entity is the exploration for gold, copper, uranium, and other economic mineral deposits.

Financial Results The net result of operations for the year was a profit after income tax of $4,038,576 (2008: loss after income tax benefit of $887,701).

Dividends No dividends were paid or declared since the start of the financial year, and the directors do not recommend the payment of dividends in respect of the financial year.


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a) Overview

During the year the consolidated entity carried out exploration on its tenements with the objective of identifying gold, copper, uranium and other economic mineral deposits. It sold its mineral sand interests in the Eucla Basin and also completed a return of capital to shareholders through the in-specie distribution of securities in Iron Road Limited.

b) Review of Operations

The consolidated entity maintained an active exploration program during the year with operations conducted in South Australia and the Northern Territory.

Direct exploration expenditure was $1.506 million with additional contributions from parties holding or earning an interest in certain joint ventures.

In light of the challenging financial environment, the company reviewed its strategy and determined that it would focus its exploration efforts on the search for gold deposits, with copper and uranium remaining as important but secondary targets.

The company also determined to conduct a measured exploration effort in keeping with its solid cash position but mindful of the likely timeframe for economic recovery.

Exploration for gold and copper continued at the Rover Project near Tennant Creek in the Northern Territory. A program of diamond drilling was in progress at year end with drill holes planned at six targets. The drilling program followed completion of detailed airborne magnetic and ground based gravity geophysical surveys. Shortly after year end, one of the program drillholes at the Rover 4 prospect intersected significant visible copper sulphide mineralisation.

A thorough review of historical exploration data from the Moonta Project located on Yorke Peninsula in South Australia highlighted a number of gold-copper prospects and targets warranting further exploration. Ground based exploration is scheduled for the first half of the 2009/10 financial year.

On Eyre Peninsula, joint venturer Quasar Resources Pty Ltd completed an airborne electromagnetic survey and a drilling program targeting uranium in the Narlaby Palaeochannel, an ancient river system. The drilling showed that an unbound radiogenic zone, first identified in drill holes completed in the joint venture’s 2007 drilling program, extends for at least 600 metres. The radiogenic anomaly was seen in two adjacent 2008 holes which intersected maximum values of 104 and 97 ppm eU3O8 respectively.

At Cleve, on the Eyre Peninsula of South Australia, a drilling program searched for unconformity style uranium mineralisation. The drilling confirmed that the requisite geological ingredients are present on the project and encountered weakly anomalous uranium mineralisation.

Efforts to generate a new gold exploration project resulted in the pegging of an application for an Exploration Permit - Minerals in the Drummond Basin in Queensland. The Drummond Basin hosts significant gold resources of epithermal style, with the Pajingo deposits being well known examples.

During the year the company sold its assets in the Eucla Basin of South Australia to Iluka Resources Limited (Iluka) for $5 million cash, clear of all costs.

The assets sold comprised 49% equity in the Colona Joint Venture (a joint venture with Iluka), including the company’s approximate 30% equity in the Tripitaka mineral sand resource; equity in six mineral claim applications pegged over the Tripitaka deposit; and ownership of the three exploration licences that were subject to the Colona Joint Venture.

The sale decision was made after Iluka advised Adelaide Resources that it would not progress a definitive feasibility study of the Tripitaka project but would develop its larger 100% owned Jacinth – Ambrosia project first.

The company also completed the distribution to its shareholders of securities in Iron Road Limited which had purchased the Warramboo Magnetite Project from Adelaide Resources in February 2008. Iron Road listed on the Australian Securities Exchange in June 2008 with Warramboo being its lead project.


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In consideration for the sale of the project, Adelaide Resources received 21 million fully paid ordinary shares in Iron Road Limited. In September 2008, Adelaide Resources also acquired 10.5 million options to acquire shares in Iron Road Limited.

In December 2008, following shareholder approval and the receipt of favourable rulings from the Australian Taxation Office concerning the proposed transaction, both the Iron Road shares and options were distributed to shareholders. The Iron Road securities were distributed at the ratio of two Iron Road Limited shares and one Iron Road Limited option for every eight Adelaide Resources Limited shares held on 17 November 2008.

Changes in State of Affairs

Other than as mentioned in this Report, the financial statements or notes thereto, there was no significant change in the state of affairs of the consolidated entity during the financial year.

Subsequent Events

Other than as mentioned in this Report, the financial statements or the notes thereto, there have not been any matters or circumstances occurring subsequent to the end of the financial year that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Environmental Developments

The consolidated entity carries out exploration activities on its properties in South Australia, Queensland and in the Northern Territory. No mining activity has been conducted by the consolidated entity on its properties.

The consolidated entity’s exploration operations are subject to environmental regulations under the various laws of South Australia, Queensland, the Northern Territory, and the Commonwealth. While its exploration activities to date have had a low level of environmental impact, the consolidated entity has adopted a best practice approach in satisfaction of the regulations of relevant government authorities.

Future Developments

Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.

Remuneration Report

This report outlines the remuneration arrangements in place for directors and other key management personnel of the company and its wholly owned subsidiaries.

Where this report refers to the ‘Date of Grant’ of options, the date mentioned is the date on which those options were agreed to be issued (whether conditionally or otherwise).

Director and other Key Management Personnel Details

The following persons acted as directors of the company during or since the end of the financial year:

P J Dowd (Non Executive Chairman) C G Drown (Managing Director) J P Horan (Non Executive Director) J J den Dryver (Non Executive Director) K R Yates (Non Executive Director) A J Brown (Non Executive Director – appointed 30 April 2009) Key management personnel of the Group only comprise the directors named above.


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Relationship between the Remuneration Policy and Company Performance

The tables below set out summary information about the consolidated entity's earnings and movements in shareholder wealth for the five years to June 2009:

30 June 2009

30 June 2008

30 June 2007

30 June 2006

30 June 2005

Revenue 315,712 307,538 345,986 225,872 255,886 Net profit / (loss) before tax 4,038,576 (881,666) (3,735,515) (1,506,998) (417,369)Net profit / (loss) after tax 4,038,576 (887,701) (3,788,956) (1,536,998) (449,109)

30 June 2009

30 June 2008

30 June 2007

30 June 2006

30 June 2005

Share price at beginning of the year $0.16 $0.54 $0.38 $0.31 $0.22 Share price at end of year $0.09 $0.16 $0.54 $0.38 $0.31 Basic earnings per share $0.0486 $(0.0110) $(0.0514) $(0.0229) $(0.0073) Diluted earnings per share $0.0462 $(0.0110) $(0.0514) $(0.0229) $(0.0073)

No dividends have been declared during the five years ended 30 June 2009 and the directors do not recommend the payment of a dividend in respect of the year ended 30 June 2009.

There is no link between the company’s performance and the setting of remuneration except as discussed below in relation to options for directors.

Remuneration Philosophy

The performance of the Group depends on the quality of its directors and other key management personnel and therefore the Group must attract, motivate and retain appropriately qualified industry personnel. The Group embodies the following principles in its remuneration framework:

provide competitive rewards to attract and retain high calibre directors and other key management personnel;

link executive rewards to shareholder value (by the granting of share options);

link reward with the strategic goals and performance of the company; and

ensure total remuneration is competitive by market standards.

There is currently no policy or monitoring of key management personnel’s limiting their risk in relation to issued options.

Remuneration Policy

Due to its size, the company does not have a remuneration committee. The compensation of directors is reviewed by the Board with the exclusion of the director concerned. The compensation of other key management personnel is reviewed by the Board.

The Board assesses the appropriateness of the nature and amount of remuneration of such persons on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum shareholder benefit from retention of high quality directors and other key management personnel. External advice on remuneration matters is sought whenever the Board deems it necessary.

The remuneration of the directors and other key management personnel is not dependent on the satisfaction of a performance condition. Share options have been issued to key management personnel in prior years. These options do not have any performance conditions. The directors have decided that the exclusion of performance conditions is appropriate, after consideration of industry practice.


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Non Executive Director Remuneration The Board seeks to set remuneration of non executive directors at a level which provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is appropriate at this stage of the company’s development. Currently, as Non Executive Chairman, P J Dowd is entitled to receive $50,000 per annum exclusive of the statutory superannuation. J J den Dryver, K R Yates and A J Brown are each entitled to receive $31,250 per annum exclusive of the statutory superannuation. J P Horan is entitled to receive $31,250 per annum exclusive of the statutory superannuation, plus the amounts set out below in the company’s consultancy agreement with an entity associated with him. Previously, prior to the appointment of A J Brown to the Board on 30 April 2009, P J Dowd was entitled to receive $70,000 per annum exclusive of statutory superannuation and J J den Dryver and K R Yates were each entitled to receive $35,000 per annum exclusive of statutory superannuation and J P Horan was entitled to receive $35,000 per annum exclusive of statutory superannuation, plus the amounts set out below in the company’s consultancy agreement with an entity associated with him. In addition, non executive directors are entitled to be paid reasonable travelling, accommodation and other expenses incurred as a consequence of their attendance at meetings of directors and otherwise in the execution of their duties as directors. Managing Director Remuneration The company aims to reward the managing director with a level and mix of remuneration commensurate with his position and responsibilities within the company to:

align the interests of the managing director with those of shareholders;

link reward with the strategic goals and performance of the company; and

ensure total remuneration is competitive by market standards.

Currently the company has a services agreement with an entity associated with C G Drown, details of which are set out below. Summary of amounts paid to Key Management Personnel The table below discloses the compensation of the key management personnel of the Group during the year.

2009 Short-term employee benefits Salary & Fees (i)

Post employment

superannuation Sub total

Share-based payments options (ii) Total

Percentage of total

remuneration for the year

that consists of options

$ $ $ $ $ %

P J Dowd 66,665 - 66,665 - 66,665 - C G Drown 223,963 - 223,963 - 223,963 - J P Horan 144,538 3,094 147,632 - 147,632 - J J den Dryver 36,978 3,094 40,072 - 40,072 - K R Yates 34,378 3,094 37,472 - 37,472 - A J Brown 5,208 - 5,208 - 5,208 - 2009 Total 511,730 9,282 521,012 - 521,012 -

(i) Includes consulting fees paid to directors. (ii) Share options do not represent cash payments to key management personnel and share options

granted may or may not ultimately be exercised by the key management personnel.


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2008 Short-term employee benefits Salary & Fees (i)

Post employment

superannuation Sub total

Share-based payments options (ii) Total

Percentage of total

remuneration for the year

that consists of options

$ $ $ $ $ % P J Dowd 58,334 - 58,334 - 58,334 - C G Drown 218,644 - 218,644 - 218,644 - J P Horan 151,246 2,850 154,096 - 154,096 - J J den Dryver 47,798 6,300 54,098 - 54,098 - K R Yates 88,378 2,165 90,543 - 90,543 - 2008 Total 564,400 11,315 575,715 - 575,715 -

(i) Includes consulting fees paid to directors.

(ii) Share options do not represent cash payments to key management personnel and share options granted may or may not ultimately be exercised by the key management personnel.

No key management personnel appointed during the year received a payment as part of his consideration for agreeing to hold the position.

Service Agreements

The consolidated entity entered into service agreements with an entity associated with C G Drown for a term of three years from 5 November, 2007 and a consultancy agreement with an entity associated with J P Horan for a term of two years from 1 October 2007, extended for a further 12 months. For the year ended 30 June 2008 the consolidated entity had service agreements with entities associated with C G Drown and J P Horan.

Should any of the above agreements be terminated by the company earlier than their expiry date, a contingency exists for the contracted amount payable to the end of their terms. The entities associated with C G Drown and J P Horan may terminate their agreements with three months notice. As at 30 June 2009, the consolidated entity had a contingent liability in relation to these agreements of $291,124 (2008: $538,846).

Details of the current services and consultancy agreements are set out below:

2009 Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum


The consolidated entity also entered into a consultancy agreement with J J den Dryver on 28 May 2008 to provide consulting services on an as needs basis at the rate of $1,300 per day (previously the rate was $1,000 per day).

Share Options held by Directors

During the financial year, the following share options were on issue:

Options series Grant date Expiry date Grant date fair value Vesting date

DO November 2005 15 November 2005 14 November 2010 $0.3048 15 November 2005 DO November 2006 21 November 2006 14 November 2010 $0.2621 21 December 2006 ESOP December 2003 23 December 2003 22 December 2008 * 23 January 2004 “DO” means director share options and “ESOP” means share options issued under the employee share option plan. Shares issued under ESOP were issued to the person prior to the person being appointed a director.


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* Not applicable as options were issued and vested before 1 January 2005.

During the year ended 30 June 2009 no share options were granted to key management personnel.

The following table summarises the value of options granted, exercised or lapsed during the year that relate to key management personnel:

Options granted value at grant

date $

Options exercised value at exercise date

$

Options lapsed value at time of

lapse $

P J Dowd - - - C G Drown - - - J P Horan - - - J J den Dryver - - - K R Yates - - - A J Brown - - -

Value of options – basis of calculation

• Value of options granted at grant date is calculated by multiplying the fair value of options at grant date by the number of options granted during the financial year.

• Value of options exercised at exercise date is calculated by multiplying the fair value of options at the time they are exercised (calculated as the difference between exercise price and the Australian Securities Exchange last sale price on the day that the options were exercised) by the number of options exercised during the financial year.

• Value of options lapsed at the lapsed date is calculated by multiplying the fair value of options at the time they lapsed multiplied by the number of options lapsed during the financial year.

The total value of options included in compensation for the financial year is calculated in accordance with Accounting Standard AASB 2 “Share-based Payment”. Options granted during the financial year are recognised in compensation over their vesting period.

Directors’ Shareholdings

The following table sets out each director’s relevant interest in shares in the company as at the date of this report.

Directors

Fully paid ordinary shares

Number

Options to acquire ordinary shares

Number P J Dowd - 500,000 CG Drown 839,130 400,000 J P Horan 1,793,130 1,000,000 J J den Dryver - 400,000 K R Yates 5,743,408 1,000,000 A J Brown 12,261,208 - 20,636,876 3,300,000

The above table includes shares held by related parties of directors.


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Meetings of Directors

The number of meetings of the company’s Board of Directors attended by each director during the year ended 30 June 2009 was:

2009 Meetings held while in office Meetings attended

P J Dowd 9 9 C G Drown 9 9 J P Horan 9 9 J J den Dryver 9 9 K R Yates 9 9 A J Brown 1 1

The company held two meetings of the Audit Committee during the year ended 30 June 2009. The members of this committee comprise J J den Dryver (Chairman) and P J Dowd.

Non-Audit Services

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 21 to the financial statements.

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise the external auditor’s independence for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact on the integrity and objectivity of the auditor, and

• none of the services 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, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.

Auditors Independence Declaration

The auditor’s independence declaration is included on page 36 of the annual report.

Indemnification of Officers and Auditors

During the year the company arranged insurance cover and paid a premium for directors in respect of indemnity against third party liability. At the Annual General Meeting of the company held on 17 November 1997 shareholders resolved to extend the indemnification for a period of seven years after a director ceases to hold office. In accordance with the terms and conditions of the insurance policy, the amount of the premium paid has not been disclosed on the basis of confidentiality, as is permitted under Section 300 (9) of the Corporations Act 2001.

The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by an officer or auditor.

Signed at Adelaide this 16th day of September 2009 in accordance with a resolution of the directors.

C G Drown J P Horan Director Director

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Meetings of Directors

The number of meetings of the company’s Board of Directors attended by each director during the year ended 30 June 2009 was:

2009 Meetings held while in office Meetings attended

P J Dowd 9 9 C G Drown 9 9 J P Horan 9 9 J J den Dryver 9 9 K R Yates 9 9 A J Brown 1 1

The company held two meetings of the Audit Committee during the year ended 30 June 2009. The members of this committee comprise J J den Dryver (Chairman) and P J Dowd.

Non-Audit Services

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 21 to the financial statements.

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise the external auditor’s independence for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact on the integrity and objectivity of the auditor, and

• none of the services 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, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.

Auditors Independence Declaration

The auditor’s independence declaration is included on page 36 of the annual report.

Indemnification of Officers and Auditors

During the year the company arranged insurance cover and paid a premium for directors in respect of indemnity against third party liability. At the Annual General Meeting of the company held on 17 November 1997 shareholders resolved to extend the indemnification for a period of seven years after a director ceases to hold office. In accordance with the terms and conditions of the insurance policy, the amount of the premium paid has not been disclosed on the basis of confidentiality, as is permitted under Section 300 (9) of the Corporations Act 2001.

The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by an officer or auditor.

Signed at Adelaide this 16th day of September 2009 in accordance with a resolution of the directors.

C G Drown J P Horan Director Director


Liability limited by a scheme approved under Professional Standards Legislation.


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Income statement for the financial year ended 30 June 2009 Note Consolidated Company

2009 $

2008 $

2009 $

2008 $

Revenue 4(a) 315,712 307,538 300,893 307,038 Other income 4(b) 4,784,297 1,039,059 - Exploration expense written off 4(b) (119,489) (176,665) - - Doubtful debts allowance 4(b) - - (1,616,919) Reversal of doubtful debt allowance 4(b) - 5,881,060 - Administration expenses (414,396) (335,368) (414,396) (335,368) Corporate consulting expenses (169,787) (187,447) (169,787) (187,447) Company promotion (60,288) (66,654) (60,288) (66,654) Salaries and wages (42,675) (106,118) (42,675) (106,118) Directors fees (175,007) (146,328) (175,007) (146,328) Occupancy expenses (67,979) (72,947) (67,979) (72,947) Share based remuneration (11,812) (97,677) (11,812) (97,677) Profit / (Loss) before income tax 4,038,576 (881,666) 6,279,068 (2,322,420) Tax (expense) / income 5 - (6,035) 1,092,171 426,041 Net Profit / (Loss) 4,038,576 (887,701) 7,371,239 (1,896,379)

Earnings Per Share Basic (cents per share) – Profit / (Loss) 27 4.86 (1.10) Diluted (cents per share) – Profit / (Loss) 27 4.62 (1.10) The above income statement should be read in conjunction with the accompanying notes.


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Balance sheet as at 30 June 2009 Note Consolidated Company

2009 $

2008 $

2009 $

2008 $

CURRENT ASSETS Cash and cash equivalents 6,179,379 3,657,746 2,084,652 3,647,246 Trade and other receivables 6 323,533 160,280 309,054 160,280 Other financial assets 7 201,550 252,980 201,550 252,980

TOTAL CURRENT ASSETS 6,704,462 4,071,006 2,595,256 4,060,506 NON-CURRENT ASSETS

Exploration and evaluation expenditure 8 4,920,622 4,788,874 - - Shares and share options in Iron Road Limited 29 40,072 7,665,000 40,072 7,665,000

Shares in controlled entity - - 10,001 10,001 Plant and equipment 9 69,475 72,650 69,475 72,650 Other receivables 10 - - 7,506,739 - Deferred tax assets 5(b) - - 1,468,997 1,430,488

TOTAL NON-CURRENT ASSETS 5,030,169 12,526,524 9,095,284 9,178,139 TOTAL ASSETS 11,734,631 16,597,530 11,690,540 13,238,645 CURRENT LIABILITIES

Trade and other payables 11 391,801 701,437 391,801 701,437 Provisions 12 3,343 11,604 3,343 11,604

TOTAL CURRENT LIABILITIES 395,144 713,041 395,144 713,041 NON-CURRENT LIABILITIES

Provisions 13 34,438 34,775 34,438 34,775 Other liabilities 14 38,448 20,579 - -

TOTAL NON-CURRENT LIABILITIES 72,886 55,354 34,438 34,775 TOTAL LIABILITIES 468,030 768,395 429,582 747,816 NET ASSETS 11,266,601 15,829,135 11,260,958 12,490,829

EQUITY

Issued capital 16 17,933,796 18,349,580 17,933,796 18,349,580 Reserves 17 1,053,415 8,407,177 1,053,415 8,407,177 Accumulated losses 18 (7,720,610) (10,927,622) (7,726,253) (14,265,928)

TOTAL EQUITY 11,266,601 15,829,135 11,260,958 12,490,829 The above balance sheet should be read in conjunction with the accompanying notes.


Page 14

Statement of recognised income and expense for the year ended 30 June 2009 Consolidated Company 2009 2008 2009 2008 $ $ $ $ Available–for–sale investments:

Profit / (Loss) on available-for-sale investments taken to equity (6,637,959) 7,318,447 (6,637,959) 7,318,447

Transfer to profit and loss on distribution of available-for-sale investments (727,615) - (727,615) -

Net income recognised directly in equity (7,365,574) 7,318,447 (7,365,574) 7,318,447

Profit / (Loss) for the period 4,038,576 (887,701) 7,371,239 (1,896,379) Total recognised income and expense for the period (3,326,998) 6,430,746 5,665

5,422,068

The above statement of recognised income and expense should be read in conjunction with the accompanying notes.


Page 15

Cash flow statement for the year ended 30 June 2009

Inflows/(Outflows)

Consolidated Company

2009 $

2008 $

2009 $

2008 $

Cash flows relating to operating activities Payments to suppliers and employees (775,384) (1,249,332) (121,615) (1,249,332) Other receipts - 4,967 - 4,967

Net operating cash flows (Note 30(a)) (775,384) (1,244,365) (121,615) (1,244,365)

Cash flows relating to investing activities Interest received 316,332 297,245 315,993 296,745 Payments for exploration and evaluation expenditure

(1,905,890)

(1,524,607) - -

Purchase of share options (105,000) - (105,000) - Proceeds from sale of tenement 5,000,000 - - - State government grant received 17,868 20,579 - - Payments for plant and equipment (27,460) (55,017) (27,460) (55,017) Proceeds from sale of plant and equipment 1,167 - 1,167 - Funding of controlled entity - - (1,625,679) (1,504,028)

Net investing cash flows 3,297,017 (1,261,800) (1,440,979) (1,262,300) Cash flows relating to financing activities

Proceeds from share issues - 1,758,940 - 1,758,940 Payments for capital raising costs - (20,117) - (20,117)

Net financing cash flows - 1,738,823 - 1,738,823 Net (decrease) / increase in cash 2,521,633 (767,342) (1,562,594) (767,842) Cash at beginning of financial year 3,657,746 4,425,088 3,647,246 4,415,088 Cash at end of financial year 6,179,379 3,657,746 2,084,652 3,647,246 The above cash flow statement should be read in conjunction with the accompanying notes.


Page 16

Notes to the Financial Statements for the Financial Year Ended 30 June 2009 1. General information

Adelaide Resources Limited (the company) is a listed public company, incorporated in Australia and operating in Australia. Adelaide Resources Limited’s registered office and its principal place of business are as follows:

Registered office Principal place of business 69 King William Road 69 King William Road Unley Unley South Australia 5061 South Australia 5061

2. Adoption of new and revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Various other Standards and Interpretations were on issue but were not yet effective at the date of authorisation of the financial report. The issue of these Standards and Interpretations do not affect the Group’s present policies and operations. The directors anticipate that the adoption of these Standards and Interpretations in future periods will not materially effect the amounts recognised in the financial statements of the Company or the Group but may change the disclosure presently made in the financial statements of the Company or the Group.

3. Significant accounting policies

Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the company and the consolidated financial statements of the Group. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the directors on 16th September 2009. Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. In the application of the Group’s accounting policies, which are described below, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.


Page 17

a) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in banks and bank deposits.

b) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of employee benefits, expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date. Contributions to accumulated benefit superannuation plans are expensed when incurred.

c) Exploration and Evaluation Expenditure Exploration and evaluation expenditures in relation to each separate area of interest, are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: i) the rights to tenure of the area of interest are current; and ii) at least one of the following conditions is also met:

• the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale: or

• exploration and evaluation activities in the area of interest have not at the

reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are relate directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in AASB 6 “Exploration for and Evaluation of Mineral Resources”) suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash-generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment, reclassified to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.


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d) Financial assets Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit and loss which are initially measured at fair value. Other financial assets are classified into the following specified categories; financial assets ‘at fair value through profit or loss’, ‘held to maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit and loss’. Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:

has been acquired principally for the purpose of selling in the near future; is a part of an identified portfolio of financial instruments that the group manages

together and has a recent actual pattern of short-term profit-taking; or is a derivative that is not designated and effective as a hedging instrument.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.

Held-to-maturity investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates where the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. Available-for-sale financial assets Certain shares and redeemable notes held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined based on quoted market prices. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly on the profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period.

Dividends on available-for-sale equity instruments are recognised in profit and loss when the Group’s right to receive payment is established.

Loans and Receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and


Page 19

receivables are measured at amortised cost using the effective interest method less impairment.

Interest is recognised by applying the effective interest rate. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit and loss.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date of impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.

e) Goods and service tax

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

i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense or:

ii) for receivables and payables which are recognised inclusive of GST, the net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

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

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

f) Impairment of assets (other than exploration and evaluation) At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.


Page 20

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

g) Income tax Current tax Current tax is calculated by references to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacting by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

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

Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.


Page 21

Tax consolidation The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Adelaide Resources Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 5 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

h) Joint ventures Interests in jointly controlled assets are reported in the financial statements by including the consolidated entity’s share of assets employed in the joint ventures, the share of liabilities incurred in relation to the joint ventures and the share of any expenses incurred in relation to the joint ventures in their respective classification categories.

i) Financial instruments issued by the company Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Other financial liabilities Other financial liabilities are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

j) Plant and equipment Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period.


Page 22

The following estimated useful lives are used in the calculation of deprecation:

• Plant and equipment – at cost 3-5 years

k) Principles of consolidation The consolidated financial statements incorporate the financial statements of the company and entities (including special purpose entities) controlled by the company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial statements of the company, intra-group transactions (‘common control transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities.

l) Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, stock rotation, price protection, rebates and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the entity; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividend and interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is that rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

m) Share-based payments Equity-settled share-based payments granted after 7 November 2002 that vest on or after 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted,


Page 23

based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.

n) Government grants Government grants are assistance by government in the form of transfers of resources to the consolidated entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

Government grants are not recognised until there is reasonable assurance that the consolidated entity will comply with the conditions attached to them and the grant will be received. Government grants whose primary condition is to assist with exploration activities are recognised as deferred income in the balance sheet and recognised as income on a systematic basis when the related exploration and evaluation is written off.

Other government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate on a systematic basis. Government grants receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the consolidated entity with no future related costs are recognised as income in the period in which it becomes receivable.

o) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method.

The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ (2004) are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising from acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.


Page 24

Consolidated Company 2009

$ 2008

$ 2009

$ 2008

$ 4. PROFIT / (LOSS) FROM OPERATIONS

a) Revenue from continuing operations consisted of the following items

Interest income: Bank deposits 298,071 279,394 283,252 278,894 Income securities 17,641 23,177 17,641 23,177 315,712 302,571 300,893 302,071 Other - 4,967 - 4,967

315,712 307,538 300,893 307,038

b) Profit / (Loss) for the year includes the following gains and losses

Other income Profit on sale of tenements (i) 3,745,238 - - -

Profit on sale of property, plant and equipment 863 - 863 -

Gain as a result of in-specie distribution of shares in Iron Road Limited (Note 17)

727,615

-

727,615

-

Change in fair value of financial assets designated as at fair value through the profit and loss

101,582

-

101,582

-

Research and development refund 203,980 - 203,980 - Other 5,019 - 5,019 -

4,784,297 - 1,039,059 -

Other expenses Depreciation of plant and equipment 30,332 22,370 30,332 22,370 Exploration write-offs 119,489 176,665 - - Operating lease rental expenses 67,979 72,947 67,979 72,947

Allowance for doubtful debts: Subsidiary

-

-

-

1,616,919

Reversal of allowance for doubtful debts: Subsidiary

-

-

(5,881,060)

- Employee benefit expense: Post employment benefits:

Accumulated benefit superannuation plans

27,264

30,034

27,264

30,034

Share based payments:

Equity settled share-based payments (ii)

5,062

39,866

5,062

39,866

Other employee benefits 692,537 747,818 692,537 747,818

724,863 817,718 724,863 817,718

Less amounts capitalised in exploration and evaluation expenditure

(332,332)

(337,959)

(332,332)

(337,959) 392,531 479,759 392,531 479,759

(i) During the year ended 30 June 2009 the company sold a number of tenements in the

Eucla Basin to Iluka Resources Limited for $5,000,000. The sale resulted in a profit to the consolidated entity of $3,745,238.

(ii) Share based payments relate to share options granted during the year to employees.

Share options do not represent cash payments to employees and share options granted may or may not be exercised by the employees.


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Consolidated Company 2009 2008 2009 2008 $ $ $ $

5. INCOME TAX (a) Income tax recognised in profit or loss Current tax expense 851,520 - (202,142) -

Deferred tax expense/(income) relating to the origination and reversal of temporary differences and tax losses

(851,520)

6,035

(890,028)

(426,041)

Total tax expense/(income) - 6,035 (1,092,170) (426,041)

The prima facie income tax expense on the loss before income tax reconciles to the tax expense/ (income) in the financial statements as follows:

Profit / (Loss) from continuing operations

4,038,576

(881,666)

6,279,068

(2,322,420)

Income tax income calculated at 30%

1,211,573

(264,500)

1,883,720

(696,726)

Allowance for subsidiary receivable - - (1,764,318) 485,076 Share based payments 3,544 29,303 3,544 29,303 Other 18,372 541 18,373 691

Gain as a result of in-specie distribution of Iron Road Limited shares (218,285) - (218,285) -

Change in fair value of financial assets through profit and loss (30,475) - (30,475) -

Prior year tax losses recognised (984,729) (444,604) (984,729) (444,604) Current year tax losses not recognised - 685,295 - 200,219 Tax expense (income) - 6,035 (1,092,170) (426,041)

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

(b) Recognised tax assets and liabilities Deferred tax assets and liabilities are attributable to the following:

Consolidated Company 2009 2008 2009 2008 $ $ $ $ Trade and other receivables (71,827) 6,475 (67,483) 6,475 Exploration and evaluation expenditure (1,476,187) (1,436,663) - - Eyre Energy IPO costs 37,994 57,208 37,994 57,208 Capital raising costs 30,997 55,240 30,997 55,240 Trade and other payables 29,344 4,050 29,344 4,050 Employee benefits 11,334 13,914 11,334 13,914 Other liabilities 11,534 6,174 - - (1,426,811) (1,293,602) 42,186 136,887 Tax value of losses carried forward 1,426,811 1,293,602 1,426,811 1,293,602 Net deferred tax assets / (liabilities) - - 1,468,997 1,430,489


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(c) Unrecognised deferred tax assets A deferred tax asset has not been recognised in respect of the following item:

Consolidated Company 2009 2008 2009 2008 $ $ $ $ Tax Losses-revenue 984,729 2,511,660 384,390 1,369,119

A deferred tax asset has not been recognised in respect of the above tax losses because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefit.

(d) Movement in recognised temporary differences and tax losses

Consolidated Company 2009 2008 2009 2008 $ $ $ $

Opening balance - - 1,430,489 998,412 Recognised in equity - 6,035 - 6,035 Recognised in income - (6,035) 1,092,170 426,041 Tax losses transferred to offset tax payable - - (1,053,662) - Closing balance - - 1,468,997 1,430,489

(e) Movement in provision for tax Opening balance - - - - Transfer of liability from subsidiary - - (1,053,662) - Utilisation of recognised tax losses - - 1,053,662 - Closing balance - - - -

Tax consolidation Relevance of tax consolidation to the consolidated entity The company and its wholly-owned Australian resident entities are in a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax consolidated group is Adelaide Resources Limited. Nature of tax funding arrangement Entities within the tax-consolidated group have entered into a tax funding arrangement with the head entity. Under the terms of the tax funding arrangement, Adelaide Resources Limited and its wholly owned Australian resident entities have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the-consolidated group.


$ 2008

$ 2009

$ 2008

$ 6. CURRENT TRADE AND OTHER

RECEIVABLES

Trade receivables - - - - Interest receivable 20,965 21,584 6,484 21,584 Other receivables 302,568 138,696 302,569 138,696 323,533 160,280 309,053 160,280


Page 27


2009 $

2008 $

2009 $

2008 $

7. OTHER CURRENT FINANCIAL ASSETS Available for sale at fair value Income securities 201,550 252,980 201,550 252,980

8. EXPLORATION AND

EVALUATION EXPENDITURE

Costs brought forward 4,788,874 3,328,041 - - Expenditure incurred during the year 1,505,999 1,952,498 - - 6,294,873 5,280,539 - - Leases sold (1,254,762) (315,000) - - Expenditure written off (119,489) (176,665) - - 4,920,622 4,788,874 - - Expenditure written off relates to exploration and evaluation expenditure associated with tenements

or parts of tenements that have been surrendered $119,489 (2008: $176,665). The recoverability of the carrying value of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.


9. PLANT AND EQUIPMENT $ $ Gross carrying amount Balance at 1 July 2007 162,816 162,816 Additions 55,017 55,017 Disposals (11,116) (11,116) Balance at 30 June 2008 206,717 206,717 Additions 27,460 27,460 Disposals (23,537) (23,537) Balance at 30 June 2009 210,640 210,640 Accumulated Depreciation Balance at 1 July 2007 (122,812) (122,812) Disposals 11,116 11,116 Depreciation expense (22,370) (22,370) Balance at 30 June 2008 (134,066) (134,066) Disposals 23,233 23,233 Depreciation Expense (30,332) (30,332) Balance at 30 June 2009 (141,165) (141,165) Net book value Balance at 30 June 2008 72,651 72,651 Balance at 30 June 2009 69,475 69,475


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2009 $

2008 $

2009 $

2008 $

10. NON-CURRENT RECEIVABLES Amount due from subsidiaries - - 9,511,786 7,886,106 Allowance for doubtful debt - - (2,005,047) (7,886,106) - - 7,506,739 -

11. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES

Trade payables and accruals 391,801 701,437 391,801 701,437

12. CURRENT LIABILITIES – PROVISIONS Employee benefits 3,343 11,604 3,343 11,604

13. NON-CURRENT LIABILITIES – PROVISIONS

Employee benefits 34,438 34,775 34,438 34,775

14. NON-CURRENT LIABILITIES – OTHER Deferred income (government grant) 38,448 20,579 - -

15. EMPLOYEE BENEFITS

The aggregate employee benefits liability recognised in and included in the financial statements is as follows

Provision for employee benefits Current (Note 12) 3,343 11,604 3,343 11,604 Non-current (Note 13) 34,438 34,775 34,438 34,775 37,781 46,379 37,781 46,379


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16. ISSUED CAPITAL


2009 $

2008 $

2009 $

2008 $

Issued share capital:

83,156,035 fully paid ordinary shares (2008: 83,156,035) 17,933,796 18,349,580 17,933,796 18,349,580

Movement in issued shares for the year: 2009 2008 No. $ No. $ Balance at beginning of financial year 83,156,035 18,349,580 77,060,960 16,604,722 Capital reduction as a result of in-specie

distribution of Iron Road Limited shares (Note 29)

-

(311,835)

-

- Capital reduction as a result of in-specie

distribution of Iron Road Limited share options (Note 29)

-

(103,949)

-

- Issued at 31 cents - - 5,100,075 1,580,940 Conversion of options at 17 cents - - 700,000 119,000 Conversion of options at 20 cents - - 295,000 59,000 Costs associated with the issue of shares - - - (20,117) Related income tax - - - 6,035 Balance at end of financial year 83,156,035 17,933,796 83,156,035 18,349,580

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value. Fully paid shares carry one vote per share and carry the right to dividends.

17. RESERVES


$ 2008

$ 2009

$ 2008

$ Employee equity-settled benefits 1,094,009 1,082,197 1,094,009 1,082,197 Available-for-sale revaluation (40,594) 7,324,980 (40,594) 7,324,980 1,053,415 8,407,177 1,053,415 8,407,177

(a) Employee equity-settled benefits reserve Balance at beginning of the financial year 1,082,197 984,520 1,082,197 984,520 Share based payment 11,812 97,677 11,812 97,677 Balance at end of the financial year 1,094,009 1,082,197 1,094,009 1,082,197

The employee equity-settled benefits reserve arises on the grant of share options to employees, consultants and executives under the Employee Share Option Plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information about share based payments made under the Plan are shown in note 19 to the financial statements.


Page 30


$ 2008

$ 2009

$ 2008

$ (b) Available-for-sale revaluation reserve Balance at beginning of the financial year 7,324,980 6,533 7,324,980 6,533

Valuation (loss) / gain – shares in Iron Road Limited (6,586,529) 7,350,000 (6,586,529) 7,350,000

Cumulative gain transferred to income statement on in-specie distribution of Iron Road Limited shares

(727,615) - (727,615) -

Valuation (loss) – other financial assets (51,430) (31,553) (51,430) (31,553) Balance at end of the financial year (40,594) 7,324,980 (40,594) 7,324,980

The available-for-sale revaluation reserve arises on the revaluation of the available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset, and is effectively realised, is recognised in profit or loss. Where a revalued financial asset is impaired that portion of the reserve which relates to that financial asset is recognised in profit or loss.

18. ACCUMULATED LOSSES


$ 2008

$ 2009

$ 2008

$ Balance at beginning of financial year (10,927,622) (10,039,921) (14,265,928) (12,369,549)

In-specie distribution of shares and share options in Iron Road Limited (Note 30) (831,564) - (831,564) -

Net Profit / (Loss) 4,038,576 (887,701) 7,371,239 (1,896,379) Balance at end of financial year (7,720,610) (10,927,622) (7,726,253) (14,265,928)

19. SHARE OPTION PLAN

The consolidated entity has an ownership-based compensation plan for executives, employees and consultants. In accordance with the provisions of the Employee Share Option Plan, as approved by shareholders at an annual general meeting, directors may issue options to purchase shares in the company to executives, employees, and consultants, at an issue price determined by the market price of ordinary shares at the time the option is granted. No directors participate in the Employee Share Option Plan. In accordance with the terms of the Employee Share Option Plan, options vest at grant date and may be exercised at any time from the date of their issue to the date of their expiry.

Share options are not listed, carry no rights to dividends and no voting rights.

The following share based payment arrangements were in existence during the financial year.

Options – Series Number Grant Date Expiry

Date Exercise

Price Fair value at grant date

Employee Share Option Plan

December 2003 225,000 23/12/2003 22/12/2008 $0.20 * December 2007 200,000 20/12/2007 19/12/2012 $0.35 0.1993 March 2008 500,000 31/03/2008 30/03/2013 $0.30 0.1156 December 2008 350,000 17/12/2008 16/12/2013 $0.04 0.0337 Director Options November 2005 2,800,000 15/11/2005 14/11/2010 $0.55 0.3048 November 2006 500,000 21/11/2006 14/11/2010 $0.55 0.2621


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* Not applicable as options were issued and vested before 1 January 2005. No amount was recorded when these were issued. Any consideration received on the exercise of these options shall be recognised in issued capital.

The weighted average of fair value of options granted during the year is $0.0337 (2008: $0.1395) per option. Options were valued using the Black-Scholes model using the following inputs:

Grant date share price 4.0 cents Exercise price 4.0 cents Calculated volatility 121.6% Option expiry 16 December 2013 Risk free interest rate 4.25%

The following reconciles the outstanding share options granted under the Plan at the beginning and end of the financial year:

Share Option Plan 2009 2008

Number of options

Weighted average

exercise price $

Number of options

Weighted average

exercise price $

Balance at beginning of financial year 4,225,000 0.492 4,520,000 0.451 Granted during the financial year 350,000 0.040 700,000 0.314 Exercised during the financial year - - ( 995,000) 0.179 Lapsed during the financial year (225,000) (0.200) - - Cancelled during the financial year (50,000) (0.350) - - Balance at end of the financial year (i) 4,300,000 0.472 4,225,000 0.492

(i) Options outstanding at end of the financial year The share options outstanding at the end of the financial year had an average exercise price of

$0.472 (2008: $0.492) and a weighted average remaining contractual life of 721days (2008: 969 days).

20. KEY MANAGEMENT PERSONNEL COMPENSATION

The key management personnel of Adelaide Resources Limited during the year were:

• P J Dowd (Non Executive chairman) • C G Drown (Managing director) • J P Horan (Non Executive director and company secretary) • J J den Dryver (Non Executive director) • K R Yates (Non Executive director) • A J Brown (Non Executive director – appointed 30 April 2009)

The aggregate compensation of key management personnel of the consolidated entity and the company is set out below:


2009 $

2008 $

2009 $

2008 $

Short-term employee benefits 511,730 564,400 511,730 564,400 Post employment benefits 9,282 11,315 9,282 11,315 Share-based payments (i) - - - -

521,012 575,715 521,012 575,715

(i) Share based payments relate to share options granted during the year to key management personnel. Share options do not represent cash payments to key management personnel and share options granted may or may not be exercised by the key management personnel.


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$ 2008

$ 2009

$ 2008

$ 21. REMUNERATION OF AUDITORS Audit or Review of the financial report 27,203 24,750 27,203 24,750 Accounting advice 15,862 8,500 15,862 8,500 Tax return preparation and advice 36,501 25,500 36,501 25,500 79,566 58,750 79,566 58,750

The auditor of Adelaide Resources Limited is Deloitte Touche Tohmatsu.

22. RELATED PARTY DISCLOSURES

a) Equity interests in related parties

Equity interests in subsidiaries Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 28 to the financial statements. Interests in joint ventures Details of interests in joint ventures are disclosed in Note 23 to the financial statements.

b) Key management personnel compensation

Details of key management personnel compensation are disclosed in Note 20 and the Remuneration Report of the Directors’ Report.

c) Transactions with key management personnel

Other than as disclosed in the Remuneration Report of the Directors’ Report, there were no transactions with key management personnel or their personally related entities during the year ended 30 June 2009 (2008: NIL).

d) Transactions within wholly owned group

The ultimate parent entity in the wholly-owned group is Adelaide Resources Limited. Amounts receivable from the controlled entities are disclosed in Note 10 to the financial statements. During the financial year Adelaide Resources Limited provided accounting and administrative services at no cost to the controlled entities and made interest free advances. Tax losses have been transferred to Adelaide Resources Limited for no consideration.

e) Equity holdings of key management personnel

(i) Fully paid ordinary shares issued by Adelaide Resources Limited

2009 Balance 1/7/08 Net Changes Balance 30/6/09 Balance held Nominally

P J Dowd - - - - C G Drown 839,130 - 839,130 - J P Horan 1,793,130 - 1,793,130 - J J den Dryver - - - - K R Yates 5,743,408 - 5,743,408 - A J Brown - 12,261,208* 12,261,208 -

* On market purchases prior to A J Brown becoming a director.


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2008 Balance 1/7/07 Net Changes Balance 30/6/08 Balance held

Nominally P J Dowd - - - - C G Drown 373,000 466,130** 839,130 - J P Horan 1,777,000 16,130** 1,793,130 - J J den Dryver - - - - K R Yates 5,727,278 16,130** 5,743,408 -

** The net change includes the issue of 16,130 shares by the company as a result of

participating in the Share Purchase Plan, which was available to all shareholders.

(ii) Options to acquire fully paid ordinary shares issued by Adelaide Resources Limited

2009 Balance 1/7/08 Granted Lapsed Balance

30/6/09 Balance

held Nominally

Vested and exercisable

P J Dowd 500,000 - - 500,000 - 500,000 C G Drown 525,000 - 125,000 400,000 - 400,000 J P Horan 1,000,000 - - 1,000,000 - 1,000,000 J J den Dryver 500,000 - 100,000 400,000 - 400,000 K R Yates 1,000,000 - - 1,000,000 - 1,000,000

2008 Balance 1/7/07 Granted Exercised Balance

30/6/08 Balance

held Nominally

Vested and exercisable

P J Dowd 500,000 - - 500,000 - 500,000 C G Drown 975,000 - 450,000 525,000 - 525,000 J P Horan 1,000,000 - - 1,000,000 - 1,000,000 J J den Dryver 500,000 - - 500,000 - 500,000 K R Yates 1,000,000 - - 1,000,000 - 1,000,000

23. JOINTLY CONTROLLED ASSETS The consolidated entity had interests in unincorporated joint ventures at 30 June 2009 as follows:

Percentage Interest 2009

Percentage Interest 2008

South Australia Moonta Porphyry Joint Venture (Note a) – Copper/Gold Exploration 90% 90% Kimba-Verran Joint Venture (Note a) – Copper/Gold Exploration 90% 90% Eyre Peninsula Uranium Joint Venture (Note b) – Uranium Exploration 100% 100% Colona Joint Venture - Mineral Sands Exploration - 49%

Notes:

(a) The consolidated entity has an option to purchase the remaining 10% at any time for a consideration of $200,000 cash or the equivalent of $200,000 in Adelaide resources Limited shares.

(b) Under the terms of this joint venture agreement, Quasar Resources Pty Ltd is required to spend

$3,000,000 over four years commencing 1 January 2007 to earn a 60% interest, with a minimum of $750,000 to be spent per year over the term of the joint venture.

After Quasar Resources Pty Ltd earns its 60% interest, the consolidated entity may elect to contribute and hold its equity position, contribute or dilute on a program by program basis, or immediately revert to a 25% equity in the joint venture, free carried to a decision to mine. If the


Page 34

consolidated entity chooses the dilution path, its interest may not be diluted below 25%, at which time the interest will be free carried through to a decision to mine. If the consolidated entity elects not to contribute to mine development, it can opt to sell or revert to a 2% revenue based royalty.

The amount included in mining tenements, exploration and evaluation (Note 8) includes $847,355 (2008: $1,218,967) relating to the above joint ventures.

24. COMMITMENTS FOR EXPENDITURE AND CONTINGENT LIABILITIES

(a) Exploration Expenditure Commitments

The consolidated entity has certain obligations to perform exploration work and expend minimum amounts of money on such works on mineral exploration tenements.

These obligations will vary from time to time, subject to statutory approval. The terms of current and future joint ventures, the grant or relinquishment of licences and changes to licence areas at renewal or expiry, will alter the expenditure commitments of the company.

Total expenditure commitments at balance date in respect of minimum expenditure requirements not provided for in the financial statements are approximately:

2009 $

2008 $

Not later than one year: 1,480,000 1,809,000 Later than one year but not later than two years: 1,905,000 1,844,750 Later than two years but not later than five years: 5,699,000 6,074,250

(b) Rover Project – Northern Territory Under an agreement entered into with Newmont Gold Exploration Pty Ltd (“Newmont”) on 28 February 2005, Adelaide Exploration Limited acquired a 100% interest in the Rover Project exploration licences and exploration licence applications located near Tennant Creek, Northern Territory, on the following terms.

• A minimum of $400,000 to be spent on exploration activities within 18 months of approval being received from the Central Land Council. This obligation had been met by December 2005.

• A net smelter return royalty to Newmont ranging from 1.5% to 2.5% after production, and

• The grant of an option to Newmont to buy back a 70% interest should a resource of more than 2 million gold ounces be discovered, by paying Adelaide Exploration Limited the lesser of $A20 million or three times the expenditure by Adelaide Exploration Limited from the date of execution of the agreement.

• Under an agreement entered into with Adelaide Exploration Limited, Adelaide Resources Limited and Franco-Nevada Australia Pty Ltd (“Franco”) dated 11 February 2009, Newmont assigned its interest in the royalty to Franco.

(c) Newcrest Mining Royalty Deed

By a Royalty Deed dated 13 February 2002 the consolidated entity is obliged to pay to Newcrest Mining Limited a royalty of 1.5% of the gross proceeds received from the sale of refined minerals, less allowable deductions, mined from certain tenements on the Eyre Peninsula, South Australia.

(d) Service Agreements

The consolidated entity entered into service agreements with an entity associated with C G Drown for a term of three years from 5 November 2007 and a consultancy agreement with an entity associated with J P Horan for a term of two years from 1 October 2007, extended for a further 12 months. For the year ended 30 June 2008 the consolidated entity had service agreements with entities associated with C G Drown and J P Horan.


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Should any of the above agreements be terminated by the company earlier than their expiry date, a contingency exists for the contracted amount payable to the end of their terms. The entities associated with C G Drown and J P Horan may terminate their agreements with three months notice. As at 30 June 2009, the consolidated entity had a contingent liability in relation to these agreements of $291,124 (2008: $538,846).

Details of the current services and consultancy agreements are set out below:


2008

Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum

The consolidated entity also entered into a consultancy agreement with J J den Dryver on 28 May 2008 to provide consulting services on an as needs basis at the rate of $1,300 per day (previously the rate was $1,000 per day).

(e) Native Title

Native Title claims have been made with respect to tenements in South Australia in which Adelaide Resources Limited has interests. The consolidated entity is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the company or its projects.

(f) Bank Guarantees As at 30 June 2009, the consolidated entity had given a bank guarantee of $50,000 (2008: $50,000) to the Central Land Council, Northern Territory, as a performance bond.

As at 30 June 2009, the consolidated entity had given a bank guarantee of $10,000 (2008: $Nil) to the Minister for Mineral Resources Development, South Australia, for an environmental bond.

As at 30 June 2009, the consolidated entity and the company had given a bank guarantee of $32,500 (2008: $Nil) to Pink Pumpkin Pty Ltd as a lease bond.

(g) Operating Lease

Operating lease relates to the lease of office space with a lease term of four years, with an option to extend for a further four years. The operating lease agreement contains a market review clause in the event that the Group exercises its option to renew. The Group does not have an option to purchase the leased asset at the expiry of the lease period.

Non-cancellable operating lease commitments Consolidated Company

2009 $

2008 $

2009 $

2008 $

Not longer than 1 year 70,940 70,752 70,940 70,752 Longer than 1 year and not longer than 5 years 79,972 157,106 79,972 157,106 Longer than 5 years - - - 150,912 227,858 150,912 227,858


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25. FINANCIAL INSTRUMENTS

Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 16, 17 and 18 respectively.

Due to the nature of the Group’s activities (exploration) the directors believe that the most advantageous way to fund activities is through equity. The Group’s exploration activities are monitored to ensure that adequate funds are available. Categories of financial instruments


2009

$ 2008

$ 2009

$ 2008

$ Financial assets Cash and cash equivalents 6,179,379 3,657,746 2,084,652 3,647,246 Loans and receivables 323,533 160,280 9,820,840 8,046,386 Available-for-sale financial assets 201,550 252,980 201,550 252,980 Shares and share options in Iron Road Limited 40,072 7,665,000 40,072 7,665,000 Financial liabilities Amortised cost 391,801 701,437 391,801 701,437

Interest rate risk management The company and the Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period.

At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s and company’s net profit would increase/decrease by $24,593 and $14,330 respectively (2008: increase/decrease by $20,207 and $20,155 respectively). This is mainly attributable to interest rates on bank deposits.

The group’s sensitivity to interest rates has not significantly changed from the prior year. Other price risks The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather trading purposes. The Group does not actively trade these investments. Equity price sensitivity The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date.

At reporting date, if the equity prices had been 5% pa higher or lower:

• net profit for the year ended 30 June 2009 would have been unaffected as the equity investments are classified as available-for-sale; and


Page 37

• other equity reserves would increase/decrease by $12,082 (2008: increase/decrease by $395,899) for the Group and Company, mainly as a result of the changes in fair value of available-for-sale shares.

The group’s sensitivity to equity prices has decreased during the current year mainly due to the in-specie distribution of Iron Road Limited shares and share options. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from activities.

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves. Liquidity and interest risk tables The following table details the company’s and the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Consolidated and Company

Weighted average effective interest

rate Less than one

year % $ 2009 Non-interest bearing - 391,801 2008 Non-interest bearing - 701,437

Fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows:

• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

• the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.

Quoted prices Financial assets in this category include income notes, shares and share options. The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair values.


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26. SEGMENT INFORMATION

The consolidated entity operates in the mineral exploration industry in Australia. 27. EARNINGS PER SHARE Consolidated

2009 Cents per share

2008 Cents per share

Basic earnings per share – Profit / (loss) 4.86 (1.10) Diluted earnings per share – Profit / (loss) 4.62 (1.10)

Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

$ $ - Earnings 4,038,576 (887,701)

Number Number - Weighted average number of ordinary shares 83,156,035 80,405,658

Diluted earnings per share The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

$ $ - Earnings 4,038,576 (887,701)

Number Number - Weighted average number of ordinary shares 87,424,049 80,405,658

28. CONTROLLED ENTITIES

Ownership Interest

Name of Entity Country of Incorporation

2009 %

2008 %

Parent Entity Adelaide Resources Limited

(i)

Australia

-

-

Subsidiaries Adelaide Exploration Pty Ltd

(ii)

Australia

100

100 Eyre Energy Pty Ltd (ii) Australia 100 100

(i) Head entity in tax consolidated group (ii) Members of tax consolidated group

29. SHARES AND OPTIONS IN IRON ROAD LIMITED

On 18 February 2008 the company announced that it had executed a sale agreement with Iron Road Limited to vend the Warramboo Iron Project into that company. Consideration for the sale was 21 million shares in Iron Road Limited. Under the sale agreement with Iron Road Limited the company agreed to undertake an in-specie distribution of the 21 million shares it received to the company’s shareholders, subject to shareholders’ approval.


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A general meeting of the company’s shareholders, held on 12 August 2008, approved the in-specie distribution of the 20,789,255 shares the company holds in Iron Road Limited.

The distribution was approved subject to the receipt of a private ruling on the tax consequences for the company of the in-specie distribution, and a class order in relation to the tax consequences for the shareholders of Adelaide Resources Limited of the in-specie distribution (collectively the “tax ruling”) from the Australian Tax Office (“ATO”).

As the tax ruling had not been received prior to Iron Road Limited announcing a rights issue of share options, the company participated in the share option issue and received 10.5 million share options.

On 7 November 2008 the company received indications from the ATO that a favourable tax ruling would be issued. Subsequently, on 17 December 2008, the ATO published its ruling.

At the Annual General Meeting of the company’s shareholders held on 17 November 2008, the shareholders approved the in-specie distribution of 10,394,901 share options the company held in Iron Road Limited.

As the shareholders of the company at the above meetings approved a capital reduction for the original cost of the shares and share options in Iron Road Limited that would be distributed via in-specie distribution, the issued capital was reduced by the original cost of the shares and share options distributed. For accounting purposes, the in-specie distribution has been accounted for at “fair value” with the difference between original cost and fair value being reported in accumulated losses.

30. NOTES TO THE CASH FLOW STATEMENT

Inflows/(Outflows) Consolidated Company

2009 $

2008 $

2009 $

2008 $

(a): Reconciliation of loss for the period to net cash flow from ordinary activities.

Profit / (Loss) for the period 4,038,577 (887,701) 7,371,239 (1,896,379) Interest revenue (316,332) (297,245) (315,993) (296,745) Share based remuneration 11,812 97,677 11,812 97,677 Revaluation of options (101,582) - (101,582) - Gain as a result of in-specie distribution of shares in Iron Road Limited

(727,615)

-

(727,615)

-

Depreciation 30,332 22,370 30,332 22,370 Profit on sale of plant and equipment (863) - (863) - Profit on sale of tenements (3,745,238) - - - Exploration written off 119,489 176,665 - - Impairment of receivables - - (5,881,060) 1,616,919 (Increase) decrease in receivables (163,253) (75,966) (148,774) (75,966) (Increase) decrease in deferred tax asset - 6,035 (38,509) (426,041) Increase/(decrease) in payables 87,886 (289,806) (312,004) (289,806) Increase/(decrease) in provisions (8,597) 3,606 (8,598) 3,606 Net operating cash flows (775,384) (1,244,365) (121,615) (1,244,365)

(b) Non-cash investing and financing activities

During the year the company and the consolidated entity made an in-specie distribution of 20,789,255 shares and 10,394,901 share options in Iron Road Limited.

During the previous year the company and the consolidated entity sold the Warramboo Iron Project for 21 million shares in Iron Road Limited.

These transactions are not reflected in the cash flow statement.


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Directors’ Declaration The directors declare that: (a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to

pay its debts as and when they become due and payable; (b) In the directors’ opinion, the financial statements and notes thereto are in accordance with the

Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and consolidated entity; and

(c) The directors have been given the declaration required by Section 295A of the Corporation Act 2001. Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001. On behalf of the directors C G Drown J P Horan Director Director Adelaide, South Australia 16th September 2009

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Directors’ Declaration The directors declare that: (a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to

pay its debts as and when they become due and payable; (b) In the directors’ opinion, the financial statements and notes thereto are in accordance with the

Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and consolidated entity; and

(c) The directors have been given the declaration required by Section 295A of the Corporation Act 2001. Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001. On behalf of the directors C G Drown J P Horan Director Director Adelaide, South Australia 16th September 2009


Liability limited by a scheme approved under Professional Standards Legislation.

37 to65.


We have audited the Remuneration Report included in pages 30 to 34 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.


Shareholder Information

Substantial ShareholdersThe names of substantial shareholders shown in the company’s share register are:

Shareholder Number of SharesLoftus Lane Investments Pty Limited 5,918,618Equities and Freeholds Limited 5,909,618Keith Yates & Associates Pty Ltd<Yates Family Super Fund A/C> 3,316,130

Distribution of Shareholders

Number of ordinary shares held No. of Holders Ordinary shares1-1000 69 49,0121,001 – 5,000 407 1,307,0685,001 – 10,000 440 3,841,55110,001 – 100,000 830 30,107,998100,000 – Over 132 47,850,406

1878 83,156,035

All ordinary shares carry one vote per share without restriction.

At the closing price on SEATS at 16 September 2009 there were 114 shareholders with less than a

marketable parcel of 1695 shares.

Top 20 Shareholders of ordinary shares

Issued Shares % Shares Loftus Lane Investments Pty Limited 5,918,618 7.12Equities and Freeholds Limited 5,909,618 7.11Keith Yates & Associates Pty Ltd <Yates Family Super Fund A/C> 3,316,130 3.99Keith Robert Yates 2,427,278 2.92Adelaide Resource Management Pty Ltd 1,500,000 1.80Weldbank Pty Ltd 1,185,693 1.43Valnera Holdings Pty Ltd 1,000,000 1.20Merrill Lynch (Australia) Nominees Pty Limited <Berndale A/C> 725,000 0.87Dorran Pty Ltd 516,130 0.62Ian Lloyd Richards 516,130 0.62New England Specialty Poultry Pty Ltd <Super Benefits Fund A/C> 515,000 0.62Henry Young & Sons Pty Ltd 491,500 0.59Walker & Hall Fine Gifts Ltd 485,000 0.58Jeach Pty Ltd <Pippi Super Fund A/C> 470,000 0.57Nicholas Mather & Judith Mather <Mather Super Fund A/C> 463,000 0.56Chris Drown & Lynette Drown <C&L Drown Family A/C> 450,000 0.54Comsec Nominees Pty Ltd 447,366 0.54Dean Wilfred Hosking & Judith Esme Hosking 416,130 0.50Austin Joseph Carew <Share Trading A/C> 410,000 0.49Howard Yates & Peta Yates <Yates Family Super Fund A/C> 400,226 0.48Total of top 20 holdings 27,562,819 33.15Other holdings 55,593,216 66.85Total fully paid shares issued 83,156,035 100.00

OptionsThere are 4,300,000 unlisted options held by employees under the company’s Employee Share Option

Plan and by directors.

as at 16 September 2009

2009 - Andromeda Metals · 2019. 6. 27. · John den Dryver Non Executive Director Keith Yates Non...

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