For personal use only - ASX · 2011-10-21 · The Company holds a diversified portfolio of highly prospective tenements for iron ore, nickel and other base metals in three main projects

ANNUAL REPORT 2011

Condor Metals Limited…. Successful exploration for base metals….

www.condornickel.com

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Published: October 2011


ACN 128 512 907 ABN 36 128 512 907

Company Profile

Dingo Range ProjectThe Dingo Range Project is located some 200 kilometres north of Leonora in Western Australia. The project is 80 kilometres north-north east of Darlot Gold Mine, 40 kilometres east of Bronzewing Gold Mine and 35 kilometres southwest of the Mt Fisher gold mining area.

Geochemical soil sampling programs and surface rock chip sampling have indicated the presence of significant copper mineralisation and copper grades of 3-4%.

The project lies in the north-northwest trending Dingo Range greenstone belt. The linear strike distance between the most northern and most southern tenement boundaries is approximately 64 kilometres and covers an area of 324 square kilometres.

Kallona Creek ProspectThe Kallona Creek Prospect is located approximately 70 kilometres southeast of the Nullagine townsite on the Balfour Downs sheet, within the East Pilbara district of Western Australia.

The area is prospective for iron ore and manganese deposits. A wide spaced reconnaissance program of 54 RC holes for 3,028m was completed in late July. Assay results are encouraging for both iron ore and manganese at shallow depths.

The Company is currently planning the second phase of drilling to better define targets.

Grey Dam Nickel ProspectThe Grey Dam Nickel Prospect is located in the north east Coolgardie region, approximately eight kilometres from the Kurnalpi townsite, some 80 kilometres east-north east of Kalgoorlie-Boulder.

The presence of nickel and cobalt mineralisation has proven to be significant in the larger Grey Dam prospect.

This area is transacted by a strong mineralised north-northwest trending shear zone called the Avoca Shear which hosts gold and nickel mineralisation.

Condor Metals Limited is a Western Australian-based iron ore, manganese and nickel exploration company.

The Company holds a diversified portfolio of highly prospective tenements for iron ore, nickel and other base metals in three main projects. These are the Dingo Range Iron Ore Project, the Kallona Creek Iron/Manganese Prospect and the Grey Dam Nickel Prospect.

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Annual Report 2011 Condor Metals Limited | 1

Condor Metals Limited Annual Report 2011

Table of contents Chairman’s Report 3

Operational Review 5

Community Standards 15

Commodities Overview 16

Annual Financial Report 17

Directors’ Report 18

Corporate Governance Statement 25

Financial Report

Statement of Comprehensive Income 31

Statement of Financial Position 32

Statement of Changes in Equity 33

Statement of Cash Flows 34

Notes to the Financial Statements 35

Directors’ Declaration 47

Auditor’s Independence Declaration 48

Independent Auditor’s Report 49

Shareholder Information 51

Corporate Directory 53

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2 | Condor Metals Limited Annual Report 2011

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It is just over a year since I became a director and some ten months since becoming Chairman. In that short time I am pleased to report to you on a year of significant progress at Condor Metals. This progress has been driven by the adoption of a new, highly commercial business strategy and culture changes at Board level, the resourcing of a high quality executive team and encouraging exploration work across our key prospects.

These changes are already providing the platform for us to better realise our potential and to generate rewarding returns for shareholders over the longer term.

Under the new Board and management, Condor has transformed the way it approaches business. Historically, the Company was focused on the accumulation of tenements. The new Board and management’s view is that exploration companies generate maximum shareholder value by not just identifying and acquiring quality tenements, but undertaking substantial developmental work on them. To this end, we now have active exploration programs underway, which are already showing encouraging results.

The new Board, consisting of Robert Schuitema, Ross Gillon and myself, have made substantial changes to the corporate culture. This is illustrated by the instilling of a strict financial discipline, coupled with a heightened sense of commercial priorities. Early benefits are shown by more cost-effective drilling activity and leaner corporate overheads.

During the year our executive team was bolstered by two high profile appointments: John McKinstry was appointed Chief Operating Officer. He brings significant technical and management skills to Condor, along with a proven track record of generating significant shareholder value. Andrew Jones was appointed Exploration Manager. He brings to the Company extensive geological experience across a wide range of commodities.

The now fully-focussed exploration programs which commenced during 2011 have heightened our optimism regarding the Company’s tenements. The Kallona iron ore and manganese prospect remains the Company’s key focus. Recent drilling results are revealing manganese intersections covering broad distances at shallow depths. This also enhances the Prospect’s iron ore potential and we continue to drill with the goal of establishing an Initial Resource estimate in the near future.

As many investors seek safe havens in the current volatility in global financial markets, it is a difficult time for exploration companies. Condor, however, is well funded to pursue its goals and is also able to actively seek new opportunities, both by exploration and corporately. The Company’s financial position is strong, with some $3 million in cash at 30 June 2011, no debt and a fully funded exploration program underway.

Condor has moved into the new financial year in a very strong position and with excellent prospects. The Company holds a portfolio of highly prospective tenements, has a strong Board and management team and has strategies in place to generate significant value for shareholders.

On behalf of everyone at Condor, I thank you for your continued support and look forward to reporting on further significant progress in the year ahead.

Yours sincerely,

Laurence Freedman AM Chairman

Chairman’s ReportDear Fellow Shareholder,

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Operational Review

During the year Condor Nickel Limited formally changed its name to Condor Metals Limited (“Condor” or “the Company”), to reflect more effectively the Company’s wider focus on iron, manganese and base metals in addition to nickel. The Company’s priority targets during the 2010/2011 year were:

Dingo Creek Base metals (Cu, Zn, Ni)

Grey Dam Nickel laterites and sulphides

Gundocketa Iron

Kallona Creek Iron / Manganese

Southern Cross Nickel

The Board of Directors underwent significant change in the year. Mr Laurence Freedman AM and Mr Robert Schuitema joined the Board. Mr Ian Burston AM and Ms Elaine Carr resigned as directors during the year. The new Board moved to create management direction for the company by appointing Mr John McKinstry to the company as Chief Operating Officer (COO) and Mr Andrew Jones as Exploration Manager.

The appointment of senior staff, and a shared services arrangement with Carrick Gold Limited (“Carrick”), heralded a shift in focus from Condor being an acquirer of tenements to being a true exploration company. The arrangement of shared administrative services with Carrick will continue until Condor can justify the additional expense of its own office and support staff. This arrangement keeps overheads down, whilst providing access to services not normally available to small exploration companies.

During the year Condor acquired vehicles, a caravan and field equipment to enable the Company to carry out exploration work efficiently. Condor continues to seek opportunities for acquiring or farming in to new tenements, and to divest or enter into joint ventures where there is benefit to shareholders. In keeping with that Condor has recently applied for new tenements in the Gascoyne area: ground which is prospective for new iron and base metals targets.

The majority of expenditure during the year was carried out on the Kallona iron and manganese prospect in the East Pilbara. An airborne geophysical survey, combined with mapping and surface sampling, enabled a drilling program to be designed for the project. Following the mandatory approvals and completion of a cultural heritage agreement, drilling commenced in June 2011. Results received subsequent to the end of the year confirmed the presence of manganese and consistent iron intersections which will require further drilling in the 2011/2012 year. Condor continued to explore the Dingo Range tenements southeast of Wiluna, following up soil sampling which identified copper and gold anomalies.

The Gundocketa iron ore prospect was acquired in March 2010. Soil sampling and mapping showed promising results, but the Company’s lack of physical resources prevented follow–up work being carried out at the time. Condor is now planning for the follow–up work to take place in the 2011/2012 year.

Exploration field crew at Kallona, East Pilbara

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Operational Review (Cont’d)

Kallona Prospect (100% working interest)

Condor’s Kallona project area is approximately 70 kilometres southeast of Nullagine in the East Pilbara, Western Australia. The project area lies 75 kilometres west of the Nullagine River JV (Fortescue Metals Group and BC Iron). The area contains outcropping Marra Mamba Iron Formation and the manganese bearing Carawine Dolomite, which are both largely covered by weathered and transported material. As a result, the area had not previously attracted exploration attention.

Rock chip samples taken by Condor from the Carawine Dolomite contained 27–38% manganese. The project area is considered prospective for both iron ore and manganese deposits. The targets lie immediately north of Hancock Prospecting’s recently commissioned Nicholas Downs manganese mine and southwest of Consolidated Minerals’ Woodie Woodie manganese mine. Other prominent miners operating in the region include BC Iron and Fortescue Metals at their Nullagine JV and Hancock Prospecting’s Roy Hill iron project.

In late 2010 Condor commissioned Southern Geoscience Consultants (SGC) to manage a VTEM survey on the Kallona tenement (see Fig 1). During the March quarter the report from SGC was finalised and on the basis of the targets provided, a program of 85 reverse circulation (RC) holes was designed and budgeted. An agreement was struck with the local custodians, the Palyku people, on cultural heritage management. Site clearance to allow drilling was completed quickly and efficiently.

Kallona’s conductive zones cover significantly large areas and are similar in nature to other manganese deposits, such as Woodie Woodie. Drill testing of a selection of the higher priority anomalies will be undertaken as part of an initial assessment of the mineralisation of the conductivity zones.

The aeromagnetic survey identified a substantial and unexpected strongly magnetic complex occupying the central western portion of the survey area. The complex and associated structures may influence the distribution of manganese mineralisation.

Figure 1 Location of the Kallona Project

Figure 2 Kallona Drilling Location Map

Figure 3 Kallona Schematic Cross Section

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Drilling commenced in June 2011 with a wide-spaced program targeting largely conductive features identified by the geophysical program. More broadly, it was to determine the dip, thickness and quality of the iron formation.

The Phase 1 drilling program of 54 RC drill holes for 3,028m was completed in late July, with samples submitted to SGS Australia in Perth for analysis.

One metre samples were taken where the presence of manganese or iron was observed during geological logging, and these results have been received. Four metre composite samples were taken from the remainder of the drilling. The results from these samples provided further confirmation of the wide spread manganese mineralisation. In addition the Company was able to locate the results of three exploration holes drilled by CRA in 1986. The three holes all intersected manganese mineralisation and show that it extends significantly further north in the tenement than first thought.

The original drilling returned manganese values of greater than 5% from 10 separate drill holes spread across seven of the 11 north–south drill lines. The most significant manganese intersections include 5m at 10.6% manganese from 63m, 11m at 12.3% manganese from 11m, 5m at 12.2% manganese from 11m, 8m at 11.5% manganese from 58m, and 12m at 7.8% manganese from 37m.

From the four metre composite results, broad manganese intercepts at shallow depths include 24m @ 3.82% Mn from 8m, 18m @ 8.34% Mn from 10m, 36m @ 2.4% Mn from 48m, 23m @ 2.74% Mn from 53m and 26m @ 3.03% Mn from 48m.

Manganese has been mapped in outcrops close to the contact between the Jeerinah Formation and Marra Mamba Iron Formation. Intersections in holes KLRC025 and KLRC026 are in the vicinity of these outcrops.

Several of the drill lines which have manganese intersections mentioned above are more than one kilometre apart, leaving significant scope for further exploration success. Initial work will focus on any apparent correlation between the observed results and magnetic and conductive features seen in the geophysical work.

In addition to the manganese results, eleven of the drill lines completed to date at Kallona intersected the banded iron formation of the Marra Mamba Iron Formation. The thickness of the banded iron formation that was intersected varied between 5m and 15m, and interpretation of the drilling data indicates that the stratigraphy is dipping shallowly towards the north.

Assay results from the banded iron to date have produced best intersections of 8m at 56% iron from 8m, 5m at 50.9% iron from 12m, and 5m at 53.8% iron from 4m.

Following from the success of the Phase 1 drilling program the Company plans to complete a further eight north–south drill lines for approximately 3,750m of RC drilling in 2011/2012.

Dingo Range Project (100% working interest)

The Dingo Range Project comprises seven exploration licences (E53/1352, 1377, 1380, 1407, 1421, 1447 and E37/925) and is situated 150 kilometres east–southeast of Wiluna in Western Australia, covering part of the Mt Fisher greenstone belt.

The area covered by the exploration licences is 324.5 square kilometres with a linear strike distance between the most northern and most southern tenement boundaries of approximately 65 kilometres. The project is located 80 kilometres north–northeast of the Darlot Gold Mine, 40 kilometres east of the Bronzewing Gold Mine and 35 kilometres southwest of the Mt Fisher gold mining area. Significant gold mineralisation has been reported surrounding Hurley’s Reward (Melrose Project) six kilometres southeast of E53/1380, and significant uranium mineralisation has been discovered at Lake Maitland, 20 kilometres to the west of the project tenement area.

Significant exploration by previous explorers has targeted the Dingo Range area for base metals, including nickel, copper and iron. Rotary air blast (RAB) drilling programmes have identified basalts and strong nickel mineral anomalies. Other rock types, including graphitic shales, metasediments and granites, have identified mineral anomalies including gold, copper, iron, lead, zinc and titanium.

The north–northwest trending Dingo Range belt is an Archaean greenstone belt located east of the Yandel greenstone belt. The two greenstone belts are separated by Archaean granitoids.

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RAB drilling on E53/1380 was carried out in August 2010. A total of 60 holes for 1,421 metres were drilled to varying depths. The purpose of this drilling was to investigate the mineral content, particularly iron, of the regolith over a wide area and to determine the geology of the underlying bedrock. The surface exposure of the tenement includes ridges of a banded iron formation and a significant cover of iron gravels, which initiated the current RAB drilling programme.

Intervals of horizontal iron rich layers were encountered in most of the holes, representing a secondary enrichment of iron in a completely weathered regolith geology. The underlying bedrock was generally mafic to ultramafic, with minor quartz veining intersected.

The drilling was used to test for the occurrence of nickel and gold, and where anomalous in the first phase composite sampling technique, three holes were re–sampled at one metre intervals. Drill holes WGR29 and WGR30 were re–sampled for nickel and WGR36 was re–sampled for gold.

Within E53/1352 the Johnny Walker prospect indicates the presence of significant copper mineralisation. The strongly altered sediments are associated with graphitic shales and quartz veining. Surface rock chip sampling in the past by Condor has delivered copper grades of 3–4%.

In the 2010 auger soil sampling program, two gold anomalies of 215ppb gold and 110ppb gold were discovered, located approximately one kilometre

apart in a northeast trending direction. Both soil anomalies have been the target of the recent auger soil sampling on 100 square metre spacings, infilling and extending previous traverse lines.

During the March quarter, a smaller surface soil sampling and mapping program was carried out to define the anomalous areas further. A total of 326 auger soil samples have extended the coverage of the adjacent areas on E53/1407 and 80 surface soil samples have been collected at the anomaly.

Peak assay results indicate geochemical anomalies at the following areas:

> McKay Bore – 1186ppm Ni, 250ppm Cu

> Mckay Bore South – 64ppb Au

> Johnny Walker – 488ppm Cu

> Johnny Walker East – 1590ppm Ni,549ppm Cu

> Dingo Range – 3033ppm Ni, 145ppm Cu

> Freeman’s Find 2 North – 117ppb Au

Soil geochemistry results have indicated that significant base metal mineralisation may occur on E53/1407. Work is continuing on this tenement to evaluate the nickel and gold potential. Results from the reconnaissance sampling and the indications of previous work by other companies show that the tenement contains significant mineralisation which needs to be properly investigated. For the 2011/2012 year a preliminary EM survey (one loop, two traverse line survey) will be carried out in conjunction with continuing evaluation of the Johnny Walker copper prospect on E53/1352 (Fig 6).

Figure 4 Dingo Range Project

Figure 5 Dingo Range Tenements

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Gundocketa Project (100% working interest)

The Gundocketa Project (E25/292) is located 60 kilometres due east of Kalgoorlie Boulder in Western Australia. The tenements lie 20 kilometres west of Fairstar Resources’ Steeple Hill iron ore project. Attractive features of the project are its proximity to Kalgoorlie and the short distance from the southern boundary of E25/292 to the Trans Australian Railway (17 kilometres).

A field visit to follow up on the results from two auger soil geochemistry programs indicated the presence of an iron enriched horizon, occurring as a strong surface layer of fine lateritic pisolites (gravel). The pisolitic layer forms alluvial concentrations as part of drainage systems entering Lake Yindarlgooda.

The main iron rich alluvial pisolitic layer is continuous over a cumulative strike distance of around 10 kilometres. The source of the alluvial material has not been determined; however, field investigations indicated the presence of iron rich rocks outcropping on the surface near the lake and to the north of the tenement.

Iron rich pisolitic lateritic cover associated with the drainage system was established over an area of approximately 3.9 square kilometres on the Gundocketa exploration lease. The area is estimated at approximately 10 kilometres in length and 100m to 700m in variable width. It is similar to the area being evaluated for the Steeple Hill project, and if

it is proven to be a deposit similar in nature, it may add sufficient scale to justify the capital expense involved in mining.

Lag sampling of the iron pisolites in 26 locations was carried out with samples screened to +2mm and foreign particles separated out by hand. Rock chip sampling of outcropping weathered rocks was carried out at several locations within the tenement boundary.

Future work involves additional lag sampling on a wider spaced grid pattern over defined areas adjacent to the lake, and submission of a work program to excavate trenches to determine the depth of the iron enriched layer.

Limited resources prevented additional work at Gundocketa, but it remains high on the Company’s priority list of prospects for evaluation.

Figure 8 Grey Dam Nickel Project and Gundocketa Project

Figure 6 Soil sampling conducted in March quarter 2011

Figure 7 Gundocketa

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Grey Dam Nickel Project (Nickel rights)

Condor acquired the nickel rights on tenements held by Carrick as part of the Company’s initial listing. Previous exploration work by Carrick identified significant lateritic and sulphide nickel targets at Grey Dam and Halfway Hill. Halfway Hill lies approximately five kilometres southeast of the Black Swan nickel mine.

The presence of nickel and cobalt mineralisation has proven to be significant in the larger area of the Grey Dam prospect. A significant definition exists between nickel laterite mineralisation overlying considerable nickel sulphides at depth.

The geology of the exploration area has been interpreted from magnetic intensity images describing the strike directions of approximately five kilometres in a west–northwest / east–southeast direction and 10 kilometres in a north–south direction. This area is intersected by a strong mineralised north–northwest trending shear zone, the Avoca Shear, which hosts gold and nickel mineralisation (see Figure 9).

At Grey Dam the ultramafic–mafic–sediment stratigraphy includes a chert (rock type) marker horizon, which is presumed to follow the major mineralised structures and direction associated with the Avoca Shear. Strong nickel and cobalt mineralisation is related to the Avoca Shear transecting the ultramafic stratigraphy.

In December 2009 Golder Associates produced an Inferred Resource for the Grey Dam deposit. A summary of the Mineral Resource Statement is shown below.

Other than meeting minimum expenditure requirements, there was no activity on the Grey Dam Nickel Project during the year. Condor’s ongoing interest is in the presence of nickel sulphides at depth, at which future work will be directed.

Work programmed for 2011/2012 starts with a more detailed geophysical survey testing for the presence of nickel sulphides.

New Projects for 2011/2012

The Company applied for, and is awaiting the grant of, tenements in several localities in Western Australia which include the Southern Cross area between Pert and Kalgoorlie, Gascoyne area inland from Carnarvon (Milly Milly, Andes & Mt James Creek projects). These tenements are considered prospective for a combination of iron, gold and base metals. The Company has also made applications for new applications (Hancock Hill & Yindarlgooda) which will become part of the Grey Dam Nickel Project east of Kalgoorlie.

Southern Cross Prospect (100% working interest, under application)

Exploration licence application E77/1898 is a 50–block, approximately 150 square kilometre area situated within the northwest trending eastern limb of the Southern Cross greenstone belt (Fig 10). The application commences in the north near the historic gold mining town of Southern Cross, and stretches in a south–southeast direction adjacent to the operating Marvel Loch gold mine tenements (where 121,870 ounces of gold were produced in FY2010).

The application area overlays mining leases held by St Barbara Mines; these mining leases will be excised out of the final exploration lease granted. Historically a number of high–grade, significant gold deposits have been located within the belt, typically controlled by structure and lithology. The tenement is in close proximity to a processing plant and other associated infrastructure.

Figure 9 Grey Dam Nickel Project

Ni cut–off % Tonnes Ni % Co ppm Mg % Al %

0.4 14,50M 0.7 456 8.75 2.15

0.7 5,22M 0.94 802 7.67 2.31

1 1,75M 1.16 1062 7.19 2.36

Mineral Resource Statement for Grey Dam (source: Golder Associates, 2009)

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Previous significant drill results for gold on E77/1898 (from open file) include;

RAB

> 4m at 0.33g/t gold from 36m

RC




Milly Milly (100% working interest, under application)

The Milly Milly project area consists of two exploration licence applications (E09/1924 & E09/1925) covering a combined area of 318km2. The project is located 300km southeast of Carnarvon, in the Gascoyne region of Western Australia.

The area is part of the Archaean Narryer Gneiss Terrane largely composed of metamorphosed mafic intrusions, granitoids and sedimentary rock types. The area is prospective for a variety of commodities such as nickel, iron, copper, lead and zinc. The Jack Hills Iron Ore Mine operated by Crosslands Resources Ltd’s is located in the region producing 1.8 million tonnes per annum of direct shipping iron ore. The region is currently the focus of a high level of exploration by various companies.

Figure 10 Southern Cross EL Application location

Figure 11 Mining lease areas to be excised out of the EL area

Figure 12 Milly Milly Tenement

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Mount James Creek (100% working interest, under application)

Exploration licence application E09/1942 covers an area of 175km2 in the Proterozoic Gascoyne Complex of Western Australia located and is located 300km east of Carnarvon.

The project area contains historic gold, base metal and uranium prospects and initial exploration is likely to be focused on these known areas of interest.

Andes (100% working interest, under application)

The Andes Project (E52/2723) is located 190km southwest of Paraburdoo in northern Western Australia covering an area of 54 sub blocks. The licence is easily accessed along the Meekatharra Road.

The project area is within the Ashburton and Edmund Basins which are considered highly prospective for Cu–Pb–Zn–Ag mineralisation and historic prospects are known within the application area. The Prairie Downs Zn–Pb–Ag deposit occurs 100km to the east in a similar geological setting.

Figure 14 Andes Project

Figure 13 Mount James Creek Project

The information in this report which relates to exploration results, mineral resources or ore reserves is based on information

compiled by Stephen Godfrey who is a Member of The Australasian Institute of Mining and Metallurgy and a Member of The

Australian Institute of Geoscientists with a minimum of five years experience which is relevant to the style of mineralisation

and type of deposit under consideration and to the activity which he 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 Godfrey consents to the inclusion in the report of the matters based on his information in the form and context in which it

appears. Mr Godfrey is an employee of Golders Associates, and consults to Condor Metals Limited.

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Table 1: Kallona Drill CollarHole Id Northing Easting Orientation Depth (m)

KLRC001 7527518 256775 Vertical 39

KLRC002 7527691 256779 Vertical 51

KLRC003 7527934 256793 Vertical 42

KLRC004 7528143 256810 Vertical 42

KLRC005 7528355 256815 Vertical 60

KLRC006 7528510 256824 Vertical 63

KLRC007 7527691 259903 Vertical 36

KLRC008 7527765 259900 Vertical 42

KLRC009 7527877 259905 Vertical 42

KLRC010 7528111 259916 Vertical 42

KLRC011 7528240 259915 Vertical 69

KLRC012 7527828 259246 Vertical 39

KLRC013 7528130 259255 Vertical 66

KLRC014 7528342 259255 Vertical 81

KLRC015 7527686 257975 Vertical 33

KLRC016 7527943 257984 Vertical 36

KLRC017 7528244 257988 Vertical 67

KLRC018 7528506 258006 Vertical 81

KLRC019 7527328 257289 Vertical 51

KLRC020 7527642 257315 Vertical 33

KLRC021 7527815 257311 Vertical 42

KLRC022 7528042 257310 Vertical 45

KLRC023 7528302 257302 Vertical 60

KLRC024 7528550 257302 Vertical 48

KLRC025 7527257 255982 Vertical 48

KLRC026 7527412 255978 Vertical 39

KLRC027 7527554 255973 Vertical 66

Hole Id Northing Easting Orientat on Depth (m)

KLRC028 7527642 255969 Vertical 72

KLRC029 7527447 254765 Vertical 42

KLRC030 7527638 254765 Vertical 45

KLRC031 7527771 254742 Vertical 54

KLRC032 7526712 253281 Vertical 48

KLRC033 7526912 253329 Vertical 45

KLRC034 7527111 253258 Vertical 60

KLRC035 7527270 253288 Vertical 39

KLRC036 7527452 253250 Vertical 51

KLRC037 7528559 259210 Vertical 60

KLRC038 7527903 261650 Vertical 45

KLRC039 7528054 261654 Vertical 51

KLRC040 7528182 261646 Vertical 57

KLRC041 7528590 261637 Vertical 76

KLRC042 7528385 261640 Vertical 64

KLRC043 7528882 261646 Vertical 80

KLRC044 7529033 261646 Vertical 94

KLRC045 7528338 263041 Vertical 46

KLRC046 7528519 263125 Vertical 55

KLRC047 7528900 263164 Vertical 64

KLRC048 7528710 263155 Vertical 49

KLRC049 7529298 263186 Vertical 79

KLRC050 7529462 263191 Vertical 94

KLRC051 7527864 264155 Vertical 43

KLRC052 7528249 264317 Vertical 61

KLRC053 7528528 264205 Vertical 103

KLRC054 7528807 264214 Vertical 88

Table 2: Kallona Fe Drill Intersects

Hole Id From To Interval Fe (%) SiO2 (%) Al2O3 (%) P (%) S (%) LOI1000

KLRC004 8 16 8 56 2 6.8 4.7 0.03 0.11 6.4

KLRC009 12 17 5 50.9 12 5 8.1 0.03 0.066 5.3

KLRC013 47 48 1 57.1 12.7 3.2 0.01 0.038 1.68

KLRC024 24 27 3 56.7 7.2 3.6 0.046 0.032 7.1

KLRC033 0 4 4 52.2 13.6 4.7 0.05 0.12 5.8

KLRC033 7 8 1 54 5 13.2 3.2 0.029 0.048 4.9

KLRC034 4 9 5 53.4 9.8 4.9 0.042 0.14 6.8

KLRC036 22 27 5 53 8.9 6.3 0.037 0.071 7.4

KLRC045 16 20 4 50.6 10.6 8.8 0.044 0.047 6.9

KLRC050 68 69 1 57.3 3.7 1.3 0.069 0.006 6.2

KLRC054 54 55 1 52.1 7.5 2.6 0.39 0.019 12.1

KLRC054 59 60 1 50.2 6.8 2 5 0.38 0.014 12.3

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Table 3: Kallona Mn Drill IntersectsHole Id From To Interval Mn (%)

KLRC01 12 16 4 4.16

KLRC02 9 16 7 2.01

KLRC03 6 7 1 1.91

KLRC04 5 6 1 1.07

KLRC04 8 10 2 1.24

KLRC04 15 17 2 1.08

KLRC05 27 29 2 1.77

KLRC010 27 28 1 1.49

KLRC013 42 43 1 1.32

KLRC013 52 64 13 2 3

KLRC014 24 40 16 1.53

KLRC016 8 32 24 3.82

KLRC019 0 12 12 2.18

KLRC019 24 28 4 1.17

KLRC025 16 20 4 3.55

KLRC025 23 24 1 1.6

KLRC025 25 26 1 1.17

KLRC026 10 28 18 8.34

including 11 15 4 12 33

including 17 21 4 17.68

KLRC027 50 51 1 1.8

KLRC028 60 66 6 1.8

KLRC034 56 60 4 2.03

KLRC035 20 24 4 1.43

KLRC037 56 60 4 3.98

KLRC039 48 51 3 1.81

KLRC040 20 28 8 1.39

KLRC040 44 56 12 3.29

KLRC041 22 23 1 1.15

KLRC041 36 44 8 1.1

KLRC041 60 68 8 2.12

KLRC042 34 36 2 2.09

KLRC042 52 53 1 2.78

KLRC043 36 40 4 1.32

Hole Id From To Interval Mn (%)

KLRC043 48 52 4 1.09

KLRC043 57 77 20 3.21

KLRC044 48 84 36 2.4

including 60 63 3 19.36

KLRC047 40 44 4 2.57

KLRC048 12 16 4 1.53

KLRC049 53 76 23 2.74

KLRC050 36 52 16 6 3

KLRC050 55 65 10 1.01

KLRC050 69 75 6 1.05

KLRC053 100 103 3 2.12

KLRC054 48 74 26 3.03

KLRC054 85 88 3 1.41

KLRC040 20 28 8 1.39

KLRC040 44 56 12 3.29

KLRC041 22 23 1 1.15

KLRC041 36 44 8 1.1

KLRC041 60 68 8 2.12

KLRC042 34 36 2 2.09

KLRC042 52 53 1 2.78

KLRC043 36 40 4 1.32

KLRC043 48 52 4 1.09

KLRC043 57 77 20 3.21

KLRC044 48 84 36 2.4

including 60 63 3 19.36

KLRC047 40 44 4 2.57

KLRC048 12 16 4 1.53

KLRC049 53 76 23 2.74

KLRC050 36 52 16 6 3

KLRC050 55 65 10 1.01

KLRC050 69 75 6 1.05

KLRC053 100 103 3 2.12

KLRC054 48 74 26 3.03

KLRC054 85 88 3 1.41For

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Community Standards

Condor understands that the development of successful resource projects demands a proactive recognition of the breadth of stakeholder interest in these projects.

The Company is committed to the protection of the environment and to the ensure health and safety of its employees, customers, contractors and communities where it operates and in all its business activities.

The Company is dedicated to comply with all applicable laws and regulations and to work with government and other stakeholders in policy development and implementation.

Traditional Owners

Condor has engaged the assistance of Aboriginal parties representing the traditional owners of the land on which it operates.

An extensive Cultural Heritage Management Plan will be developed in consultation with the traditional owners as the Company’s various projects are developed toward production.

Condor commits to ongoing communication and consultation with traditional owners in all areas where it operates.

Landholders

Condor has a commitment to work constructively and proactively with landholders. The Company’s aim is to minimise the impact on their livelihood and lifestyle.

Condor will continue to conduct its operations with the intention of developing long and collaborative relationships with landholders.

Health and Safety

Condor undertakes its operations with the philosophy that occupational health and safety is paramount. The Company aims to continually improve its processes and performances.

Promoting and ensuring a culture in which all employees and contractors fulfil their individual responsibilities in implementing the Health and Safety policy and meeting the regulatory standards remains a key focus.

Cultural heritage fieldwork at Kallona, East Pilbara

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Commodities Overview

Iron ore

Most iron ores mined today comprise the iron oxide minerals hematite, goethite, limonite, a mixture of hydrated iron oxides and magnetite.

Most iron ore resources occur in iron-rich sedimentary rocks known as banded iron formations (BIFs) which are almost exclusively of Precambrian age (i.e. greater than 600 million years old). BIFs occur on all continents. In many instances they are mined as iron ores, but most importantly they are the source rocks for most of the large high-grade concentrations of iron ore currently mined throughout the world.

In North West Australia the Pilbara district hosts three main types of deposit: iron oxide enrichments within BIFs; iron oxides deposited along ancient, mainly Tertiary age river channels (palaeochannels); and iron oxide deposits formed from the erosion of existing ore bodies (detrital iron ore deposits).

The BIF enrichment deposits comprising hematite and hematite goethite are the most important in regard to resources and production. The iron content of these ores varies widely and until recently most deposits needed to have an average grade of more than 60% Fe for mining to be commercially viable. However, some deposits can now have iron grades between 56-59% Fe and be commercially viable.

The palaeochannel deposits comprised of pisolitic limonite are the next in importance and are prized for their low impurities such as phosphorus. They are not as rich in iron as the BIF enrichment ores. Those mined usually contain 57-59% Fe.

Detrital iron ore deposits, including scree and canga deposits, are found downhill of the BIF enrichment deposits from which they have been eroded. They are usually easily recovered and have a grade of between 40-55% Fe. BIF enrichment deposits also occur elsewhere in Western Australia in the Pilbara (e.g. Yarrie), and the Yilgarn Block (e.g. Koolyanobbing) and in South Australia (e.g. Iron Duke, Middleback Range).

Although iron ore resources occur in all the Australian States and Territories, almost 93% of identified resources (totalling 64 billion tonnes) occur in Western Australia, including almost 80% in the Hamersley Province, one of the world’s major iron ore provinces.

Manganese

Manganese (Mn) is essential to iron and steel production by virtue of its sulphur–fixing, deoxidizing, and alloying properties.

Steelmaking, including its iron making component, accounts for most global manganese demand. Manganese ferroalloys are used to provide most of this key ingredient to steelmaking.

Products for construction, machinery, and transportation are leading end uses of manganese. Manganese also is a key component of certain widely used aluminium alloys and, in oxide form, dry cell batteries. As ore, additional quantities of manganese are used for such non–metallurgical purposes as plant fertilizers, animal feed, and colorants for brick.

Nickel

Nickel (Ni) is primarily sold for first use as refined metal (cathode, powder, briquette, etc.) or ferronickel. The majority of the nickel consumed is used to make stainless steel.

A material amount of nickel also goes into superalloys or nonferrous alloys. Both families of alloys are widely used due to their corrosion resistance.

The aerospace industry is a leading consumer of nickel–base superalloys. Turbine blades, discs and other critical parts of jet engines are fabricated from superalloys. Nickel–base superalloys are also used in land–based combustion turbines, such as those found at electric power generation stations.

The remaining consumption is divided between alloy steels, rechargeable batteries, catalysts and other chemicals, coinage, foundry products, and plating.

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For the year ended 30 June 2011

Condor Metals LimitedACN 128 512 907

Annual Financial ReportFor

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The Directors of Condor Metals Limited (‘the Company’) present their financial report on the Company for the year ended 30 June 2011.

Directors

The names of directors in office at any time during or since the end of the financial year are listed hereunder. Directors were in office for the entire period under review.

> Laurence Freedman AM (appointed Non–Executive Director on 18 August 2010 and appointed Non–Executive Chairman on 14 October 2010)

> Ross Gillon (appointed 12 May 2010)

> Robert Schuitema (appointed Non–Executive Director 9 September 2010) and Company Secretary (appointed 17 January 2011)

> Brian Martin (resigned 7 March 2011)

> Elaine Carr (resigned 27 October 2010)

> Ian Burston (resigned 31 August 2010)

Information on Directors

LAURENCE FREEDMAN AM

Non–Executive Chairman (appointed 18 August 2010)

Mr Freedman has a long history of involvement and expertise in resource companies having begun his career with the Gold Fields Group, initially as an analyst, rising to director of group companies, including Commonwealth Mining Investments.

He later joined BT Australia as Manager Investments. In 1980, he resigned from BT to found the Equitilink Group which he grew to a global investment management company, with operations around the world.

He held chairman and/or director roles at a number of Australian and international publicly listed companies. In 2000, he sold the Equitilink Group and has managed his private investment portfolio in shares, property and fixed income. He is a mentor to a number of resource, biotech and technology companies.

Mr Freedman is Chairman of the Freedman Foundation, a self–funded philanthropic charity involved in Medical Research, Youth Programs and the Arts.

Mr Freedman has held the following directorships of other public companies within the last three years:

> Carrick Gold Limited

> Phoslock Water Solutions Limited

ROSS GILLON

Non–Executive Director (appointed 12 May 2010)

Mr Gillon, principal of the legal firm of Lawton Gillon, has been in legal practice for 30 years and has been legal advisor for Condor Metals Limited since its listing in 2008. He has been a director of a number of public companies.

Mr Gillon has held the following directorships of other public companies within the last three years:


> Millennium Metals Limited

> Red River Resources Limited

> Telezon Limited

> Terrain Minerals Limited

Directors’ Report

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ROBERT SCHUITEMA

Non–Executive Director (appointed 9 September 2010)

and

Company Secretary (appointed 17 January 2011)

Mr Schuitema has extensive Australian public company experience, currently being a Director and Company Secretary of Phoslock Water Solutions Ltd and Carrick Gold Ltd and previously a Director of Electro Optical Systems Ltd. Mr Schuitema is a chartered accountant and member of the NZ Institute of Investment Analysts.

Mr Schuitema has a long history of involvement and expertise in resource companies having worked 14 years with Chase Manhattan Bank & latterly JP MorganChase as Head of Mining & Metals for Asia Pacific. As an investment banker Mr Schuitema was actively involved in raising both debt (project finance, bank loans and long term bonds) and equity (including hybrids) and providing M&A advise for resource companies both in Australia and internationally.

Mr Schuitema worked with resource companies ranging from the major resource houses to junior resource companies financing their first project.

Mr Schuitema has held the following directorships of other public companies within the last three years:


> Phoslock Water Solutions Limited

> Electro Optical Systems Limited

IAN BURSTON AM

Non–Executive Director (resigned 31 August 2010)

He has held the following directorships of other public companies within the last three years:


> Fortescue Metals Limited

> Mincor Resources Limited

> African Iron Limited

ELAINE CARR

Executive Director (resigned 27 October 2010)

and

Company Secretary (resigned 27 October 2010)

She has held the following directorships of other public companies within the last three years:


BRIAN MARTIN

Non–Executive Director (resigned 7 March 2011)

He has held the following directorships of other public companies within the last three years:


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Principal Activities

The Company’s principal activities during the year were divided between conducting exploration and evaluation work on existing tenements and seeking out additional exploration tenements. Condor Metals Limited is a Western Australian focused exploration company whose aims are to find and demonstrate the potential of projects to others who have the requisite skills and capacity to develop them. Condor will continue to seek opportunities for acquiring or farming in to new tenements, and to divest or joint venture where there is benefit to shareholders.

Operating Results

The operating loss after income tax of the Company for the year ended 30 June 2011 was $526,984 (2010: loss of $171,134).

Review of Operations

During the year Condor Nickel Limited formally changed its name to Condor Metals Limited to better reflect the Company’s wider focus on iron, manganese and base metals in addition to nickel.

The Condor Board of directors underwent significant change during the year. Mr Laurence Freedman AM joined the board as Chairman and Mr Robert Schuitema joined as a Director and later Company Secretary. Mr Ian Burston AM, Ms Elaine Carr and Dr Brian Martin resigned during the year. The new Board has created a new direction for the Company by appointing Mr John McKinstry as Chief Operating Officer.

The Company’s offices were relocated to new premises. In an effort to keep overheads low the offices are being shared with Carrick Gold Limited. This arrangement will continue until Condor has its own workforce and can justify the additional expense of its own office and support staff. During the year Condor acquired vehicles, a caravan and field equipment to enable it to carry out exploration work efficiently.

The majority of expenditure during the year was carried out on the Kallona iron and manganese prospect in the East Pilbara. An airborne geophysical survey combined with mapping and surface sampling enabled a drilling program to be designed. Following the mandatory approvals and completion of a cultural heritage agreement, drilling commenced in June 2011. Results received subsequent to the end of the year confirmed the presence of manganese, along with consistent iron intersections. These will require further drilling in the 2011/2012 year. The Company continues to explore on the Dingo Range tenements south

east of Wiluna, following up soil sampling which identified copper and gold anomalies.

The Gundocketa iron ore prospect was acquired in March 2010. Soil sampling and mapping showed promising results, but the lack of physical resources prevented follow up work being carried out. That work is now planned to take place in the 2011/2012 year.

Basic tenement maintenance was conducted at the Grey Dam nickel deposit where the Company has a JORC compliant Resource. Future work will be directed at nickel sulphides at depth. The Company applied for and is awaiting the granting of, tenements at Southern Cross. These tenements are considered prospective for both nickel and gold.

The Company continues to seek opportunities for acquiring or farming in to new tenements, and to divest or joint venture where there is benefit to shareholders.

Cash

Condor Metals Limited remains in solid financial condition, with $3.0 million in cash at 30 June 2011 and no debt.

Financial Position

The net assets of the Company were $6,516,857 as at 30 June 2011 (2010: $6,763,841).

Significant Changes in the State of Affairs

There were no significant changes in the state of affairs of the Company occurred during the financial period.

Dividends Paid or Recommended

The directors do not recommend the payment of a dividend and no dividends have been paid or declared since the start of the financial period.

Significant Events after Balance Date

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

Likely Developments and Expected Results

The Company expects to maintain the present status and level of operation and hence there are no likely unwarranted developments in the entity’s operations.

Directors’ Report (Cont’d)

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Environmental Issues

The Company is subject to significant environmental regulation in respect of its exploration activities.

The Company ensures the appropriate standard of environmental care is achieved and, in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the period under review.

Proceedings on Behalf of Company

No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

Indemnification of Officers and Insurance Premiums

The Company has paid premiums to insure the directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the company.

Risk Management

The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that activities are aligned with the risks and opportunities identified by the Board.

The Company believes that it is crucial for all Board members to be a part of this process and, as such, the Board has not established a separate risk management committee.

Remuneration Report (Audited)

This report outlines the remuneration arrangements in place for directors and executives of the Company.

Remuneration Policy

The remuneration policy of Condor Metals Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long–term incentives based on key performance areas affecting the economic entity’s ability to attract and retain the best executives and directors to run and manage the Company.

The remuneration policy setting out the terms and conditions for the executive directors and other senior executives was developed by the Board. All executives receive a base salary (which is based on factors such as ability and experience). The Board reviews executive packages annually by reference to the economic entity’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. The performance of the executive directors is measured against the objective of promoting growth in shareholder value

The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long–term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements.

The board policy is to remunerate non–executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non–executive directors and reviews their remuneration annually based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non–executive directors is subject to approval by shareholders in general meeting (currently $240,000 per annum).F

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Key management personnel service agreements

Details of the key conditions of service agreements for key management personnel are as follows:

Commencement Date

Notice Period Base Salary

Base SalaryTermination Payments Provided *

John McKinstry 31/01/2011 3 months $100,000 none

Wade Johnson 04/04/2011 1 month $65,000 none

* other than statutory entitlements.

There are no other agreements with key management personnel.

Key Management Personnel Remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives.

(a) Key management personnel compensation

2011Short–term

benefitsPost–employment benefits

Name

Cash salary and fees

Non–monetary benefits

Super– annuation

Retirement benefits

Other Total

$ $ $ $ $ $

Directors

Elaine Carr * 19,230 – 1,731 – – 20,961

Brian Martin * 37,500 – 3,375 – 25,000 65,875

Ian Burston 8,424 – – – – 8,424

Laurence Freedman 43,342 – 3,901 – – 47,243

Ross Gillon 50,000 – – – – 50,000

Robert Schuitema 47,853 – 4,307 – – 52,160

Executives

Bevan Jaggard 20,000 – – – – 20,000

John McKinstry 50,010 66,331 – – – 116,341

Wade Johnson 25,000 23,945 – – – 48,945

Totals 301,359 90,276 13,314 – 25,000 429,949

* resigned during the year.


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2010Short–term

benefitsPost–employment benefits

Name

Cash salary and fees

Non–monetary benefits

Super– annuation

Retirement benefits

Others Total

$ $ $ $ $ $

Directors

Frank Carr ** 116,800 – – – 80,000 196,800

Brian Martin 42,500 – – – – 42,500

Ian Burston 12,500 – – – – 12,500

Ross Gillon 6,730 – – – 6,730

Executives

Bevan Jaggard 40,000 – – – 40,000

Totals 218,530 – – – 80,000 298,530

** ceased to be key management personnel on 6 June 2010.

Directors’ Relevant Interests

The relevant interest of each director in the capital of the company at the date of this report is as follows:

Director No of Ordinary SharesNo of Options over

Ordinary Shares

Laurence Freedman 7,137,869 –

Ross Gillon 1,161,000 –

Robert Schuitema 390,000 –

Meetings of Directors

During the financial period, 10 meetings of directors were held. There were 2 audit committee meetings held during the period. Attendances by each director during the period were as follows:

Board Meetings Audit Committee

Number of meetings eligible to

attend

Number attended

Number of meetings eligible to

attend

Number attended

Ian Burston 2 2 * *

Elaine Carr 4 3 1 1

Brian Martin 7 6 2 2

Laurence Freedman 9 9 2 2

Ross Gillon 10 10 2 2

Robert Schuitema 8 8 2 2

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Non–Audit Services

No non–audit services were provided by the entity’s auditor, RSM Bird Cameron Partners, as shown at Note 15.

Auditor’s Independence Declaration

We have obtained an Auditor’s Independence Declaration. Please refer to “Auditor’s Independence Declaration” included on page 48 of the financial statements.

The Report of Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.

Robert Schuitema Director

Dated at Perth this 12th day of September 2011


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The Board of Directors of Condor Metals Limited is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of Condor Metals Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

The following formalises the main corporate governance practices established and in force throughout the financial year to ensure the Board is well equipped to discharge its responsibilities.

Composition of the BoardThe composition of the Board shall be determined in accordance with the following principles and guidelines:

> The Board should consist of at least 3 Directors, increasing where additional expertise in considered desirable in certain areas.

> At least 50% of the Board members should be Non–Executive Directors.

> The Chairman of the Board should be a Non–Executive Director.

> Directors should bring characteristics which allow a mix of qualifications, skills and experience.

> All available information in connection with items to be discussed at a meeting of the Board shall be provided to each Director prior to that meeting.

The Board will review its composition on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board will select appropriate candidates with relevant qualifications, skills and experience. External advisers may be used to assist in such a process. The Board will then appoint the most suitable candidate, who must stand for election at the next general meeting of shareholders.

The primary responsibilities of the Board include:

> The establishment of the long term goals of the Company and strategic plans to achieve those goals;

> The review and adoption of annual budgets for the financial performance of the Company and monitoring those results on quarterly basis. This includes the establishment and monitoring of key performance indicators (both financial and non–financial) for all significant business processes;

> Ensuring the Company has implemented adequate systems of internal control together with appropriate monitoring of compliance activities; and

> The approval of the annual and half–year financial reports.

The terms and conditions of the appointment and retirement of Directors will be set out in a letter of appointment which covers remuneration, expectations, terms, the procedures for dealing with conflicts of interest and the availability of independent professional advice.

The performance of all Directors will be reviewed by the Chairman each year.

Independent professional adviceEach Director will have the right to seek independent professional advice at the Company’s expense.

The prior approval of the Chairman will be required, which will not be unreasonably withheld.

RemunerationThe Board will review the remuneration packages and policies applicable to the Directors and Senior Executives on an annual basis. Remuneration levels will be competitively set to attract the most qualified and experienced Directors and Senior Executives.

Where necessary the Board will obtain independent advice on the appropriateness of remuneration packages.

Audit CommitteeThe Board shall maintain an Audit Committee of at least two Directors. Audit Committee meetings may also be attended, by invitation, by the external auditors. The role of the Committee will be to provide a direct link between the Board and the external auditors.

It will also give the Board additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining the matters for inclusion in the financial statements.

The responsibilities of the Audit Committee include:

> Monitoring compliance with regulatory requirements;

> Improving the quality of the accounting function;

> Reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been identified

Corporate Governance Statement

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appropriate and prompt remedial action is taken by management; and

> Liaising with the external auditors and ensuring that the annual audit and half–year review are conducted in an effective manner.

The Audit Committee will review the performance of the external auditors on an annual basis. Nomination of auditors will be at the discretion of the Audit Committee.

Business riskThe Board will monitor and receive advice on areas of operational and financial risk, and consider strategies for appropriate risk management arrangements.

Specific areas of risk identified initially and regularly considered at Board Meetings include risks associated with business and investment, new and rapidly evolving markets, technological change, competition and business and strategic alliances, the environment and continuous disclosure obligations.

Ethical standardsThe Board’s policy is for the Directors and Senior Management to conduct themselves with the highest ethical standards. All Directors and employees will be expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

Trading in Condor Metals Limited SecuritiesThe Board’s policy with regard to trading in the Company’s securities is that prior to any transaction, Directors and officers must obtain clearance from the Chairman to ensure that no transactions are made where the Director or officer is in possession of price sensitive information.

Authority limitsThe Board shall annually review the level of authority limits for the Managing Director and Senior Management. That review shall coincide with the approval of the annual budgets.

ConfidentialityThe Board members are required to ensure that all Company business is kept confidential by each Director and staff in his control.

Dealing with conflicts of interestA potential conflict of interest may arise from time to time.

If a conflict or potential conflict of interest arises, full disclosure should be made to the Board as soon as the Director becomes aware of the conflict or potential conflict. The Board shall manage the conflict In such a way that the interests of the Company as a whole are safeguarded.

A conflict will arise:

> When the private or other business interests of Directors and officers conflict directly or indirectly with their obligations to the Company; and

> When benefits (including gifts or entertainment) are received from a person doing business which could be seen by others as creating an obligation to someone other than the Company.

Directors and officers shall not act in a way which may cause others to question their loyalty to the Company.

Corporate Governance Statement (Cont’d)

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ASX PRINCIPLE STATUS REFERENCE/COMMENT

Principle 1: Lay solid foundations for management and oversight.

1.1 Formalise and disclose the functions reserved to the board and those delegated to management.

A The Company has formalised and disclosed the functions reserved to the Board and those delegated to management. The Company has a small Board consisting of three Directors, two are Non–Executive.

The full Board currently meets every 4–6 weeks. In addition, strategy meetings and any extraordinary meetings are held at such other times as may be necessary to address any specific significant matters that may arise.

Principle 2: Structure the Board to add value

2.1 A majority of Board members should be independent directors.

A All of the Directors are Non–Executives.

2.2 The chairperson should be an independent director. A The Company has a Non–Executives Chairman.

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

A The positions of Chairman and Managing Director are not held by the same person.

2.4 The Board should establish a nomination committee.

A The Board has a Nomination Committee. For the time being, all Directors are members of the Committee.

2.5 The company should disclose the process for evaluating the performance of the board.

A The performance of all Directors will be reviewed by the Chairman each year.

2.6 Provide the information indicated in Guide to reporting on Principle 2.

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 making

3.1 Establish a Code of Conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to:

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

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

Company has formulated a Code of Conduct which can be viewed on the Company’s website.

The board continues to review existing procedures over time to ensure adequate processes are in place.

All directors, employees and contractors are expected to act with the utmost integrity and objectivity in their dealings with other parties, striving at all times to enhance the reputation and performance of the company.

3.2 Establish a diversity policy with measurable objectives and monitor through an annual assessment process.

A The Company has 5 employees (3 male, 2 female) as at the date of this report. The Board is committed to diversity of its employees as the company grows in size and has a larger employment base.

3.3 Disclose the policy and measurable objectives concerning gender diversity.

A The Company will take gender diversity into consideration as it grows in size and has a larger employment base.

3.4 The Company should disclose in the annual report the proportion of women employed in the organisation , in senior roles and on the Board.

A 40% of the Company’s employees are females. At this stage the Board has no female directors.

3.5 Provide the information indicated in guide to reporting on Principle 3.

A Website and annual report.

Legend: A = Adopted

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Principle 4: Safeguard integrity in financial reporting

4.1 The Board should establish an audit committee A The Company has established an Audit Committee.

4 2 Structure the audit committee so that it consist of:

– Only Non–Executive Directors

– A majority of independent directors

– An independent chairperson who is not the chairperson of the Board

– At least three members.

A The Audit Committee currently consists of three Non–Executive Directors. The charter for this Committee is disclosed on the Company’s website.

The chair of the Audit Committee is not the Chairman of the Board. All Audit Committee members are financially literate, and the chair is a qualified accountant.

4 3 The audit committee should have a formal charter A The Audit Committee has a formal charter.


A A copy of the charter is on the Company’s website.

Principle 5: Make timely and balanced disclosure

5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.

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 Company publishes and releases the ASX quarterly reports on cash flow as well as annual and half–yearly results.

Principle 6: Respect the rights of shareholders

6.1 Design and disclose a communications strategy to promote effectiveness communication with shareholders and encourage effective participation at general meetings.

A In line with adherence to continuous disclosure requirements of ASX, all shareholders are kept informed of material developments affecting the Company.

Shareholders are encouraged to exercise their right to vote, either by attending meetings, or by lodging a proxy. The Company’s auditors attend all shareholders’ meetings.


A This disclosure is through regular shareholder communications including the Annual Report, Quarterly Reports, the Company website and this distribution of specific releases covering major transactions or events, as they arise.

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Principle 7: Recognise and manage risk

7.1 The Board or appropriate board committee should establish policies on risk oversight and management.

A This disclosure is through regular shareholder communications including the Annual Report, Quarterly Reports, the Company website and this distribution of specific releases covering major transactions or events, as they arise.

7.2 The Board should require management to design and implement the risk management and internal control system.

A 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.

A Determined areas of risk which are regularly considered include:

– Performance and funding of commercial activities

– Budget control and asset protection

– Compliance with government laws and regulations

– Safety and the environment

– Continuous disclosure obligations.

7.3 The board should disclose that it has received assurance from the CEO/CFO in accordance with section 295A of the Corporations Act 2001.

A Disclosure in directors’ report.

7.4 Provide information indicated in Guide to reporting on Principle 7.

A Website and reports from management.

Principle 8: Remunerate fairly and responsibly

8.1 The Board should establish a Remuneration Committee.

A The Board has established a Remuneration Committee.

8.2 The Remuneration Committee should be structured such that it:

i) Contains majority of independent directors

ii) Is chaired by an independent director

iii) Has at least three members

A The Remuneration Committee consists of 3 members, has majority independent directors and is chaired by an independent director.

8.3 Clearly distinguish the structure of non executives directors’ remuneration from that of executives.

A The Company discloses remuneration related information in its Annual Report to shareholders in accordance with the Corporations Act 2001.

Remuneration levels are determined by the board on an individual basis, the size of the Company making individual assessment more appropriate than formal remuneration policies.

The policy disclosed in the remuneration report distinguishes between Non–Executive Directors and Senior Managers.

8.4 Provide information indicated in Guide to reporting on Principle 8.

A Website and annual report.

Legend: A = Adopted

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Community Standards

Condor understands that the development of successful resource projects demands a proactive recognition of the breadth of stakeholder interest in these projects.

The Company is committed to the protection of the environment and to the ensure health and safety of its employees, customers, contractors and communities where it operates and in all its business activities.

The Company is dedicated to comply with all applicable laws and regulations and to work with government and other stakeholders in policy development and implementation.

Traditional Owners

Condor has engaged the assistance of Aboriginal parties representing the traditional owners of the land on which it operates.

An extensive Cultural Heritage Management Plan will be developed in consultation with the traditional owners as the Company’s various projects are developed toward production.

Condor commits to ongoing communication and consultation with traditional owners in all areas where it operates.

Landholders

Condor has a commitment to work constructively and proactively with landholders. The Company’s aim is to minimise the impact on their livelihood and lifestyle.

Condor will continue to conduct its operations with the intention of developing long and collaborative relationships with landholders.

Health and Safety

Condor undertakes its operations with the philosophy that occupational health and safety is paramount. The Company aims to continually improve its processes and performances.

Promoting and ensuring a culture in which all employees and contractors fulfil their individual responsibilities in implementing the Health and Safety policy and meeting the regulatory standards remains a key focus.


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Financial Report

Statement of Comprehensive Income for the year ended 30 June 2011

Restated

2011 2010

Note $ $

Revenue 2 202,128 196,482

Management and directors’ fees (309,749) (298,530)

Wages and salaries (130,842) –

Administrative expenses (103,236) (1,810)

Advertising and promotional costs (83,795) (6,500)

Professional fees (65,802) (37,196)

Listing and share registry expenses (33,074) (23,580)

Depreciation (2,614) –

Loss before income tax (526,984) (171,134)

Income tax expense 3 – –

Loss after income tax (526,984) (171,134)

Other comprehensive income – –

Total comprehensive loss (526,984) (171,134)

Basic and diluted loss per share (cents) 12 (0.82) (0 26)

The accompanying notes form an integral part of these financial statements.

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Statement of Financial Position for the year ended 30 June 2011

2011 2010

Note $ $

ASSETS

Current Assets

Cash and cash equivalents 13(b) 3,041,634 4,373,736

Trade and other receivables 5 136,144 9,989

Total Current Assets 3,177,778 4,383,725

Non–Current Assets

Trade and other receivables 5 214,602 –

Plant and equipment 6 50,325 –

Exploration, evaluation and development expenditure 7 3,284,387 2,548,977

Total Non–Current Assets 3,549,314 2,548,977

TOTAL ASSETS 6,727,092 6,932,702

LIABILITIES

Current Liabilities

Trade and other payables 8 (210,235) (168,861)

TOTAL LIABILITIES (210,235) (168,861)

NET ASSETS 6,516,857 6,763,841

EQUITY

Contributed equity 9 7,275,497 6,995,497

Accumulated loss (758,640) (231,656)

TOTAL EQUITY 6,516,857 6,763,841


Financial Report (Cont’d)

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Statement of Changes In Equity for the year ended 30 June 2011

Contributed Equity Accumulated Profit/(Losses)

Total Equity

$ $ $

2010

Balance at 1 July 2008 7,004,712 (60,522) 6,944,190

Total comprehensive loss for the year – (171,134) (171,134)

Transaction costs from issue of shares in prior year (9,215) – (9,215)

Balance at 30 June 2010 6,995,497 (231,656) 6,763,841

2011

Balance at 1 July 2010 6,995,497 (231,656) 6,763,841

Total comprehensive loss for the year – (526,984) (526,984)

Shares issued during the year 280,000 – 280,000

Balance at 30 June 2011 7,275,497 (758,640) 6,516,857


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Statement of Cash Flows for the year ended 30 June 2011

2011 2010

Note $ $

Cash flows from Operating Activities

Payments to suppliers and employees (745,917) (262,928)

Interest received 202,164 196,482

Net cash used in operating activities 13 (a) (543,753) (66,446)

Cash flows from Investing Activities

Payments for exploration expenditures (735,410) (295,200)

Payments for plant and equipment (52,939) –

Net cash used in investing activities (788,349) (295,200)

Cash flows from Financing Activities

Transaction costs for issue of shares – (9,215)

Net cash used in financing activities – (9,215)

Net decrease in cash held (1,332,102) (370,861)

Cash and cash equivalents at the beginning of the financial period 4,373,736 4,744,597

Cash and cash equivalents at the end of the financial year 13(b) 3,041,634 4,373,736



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Note 1: Statement of Significant Accounting Policies

The financial report covers the Company of Condor Metals Limited, a listed public company incorporated and domiciled in Australia.

The financial report was authorised for issue on 12 September 2011 by the Board of Directors.

Basis of Preparation

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

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

The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non–current assets, financial assets and financial liabilities.

Accounting policies

a) Revenue recognition

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

b) Income tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit of loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or loss when the tax related to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

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

Notes to the Financial Statements for the year ended 30 June 2011

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c) Mining Tenements and Exploration and Development Expenditure

Mining tenements are carried at cost, less accumulated impairment losses.

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

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

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

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

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

d) Financial Instruments

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and their fair value of consideration paid, including the transfer of non–cash assets or liabilities assumed, is recognised in profit or loss.

Classification and Subsequent Measurement

i. Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designed as such to avoid an accounting mismatch or to enable performance evaluation where a group or financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.

ii. Loans and receivables

Loans and receivables are non–derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.

Notes to the Financial Statements for the year ended 30 June 2011 Cont’d


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iii. Held–to–maturity investments

Held–to–maturity investments are non–derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.

iv. Available–for–sale financial assets

Available–for–sale financial assets are non–derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

v. Financial Liabilities

Non–derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment of Assets

At each reporting date, the Company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash–generating unit to which the asset belongs.

e) Impairment assets

At each reporting date, the entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

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 a 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.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset 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 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 prior years. 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.

f) Plant and Equipment

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


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Plant and equipment

Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(e) for details of impairment).

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

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

Depreciation

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

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

Class of fixed asset Depreciation rate

Plant and equipment 20–33%

Motor vehicles 20–33%

IT equipment 33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

g) Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits held at call with banks.

h) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

i) Contributed Equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.



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j) Earnings Per Share

(i) Basic Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted Earnings per Share

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

k) Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the economic entity, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight–line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

l) Employee benefits

Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on–costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

m) Critical accounting estimates and other accounting judgements

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

The Company is of the view that there are no critical accounting estimates and judgements in this financial report, other than accounting estimates and judgements in relation to the carrying value of mineral exploration expenditure.

Key judgements

Deferred exploration and evaluation expenditure

Deferred exploration and evaluation expenditure

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at reporting date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, refer to the accounting policy stated in Note 1(c).

n) Comparative Figures

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

Note 2: Revenue

2011 2010

$ $

Interest received 202,128 196,482


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Note 3: Income Tax

(a) Income tax recognised in profit

No income tax is payable by the Company as it recorded losses for income tax purposes for the year.

(b) Numerical reconciliation between income tax expense and the loss before income tax

2011 2010

$ $

Loss before income tax (526,984) (171,134)

Income tax at 30% 158,095 51,340

Tax effect of:

Deferred tax asset not recognised (158,095) (51,340)

Income tax expense – –

(c) Unrecognised deferred tax balances

Tax losses available to members of the group – revenue 4,354,555 3,055,748

Potential tax benefit at 30% 1,306,366 916,275

A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the probability criteria disclosed in Note 1(b) is not satisfied and such benefit will only be available if the conditions of deductibility, also disclosed in Note 1(b), are satisfied.

Note 4: Dividends

No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.

Note 5: Trade and other receivables

Current

Interest receivable 58,685 –

Other receivables 40,000 –

Goods and services tax 33,034 9,989

Prepayments 4,425 –

136,144 9,989

Non–current

Employee share loans 214,602 –

Total trade and other receivables 350,746 9,989

Employee share loans consist of interest–free loans given to senior executives in order to purchase shares in the Company. The loans have been measured at their discounted value based on market lending rates to fair value according to the loan term. For more information on the terms and conditions of the employee share loans refer to Note 11.



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Note 6: Exploration and evaluation expenditure

Plant and equipment

Motor vehicles

IT equipment

Total

$ $ $ $

Written down value at the beginning of the year – – – –

Additions 10,656 40,026 2,257 52,939

Depreciation (545) (2,017) (52) (2,614)

Written down value at 30 June 2011 10,111 38,009 2,205 50,325

At cost 10,656 40,026 2,257 52,939

Accumulated depreciation (545) (2,017) (52) (2,614)

Balance at 30 June 2011 10,111 38,009 2,205 50,325

Note 7: Exploration and evaluation expenditure

Costs carried forward in respect of areas of interest in the following phases:

Exploration and evaluation phase – at cost

Balance at beginning of year 2,548,977 2,253,777

Expenditure Incurred 735,410 295,200

Total deferred exploration and evaluation expenditure 3,284,387 2,548,977

Note 8: Payables (Current)

Trade and other creditors 210,235 168,861

Note 9: Contributed Equity

a) Paid up capital

64,000,000 ordinary shares (30 June 2010: 64,000,000 ordinary shares) 7,275,497 6,995,497

b) Movements in shares on issue

No of Shares Paid up Capital

$

Balance at 1 July 2009 64,000,000 7,004,712

Transaction costs from issue of shares in prior year – (9,215)

Balance at 30 June 2010 64,000,000 6,995,497

Shares issued during the year 1,400,000 280,000

Balance at 30 June 2011 65,400,000 7,275,497

c) Movements in options on issue

There are no options issued and outstanding options over unissued ordinary shares during the year.

d) Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.


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Note 10: Interests of Key Management Personnel

a) Key management personnel compensation

Refer to the Remuneration Report contained in the Director’s Report for details of the remuneration paid to each member of the Company’s key management personnel for the year ended 30 June 2011.

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

2011 2010

$ $

Short–term employee benefits 391,635 298,530

Other payments 25,000 –

Post–employment benefits 13,314 –

429,949 298,530

b) Key management personnel shareholdings

The number of ordinary shares in Condor Metals Limited held by each key management personnel of the Company during the financial year is as follows:

Balance 1 July 2010

Granted as Remuneration

Options Exercised Net Change OtherBalance

30 June 2011

Directors

Ian Burston * – – – – –

Elaine Carr * 27,400 – – (27,400) –

Ross Gillon 1,111,000 – – 50,000 1,161,000

Brian Martin * 182,000 – – (182,000) –

Laurence Freedman

– – – 7,137,869 7,137,869

Robert Schuitema – – – 390,000 390,000

Executives

Bevan Jaggard * 218,800 – – (218,800) –

John McKinstry – – 1,000,000 1,000,000

Wade Johnson – – 400,000 400,000

Totals 1,539,200 – – 8,549,669 10,088,869

* ceased to be key management personnel during the year

Balance 1 July 2009

Granted as Remuneration

Options Exercised Net Change OtherBalance

30 June 2009

Directors

Ian Burston – – – – –

Elaine Carr – – – 27,400 27,400

Ross Gillon – – – 1,111,000 1,111,000

Frank Carr ** 12,000,000 – – 800,000 12,800,000

Brian Martin 182,000 – – – 182,000

Executives

Bevan Jaggard 218,800 – – – 218,800

Totals 12,400,800 – – 1,938,400 14,339,200

** ceased to be key management personnel on 6 June 2010



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Note 12: Related party transactions

Other transactions and balances with directors and other key management personnel.

Service agreement

During the financial year, $40,000 (2010: $80,000) was paid to Noble Pacific Pty Ltd.

Investor relations services

The Company has engaged Radar Investor Relations Pty Ltd, a director–related entity, to perform investor relations activities on behalf of the Company. The agreement is renewable by negotiation and mutual consent. The total value of services provided in the current year was $54,303 (2010: nil). The services were provided on an arm’s length basis.

Interest free employee share loans

During the year, the Company issued two unsecured interest–free loans to two executives in order to fund a purchase of the Company’s shares on behalf of these executives. The loan term is for three years and 50% of the shares held must be kept in escrow for a minimum of two years; the other 50% for a minimum of three years. The loans are repayable in full should the executive cease employment with the Company.

Note 12: Loss Per Share

(a) Basic Earnings Per Share

2011 2010

$ $

Loss used in calculating basic earnings per share (526,984) (171,134)

Weighted average number of ordinary shares on issue during the year used as the denominator in calculating basic loss per share 64,482,740 64,000,000

Basic loss per share (cents) (0.82) (0.26)

b) Diluted profit/(loss) Per Share

Diluted profit/(loss) per share is the same as basic profit/(loss) per share as there are no potential ordinary shares that are dilutive.

Note 13: Cash Flow Information

a) Reconciliation of the net loss after income tax to the net cash flows from operating activities

Net loss for the year (526,984) (171,134)

Depreciation 2,614 –

Changes in assets and liabilities

Decrease in trade and other receivables (60,757) (5,186)

Decrease in trade and other creditors 41,374 109,874

Net cash outflow from operating activities (543,753) (66,446)

b) Reconciliation of cash

Cash balance comprises:

– cash assets 3,041,634 4,373,736

(c) Non–cash financing activities

During the year, the Company issued shares to executives funded by an interest free share loan. The value of shares issued was $280,000 (2010: nil). For further details of the employee share loans, refer to Note 11.


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Note 14: Expenditure Commitments

The Company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets in which it has an interest. Outstanding exploration commitments for the next twelve months are as follows:

2011 2010

$ $

Not later than one year 349,863 519,200

Between one and five years 454,367 –

804,230 519,200

The Company has certain operating lease commitments for annual rentals for mineral exploration assets in which it has an interest. Non–cancellable operating leases contracted for but not recognised in the financial statements:

Not later than one year 28,367 –

Between one and five years 40,737 –

69,104 –

Note 15: Auditor’s Remuneration

Statutory audit

Audit and review of financial statements 23,375 15,675

Note 16: Segment Information

The Company has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Company operates as a single segment which is mineral exploration within Australia.

The Company is domiciled in Australia. All revenue from external parties is generated from Australia only. Segment revenues are allocated based on the country in which the party is located.

Operating revenues of approximately Nil (2010 – Nil) are derived from a single external party.

All the assets are located in Australia only. Segment assets are allocated to countries based on where the assets are located.

Note 17: Financial risk management objectives and policies

a) Interest Rate Risk

The Company’s exposure to interest rate risk which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below:

Weighted AverageFloating

Interest RateFixed Interest Maturing

Fixed Interest Maturing

Interest Rate 1 Year or Less 1 to 5 Years

(%) $ $ $

30 June 2011

Cash assets 5.31 541,634 2,500,000 –

30 June 2010

Cash assets 5.35 4,373,736 – –



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Interest rate sensitivity analysis

At 30 June 2011, if interest rates had changed by 50 basis points during the entire year with all other variables held constant, profit for the year and equity would have been $16,681 higher/lower (2010: $9,824), mainly as a result of higher/lower interest income from cash and cash equivalents.

A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

b) Credit Risk

The maximum exposure to credit risk at reporting date on financial assets of the Company is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements.

c) Commodity Price Risk

The Company is not exposed to commodity price risk as the operations of the Company are not yet at the production stage.

d) Liquidity Risk

The Company manages liquidity risk by monitoring forecast cash flows.

The table below analyses the entity’s financial liabilities into relevant maturity groupings based on the remaining period from the statement of financial position date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, these balances will not necessarily agree with the amounts disclosed in the statement of financial position.

Less than 6 months

6 months to 1 year

1 to 5 years

Total

$ $ $ $

30 June 2011 Financial liabilities due for payment

Trade and other payables (210,235) – – (210,235)

(210,235) – – (210,235)

Financial assets – cash flows realisable

Cash assets 3,041,634 – – 3,041,634

Trade and other receivable 136,144 – 214,602 350,746

3,177,778 - 214,602 3,392,380

Net (outflow)/inflow on financial instruments 2,967,543 - 214,602 3,182,145

30 June 2010 Financial liabilities due for payment

Trade and other payables (168,861) - - (168,861)

(168,861) - - (168,861)

Financial assets – cash flows realisable

Cash assets 4,373,736 - - 4,373,736

Trade and other receivable 9,989 - - 9,989

4,383,725 - - 4,383,725

Net (outflow)/inflow on financial instruments 4,214,864 - - 4,214,864


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e) Foreign Exchange Risk

The Company is not exposed to foreign exchange risk as all transactions of the Company are in Australian dollars.

f) Net Fair Value of Financial Assets and Liabilities

The carrying amounts of financial instruments included in the statement of financial position approximate their fair values due to their short terms of maturity.

Note 18: Events Subsequent to Reporting Date

There were no events of significance subsequent to 30 June 2011.

Note 19: Contingent Liabilities

There are no contingent liabilities at reporting date.

Note 20 New accounting standards for application in future periods

In the current year, the Company 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. The adoption of these new and revised Standards and Interpretations has not resulted in a significant or material change to the Company’s accounting policies.

New standards issued but not yet effective

At the date of this financial report the following standards, which may impact the entity in the period of initial application, have been issued but are not yet effective:

Reference Title SummaryApplication date

(financial years beginning)Expected

Impact

AASB 9 Financial Instruments

Replaces the requirements of AASB 139 for the classification and measurement of financial assets. This is the result of the first part of Phase 1 of the IASB’s project to replace IAS 39.

1 January 2013No expected

impact on the entity

AASB 124 Related Party Disclosures

Revised standard. The definition of a related party is simplified to clarify its intended meaning and eliminate inconsistencies from the application of the definition

1 January 2011Disclosure

only

The Company has decided against early adoption of these standards.

Note 21: Company Details

The principal place of business of the Company is: Condor Metals Limited 12 St Georges Terrace Perth WA 6000 Australia



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The directors of the company declare that:

1. the financial statements and notes, as set out on pages 16 to 34, are in accordance with the Corporations Act 2001 and:

a. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and

b. give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the company;

2. the directors have been given the declarations required by s295A of the Corporations Act 2001 that:

a. the financial records of the company for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001;

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

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

3. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

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

On behalf of the Directors:

Robert Schuitema Director

Dated at Perth this 12th day of September 2011

Directors’ Declaration

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RSM Bird Cameron Partners 8 St Georges Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9111 www.rsmi.com au

Liability limited by a scheme approved under Professional Standards Legislation

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036

RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms. RSM International is the name given to a network of independent accounting and consulting firms each of which practices in its own right. RSM International does not exist in any jurisdiction as a separate legal entity.

AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Condor Metals Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

RSM BIRD CAMERON PARTNERS Chartered Accountants

Perth, WA DAVID WALL Dated: 12 September 2011 Partner

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RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au

Liability limited by a scheme approved under Professional Standards Legislation

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036

RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms. RSM International is the name given to a network of independent accounting and consulting firms each of which practices in its own right. RSM International does not exist in any jurisdiction as a separate legal entity.

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF CONDOR METALS LIMITED

Report on the Financial Report We have audited the accompanying financial report of Condor Metals Limited (“the company”), which comprises the statement of financial position as at 30 June 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors' declaration. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. F

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Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Condor Metals Limited, would be in the same terms if given to the directors as at the time of this auditor's report. Opinion In our opinion: (a) the financial report of Condor Metals Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company's financial position as at 30 June 2011 and of its performance for the year ended on that date; and

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

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of Condor Metals Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001. RSM BIRD CAMERON PARTNERS Chartered Accountants Perth, WA D J WALL Dated: 12 September 2011 Partner F

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Shareholder InformationThe shareholder information set our below was applicable as at October 2011.

A. Distribution of equity securities

Analysis of number of equity holders by size of holding:

Spread of Holdings Number of Holders Number of Units % of Total Issue Capital

1 to 1,000 131 67,533 0.103%

1,001 to 5,000 81 226,320 0.346%

5,001 to 10,000 88 804,951 1.231%

10,001 to 100,000 247 8,746,454 13.374%

100,001 to 999,999,999,999 53 55,554,742 84.946%

Total 600 65,400,000 100.000%

No. of shareholders holding less than a marketable parcel of shares is 152 (1,818 shares).

B. Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest quoted equity security holders are listed below:

Rank Shareholder Total Units % Issue Capital

1 Mrs Susan Carr 12,800,000 19.572%

2 Chihong International Mining Ltd 9,749,000 14.907%

3 Link 405 Pty Ltd 6,897,869 10.547%

4 Carrick Gold Limited 5,600,037 8.563%

5 Mr Josip Horvat 2,500,000 3.823%

6 Mr Dennis Hawtin & Mrs Rosemary Hawtin 2,000,000 3.058%

7 Mr Denis John Reynolds 1,200,000 1.835%

8 Lawstar Pty Ltd 1,148,000 1.755%

9 Agens Pty Ltd 1,039,579 1.590%

10 McKinstry Pty Ltd 1,000,000 1.529%

11 Premar Capital Nominees Pty Ltd 969,657 1.483%

12 Hawthorne Park Investments Pty Ltd 760,000 1.162%

13 Mr Ross Gillon 750,000 1.147%

14 Creekwood Nominees Pty Ltd 666,666 1.019%

15 Mr Bevan Jaggard & Mrs Sheila Jaggard 629,800 0.963%

16 Mr Adonis Kiritsopoulos & Ms Jennifer Ford 500,000 0.765%

17 Super Robin Pty Ltd 482,091 0.737%

18 Kurnkal Pty Ltd 456,260 0.698%

19 Mrs Jennifer Johnson 400,000 0.612%

20 Mr Peter Neumann & Mrs Carolyn Neumann 400,000 0.612%

Total 49,948,959 76.375%

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C. Substantial shareholders

Substantial holders in the Company are set out below:

Rank Shareholder Total Units % Issue Capital

1 Mrs Susan Carr 12,800,000 19.572%

2 Chihong International Mining Ltd 9,749,000 14.907%

3 Link 405 Pty Ltd 6,897,869 10.547%

4 Carrick Gold Limited 5,600,037 8.563%

Shareholder Information (Cont’d)

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Condor Metals Limited

Corporate Office, 12 St Georges Terrace,

PERTH, WA, AUSTRALIA, 6000

Telephone (08) 9225 5544 Fax (08) 9225 5533

Web www.condornickel.com.au

Directors Mr Laurence Freedman AM

Mr Ross Gillon

Mr Robert Schuitema

Non Executive Chairman

Non Executive Director

Non Executive Director

Company Secretary Mr Robert Schuitema

Registered Office 12 St Georges Terrace Perth WA 6000

Corporate Office 12 St Georges TerracePerth WA 6000

Mailing Address GPO Box 2567 Perth WA 6001

Share Registry Advanced Share Registry Services 150 Stirling Highway Perth WA 6009

Auditor RSM Bird Cameron Partners 8 St Georges Terrace Perth WA 6000

Solicitor Lawton Gillon Level 11 16 St George’s Terrace Perth WA 6000

Corporate Directory

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ANNUAL REPORT 2011

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Documents

For personal use only - ASX · 2011-10-21 · The Company holds a diversified portfolio of highly prospective tenements for iron ore, nickel and other base metals in three main projects