2011annual report - asx2011/10/31 · annual report for the year ended 30 june 2011 3 chairman’s...

AFRICAN IRON LTD

2011ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE

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Corporate DireCtory

Chairman’s letter

operations reVieW

DireCtors’ report

auDitor’s inDepenDenCe DeClaration

ConsoliDateD statement of ComprehensiVe inCome

ConsoliDateD statement of finanCial position

ConsoliDateD statement of Cash floWs

ConsoliDateD statement of Changes in equity

notes to the finanCial statements

DireCtors’ DeClaration

inDepenDent auDitor’s report

Corporate goVernanCe statement

asX aDDitional information

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African Iron Limited(formerly Stirling Minerals Limited)

ABN 24 123 972 814

Annual ReportFor The Year Ended

30 June 2011

CONTENTS

Annual Report for the Year Ended 30 June 2011 1

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REGISTERED OFFICEDIRECTORS

non eXeCutiVe Chairman Dr Ian Burston

non eXeCutiVe DireCtorMr Antony Sage

non eXeCutiVe DireCtorMr Joe Ariti

non eXeCutiVe DireCtor The Hon. John Moore AO

AUDITORS

Bentleys

Level 1, 12 Kings Park Road, West Perth, WA 6005

SOLICITORS

steinepreis paganin

Level 4, 16 Milligan Street, Perth WA 6000

WEbSITE

www.africanironlimited.com

COmpANy SECRETARy

Ms Claire Tolcon

bANKERS

hsBC Bank australia limiteD88 - 190 St Georges Terrace, Perth, WA 6000

ShARE REGISRTy

Computershare inVestor serViCes pty limiteD

GPO Box 2975

Melbourne, VIC 3001

T: 1300 85 05 05 (Aus)

T: +61 3 9415 4000 (Overseas)

STOCK ExChANGE

australian seCurities eXChange limiteD

Exchange Plaza

2 The Esplanade, Perth WA 6000

asX Code

AKI - Fully paid ordinary shares AKIO - Listed options

Level 1, 2 Ord Street, West Perth WA 6005

2 African Iron Limited and its controlled entities

AFRICAN IRON LTDCORpORATE DIRECTORyF

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Dear Shareholders,

It is with great pleasure that I write to you as Chairman of our Company, African Iron Limited (“African Iron”), which in the past ten months, since relisting on ASX, has rapidly advanced the Mayoko Iron Ore Project in the Republic of Congo, West Africa (“Mayoko”).

In my view the story of African Iron can be succinctly summed up in three simple, yet important, phrases; quality partnerships, quality project and quality people.

Firstly, let me talk to you about quality partnerships. Our Company is firmly committed to building and maintaining proactive relationships with the key communities in which it operates, from the Ministerial, local government and infrastructure representatives in the capital Brazzaville, to the various communities that are in the immediate vicinity of our key project, Mayoko. These relationships are very important to everyone involved in the Company and pleasingly for all involved centre on a willingness of all parties working together to ensure the successful delivery of a project that benefits all key stakeholders.

As a Company, we also work hard building and maintaining other important partnerships, from our committed drilling contractors and other key technical advisors, who will play a major role in the success of Mayoko’s development, to our investors spread throughout the world who without their support we would not be a Company at all.

Partners are vital to our success and we will continually recognise and promote these wherever possible.

Secondly, I would like to convey to you the quality of Mayoko. I recognise it is hard as an investor to truly understand this project, given you are unable to “walk the ground and kick the rocks”, in essence you put your trust in the board and management to ensure your interests are protected and enhanced.

Mayoko , in which we recently lifted our holding from 80% to 92%, represents a near term direct shipping ore (“DSO”) development opportunity in the emerging iron ore province of West Africa. It is steadily being developed into a world class asset.

Mayoko has excellent infrastructure access with an underutilised, heavy haulage railway, in which African Iron has secured access, passing within 2km of the main prospect at Mt Lekoumou and terminating at the port of Pointe-Noire on the Atlantic coast. The Company’s objective is to develop an initial 5Mtpa DSO mining operation at Mayoko by mid-2013 leveraging off the project’s proximity to existing rail and port infrastructure.

Lastly, the other key aspect of your Company has been the attraction and retention of quality people to its operational and executive ranks.

We have spent considerable time as a Company ensuring we have the right people in place (both technically and corporately) to ensure our project is successfully developed in a timely fashion. Two of the most significant appointments the board has made in recent times have been that of the appointment of the Hon. John Moore AO to the board of directors, as an independent Non-Executive Director and Simon Youds as Chief Executive Officer.

The appointment of Mr Moore to the board of directors strengthened the independence of the board whilst providing additional capital markets and commercial skill sets.

Simon brings a wealth of general management and technical capabilities to the Company, having most recently worked as Managing Director Australia of unlisted manganese and chromite producer, Consolidated Minerals Limited. He has extensive experience in Africa and is someone with a strong track record of taking projects from development and into production. The board is pleased to have Simon as CEO and we believe, together with the other senior members of the executive, he will play a pivotal role in ensuring Mayoko enters production in 2013 as planned.

As your Chairman, I am supremely confident the quality partnerships we have built and will continue to maintain, together with the world-class team we are assembling, will ensure our Mayoko project continues to advance towards production.

In my view we have all the necessary ingredients to ensure success and I thank you for your support and look forward to updating you on our success over the coming 18 months.

Yours faithfully

Ian Burston Chairman


AFRICAN IRON LTDChAIRmAN’S LETTERF

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hIGhLIGhTS• Acquired an additional 12% equity in the Mayoko iron ore project increasing the Company’s ownership to 92%;

• Commenced a 30,000 metre resource definition drilling program, and announced the first two batches of assay results;

• Renewed the Mayoko exploration licence (Mayoko-Lekoumou Exploration Permit) for a further two (2) years until April 2013;

• Completed an air borne geophysical survey over the remaining 780km2 of the Mayoko exploration licence, which resulted

in an 80% increase in the exploration target size to 1.6-2.6 billion tonnes at 30-65% Fe1;

• Commenced various infrastructure studies around developing a transport solution for the export of iron ore from the Mayoko project;

• Engaged with Chemin de Fer Congo Ocean (rail operator) and the Ministry of Transport around progressing the Company’s rail access and cooperation Memorandum of Understanding toward a formal rail access agreement to enable the transport of 5 million tonnes per annum of iron ore;

• Expanded the Company’s landholding by 94% to 1,944km2 with the addition of the 944km2 Ngoubou-Ngoubou Authority to Prospect; and

• Appointment of capable and competent in-country executive management, and the establishment of office, communications and other support infrastructure.

The past 10 months since the Company’s re-positioning as an iron ore development company and re-listing on the ASX in mid-January 2011, has seen significant progress made toward building a 5 million tonne per annum iron ore business based on developing its 92% owned Mayoko direct shipping iron ore project, located in the Republic of Congo (“RoC”), central West Africa (“Mayoko” or “Mayoko Project”).

At a strategic level, the Company was able to successfully increase its ownership of the Mayoko Project from 80 to 92%. This was considered important to achieve as early as possible to ensure the Company did not pay at a later date for the value it is creating through sole funding, and execution, of exploration and evaluation activities.

The key to developing our iron ore business is the definition of a larger JORC compliant iron ore mineral resource at the Mayoko Project. The project has an existing JORC compliant Inferred Mineral Resource of 33 million tonnes at 56% Fe of supergene direct shipping hematite based on shallow drilling completed in 1974-1975 by earlier explorers.

To enable the definition of a larger JORC complaint resource to underwrite an iron ore business, the Company has committed significant financial resources to a 30,000 metre resource definition program (“Resource Definition Program”). The Resource Definition Program commenced within six weeks of the Company re-listing on ASX. This was made possible through an arrangement with one of the Company’s drilling contractors, Partners Drilling International, whereby three drill rigs had been retained at Mayoko following the completion of the 2010 drilling program. The Company subsequently engaged a second drilling contractor increasing the at-project rig fleet to 5, with the objective of accelerating the Resource Definition Program.

The first two batches of drill assay results were subsequently announced in August and October 2011 respectively, and confirmed the average thickness (25-30 metres) and grade (55-58% Fe) of the overlying DSO, and average thickness (40-50 metres) and grade (40-45% Fe) of the underlying beneficiable DSO (“bDSO”). bDSO will require an additional mineral processing step to DSO crushing and screening, most likely dense media separation, to produce a marketable fines product.

Drill samples are assayed at the internationally accredited Ultra Trace laboratory located in Perth, Western Australia to ensure the highest possible standards of assay quality control are achieved. Batches of drill samples are regularly shipped from RoC to Perth and now that the logistics chain is full, shareholders can expect the regular release by the Company of assay results from the Definition Drilling Program.

1. The estimate of exploration target size should not be misunderstood or misconstrued as estimates of Mineral Resources. The estimates of exploration target size

is conceptual in nature and there has been insufficient results received from drilling completed to date to estimate a Mineral Resource in accordance with the

JORC Code (2004) guidelines. Furthermore, it is uncertain if further exploration will result in the determination of a Mineral Resource.

OpERATIONS REVIEW


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The Company has retained independent, global mining group Golder Associates to prepare its first JORC resource update. The resource update will build on the existing DSO resource by incorporating diamond drilling completed in 2010 and Resource Definition Program drill results received up to 30 September 2011. The resource update will also have a maiden JORC resource for part of the underlying bDSO. The resource update is expected to be released at the end of October 2011. Additional JORC resource updates will be completed at 3-6 monthly intervals as drill data permits.

During the period in review, the Company has also been able to successfully renew the Mayoko-Lekoumou Exploration Permit (which hosts the Mayoko Project) (“Mayoko Licence”) for an additional 2 years. The Mayoko Licence was originally granted in April 2008 for an initial period of 3 years, and may be renewed for two subsequent periods of 2 years each with up to a 50% reduction in land area required at each renewal. The first renewal was completed with an exemption from reducing the land area, reflecting the government of the RoC’s support for the Company’s progress on exploration and evaluation of Mayoko.

In June, the Company completed an airborne geophysical survey over the remaining 78% (780km2) of the Mayoko Licence, which had not been covered in the earlier 2009 survey. The survey identified a number of new magnetic targets that are prospective for hematite (both DSO and bDSO) and magnetite iron mineralisation. Consequently, an independent geophysical consultant modeled the new targets and the Company was able to increase its exploration target size by 80% to 1.6-2.6 billion tonnes at 30-65% Fe2. Importantly, the Company is now in the process of engaging additional exploration personnel to commence a regional exploration program with the objective of assessing the new exploration targets.

Contemporaneously with the commencement of the Resource Definition Program, the Company engaged global, infrastructure group Egis International to complete an assessment of the proposed transport solution for exporting iron ore from Mayoko (“Egis Study”). The transport solution proposed by the Company is to utilise the government of RoC owned, existing, underutilized purpose built heavy haulage railway that passes within 2km of Mayoko and to export iron ore from Pointe Indenne where the government has allocated land for a minerals port development, approximately 16km to the north of the port of Pointe Noire.

The Egis Study concluded the rail could transport 10 million tonnes per annum of iron ore in its current configuration with the opening of a number of closed stations to act as passing loops and with limited capital investment to install modern signals and telecommunications to manage the increased number of train sets proposed to operate on the line. At Pointe Indenne, the Company is proposing to construct an approximate 23km spur line branching off the existing rail network. At the port, Egis evaluated a barging solution rather than capital intensive fixed infrastructure whereby barges loaded with iron ore shuttle to and from a Panamax vessel (65-80,000 tonnes DWT). At Pointe Indenne, the Company has secured a land allocation to enable the unloading of train sets, stockpiling of iron ore and loading of barges. The Egis Study has confirmed the Company has a technically feasible transport solution, which will be further detailed and costed in 2012.

Following the completion of the Egis Study, the Company has engaged with Chemin de Fer Congo Ocean (rail operator) (“CFCO”) and the Ministry of Transport around progressing the Company’s rail access and cooperation Memorandum of Understanding toward a formal rail access agreement to enable the transport of a minimum 5 million tonnes per annum of iron ore. These discussions, and ongoing collaboration with CFCO and the Ministry of Transport, will continue throughout 2012.

2. The estimate of exploration target size should not be misunderstood or misconstrued as estimates of Mineral Resources. The estimates of exploration target size

is conceptual in nature and there has been insufficient results received from drilling completed to date to estimate a Mineral Resource in accordance with the

JORC Code (2004) guidelines. Furthermore, it is uncertain if further exploration will result in the determination of a Mineral Resource.

OpERATIONS REVIEW


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In addition to the key focus of evaluating Mayoko for development, the Company has also been mindful to increase its landholding in RoC to leverage off its in-country management, know how and support infrastructure. To that end, the Company applied for and was granted an 85% interest in an Authority to Prospect over a 944km2 land package know as Ngoubou-Ngoubou, which is to the north of, and contiguous with, the Mayoko Licence. Prospect level exploration over Ngoubou-Ngoubou has identified artisanal blacksmith workings, which support the Company’s hypothesis that this land package is prospective for DSO iron ore. Following the completion of this prospect level exploration, the Company has commenced converting the Authority to Prospect to an exclusive Exploration Licence, and has commissioned an airborne magnetic survey over the whole area to define the extent of iron occurrences.

The outlook for 2012 is extremely positive for the Company as the iron ore market is forecast to remain buoyant and management continues to advance Mayoko toward a decision to mine through the delivery of a definitive feasibility study and engagement with government for the grant of an Exploitation Licence and attaching Mining Convention.

In closing, it is important to note that none of the above would have been possible without the dedicated and competent personnel that the Company has working for it in RoC. It is through their efforts that we have been able to achieve so much in such a short period of time. The board of directors extends its thanks to its RoC based personnel for their extraordinary efforts throughout 2011.

Competent Person Statement

The information in this Operations Review that relates to Exploration Results and Mineral Resources is based on information reviewed and compiled by Mr. Patrick Vekemans, who is a Member of the Australian Institute of Geosciences. Mr. Vekemans is a contractor to African Iron Limited and has sufficient experience which is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr. Vekemans consents to the inclusion in this Operations Review of this information in the form and context in which it appears.

OpERATIONS REVIEW (CONT)


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Your Directors present their report on African Iron Limited (“African Iron” or the “Company”) and its controlled entities (the “Group”) for the financial year ended 30 June 2011.

DIRECTORSThe names of the Directors in office during the financial year and as at date of this report are as follows. All Directors were in office for the entire period unless stated otherwise:

COmpANy SECRETARyOn 10 January 2011, Ms Claire Tolcon was appointed as Company Secretary to replace Ms Rebecca Sandford who resigned on that date.

pRINCIpAL ACTIVITIESThe principal activity of the Group for the financial year ended 30 June 2011 was mineral exploration.

SIGNIFICANT ChANGES IN STATE OF AFFAIRSOn 5 November 2010, the Company entered into an agreement to acquire DMC Mining Ltd (“DMC Mining”) from Cape Lambert Resources Limited (“Cape Lambert”) (ASX: CFE). At that point in time, DMC Mining owned 80% of the Mayoko Iron Ore Project located in the Republic of Congo, West Africa (“Mayoko”).

On 17 December 2010, a prospectus to raise $96 million through the issue of 320 million shares at an issue price of $0.30 per share to fund the acquisition of DMC Mining and to fast-track exploration and feasibility at Mayoko was lodged with ASIC.

On 20 December 2010, the Company’s shareholders approved the acquisition of DMC Mining for $47 million in cash and 120 million fully paid ordinary shares in the Company, and the issue of 320 million shares pursuant to the prospectus.

On 7 January 2011, the Company successfully completed the capital raising under the prospectus and acquisition of 100% of DMC Mining settled on 10 January 2011.

On 10 January 2011, the Company changed its name from Stirling Minerals Limited to African Iron Limited to reflect its new direction, and appointed a new Board with an iron ore development and operations skill set, and a new Company Secretary. The Board appointed comprised Dr Ian Burston as Non-Executive Chairman, and Mr Joe Ariti and Mr Tony Sage as Non-Executive Directors. Mr Ariti acted as the Company’s Chief Executive Officer until the appointment of Mr Simon Youds in September 2011. Ms Claire Tolcon was appointed as Company Secretary.

The Company was re-admitted to official quotation on ASX on 14 January 2011.

Non Executive Chairman Dr Ian Burston appointed 10 January 2011Non Executive Director Mr Antony Sage appointed 10 January 2011Non Executive Director Mr Joe Ariti appointed 10 January 2011Non Executive Director The Hon. John Moore AO appointed 1 July 2011Executive Director Mr Tony King resigned 10 January 2011Non Executive Director Mr Jason Bontempo resigned 10 January 2011Non Executive Director Mr Stephen Brockhurst resigned 10 January 2011

DIRECTORS’ REpORT


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REVIEW OF OpERATIONSAs set out above, the Company pursued a new direction and acquired its principal asset, being an 80% interest in the Mayoko Project, in January 2011.

The Mayoko Project represents a near term development opportunity in the emerging iron ore province of West Africa. Unlike other iron ore projects in the region, it has excellent infrastructure access with an underutilised, heavy haulage railway passing within 2km of the main prospect at Mt Lekoumou and terminating at the port of Pointe-Noire on the Atlantic coast.

The Company’s objective is to develop an initial 5Mtpa DSO operation at Mayoko by mid-2013 leveraging off the project’s proximity to existing rail and port infrastructure.

The following significant milestones were achieved during the current year subsequent to the Company acquiring its 80% interest in the Mayoko Project: • The government of the Republic of Congo renewed the Mayoko-Lekoumou iron ore exploration permit for a further period

of two years to April 2013 and the Company was granted an exemption from the requirement to relinquish up to 50% of the permit surface area on the first renewal.

• A 30,000m oxide, resource definition drilling program at the Mount Lekoumou and Mount Mipoundi prospects commenced with the objective of increasing the size and confidence of the existing supergene hematite, DSO Inferred Mineral Resource (33Mt at 56% Fe), and defining a maiden Inferred Mineral Resource for the underlying beneficiable DSO (“bDSO”) that together make up the weathered (oxide) mantle over the primary magnetite mineralisation.

• The Company has engaged independent, global mining consultant, Golder Associates Pty Ltd to prepare an interim JORC resource update to include the diamond drill results received from the 2010 drilling program, and the resource drilling definition program assay results received to 30 September 2011. The Company expects the interim resource update will be released to the market by the end of October 2011.

• The first batch of drill results has confirmed the thickness and grade of the supergene DSO iron “hat” with grades of 50-60% Fe (with reference to the 1975 drilling completed by earlier explorers) and that of the underlying bDSO at 40-45% Fe.

• Bateman Engineering Pty Ltd was appointed to manage a phase one metallurgical test work program. Davis Tube Recovery test work on magnetite banded iron formation samples remaining from the 2010 drilling program was completed and confirmed earlier results whereby high quality iron concentrates with an average 69.3% Fe and low levels of deleterious elements are produced at a coarse grind size with high average mass yields (43.5%).

• The Rail Memorandum of Understanding (“Rail MoU“) with Chemin de Fer Congo Ocean (“CFCO”) was extended and provides African Iron with access to CFCO’s heavy haulage mineral rail network, which passes within 2km of the Mayoko Project.

• Preliminary rail study completed by global infrastructure group, Egis International confirms the underutilised railway can transport a minimum 10 million tonnes per annum of iron ore.

• Preliminary studies for the rehabilitation of the Mayoko town airstrip commenced, with the aim of having it operational in 2011. The recommissioning of the airstrip will enable efficient transport of personnel and goods between Pointe-Noire and the Mayoko Project.

• Major airborne geophysics survey were completed over the remaining 780km2 of the Mayoko-Lekoumou Exploration Permit resulting in an 80% increase in the aggregate exploration target size1 to 1.6-2.6 billion tonnes at 30-65% Fe. Importantly, 320-520 million tonnes at 40-65% Fe represents potential direct shipping ore (“DSO”) and beneficiable DSO.

1. The estimates of exploration target sizes mentioned in this Annual Report should not be misunderstood or misconstrued as estimates of Mineral Resources. The

estimate of exploration target sizes are conceptual in nature and there has been insufficient exploration completed to date to determine the quantity and grade, and

estimate a Mineral Resource in accordance with JORC Code (2004) guidelines. Furthermore, it is uncertain if future exploration will result in the determination of a

Mineral Resource.

DIRECTORS’ REpORTCONTINUED


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In June 2011, ASX listed, Equatorial Resources Limited (“Equatorial”) acquired a 19.9% stake in African Iron. Equatorial is exploring for iron ore in the Republic of Congo and holds an exploration permit to the west of, and contiguous with, African Iron’s Mayoko-Lekoumou Exploration Permit.

RESULTThe net loss attributable for the year ended 30 June 2011 was $6,886,511 (2010: net profit of $973,089).

DIVIDENDSNo dividend has been paid or recommended by the Directors since the commencement of the financial year.

SUbSEqUENT EVENTSIn July 2011, the independence of the board was strengthened by the appointment of the Hon. John Moore AO as an independent, Non-Executive Director.

In August 2011, the Company secured, through a new 85% owned Congolese subsidiary, an Authority to Prospect for iron ore in the Republic of Congo, West Africa (“Ngoubou-Ngoubou Permit”). The Ngoubou-Ngoubou permit covers an area of 944km2

and is the northern extension of the Company’s Mayoko-Lekoumou Exploration Permit, which hosts the Mayoko iron ore project.

The Company appointed Mr Simon Youds as its Chief Executive Officer with effect from 5 September 2011. Mr Youds is a professional mining engineer with extensive African and bulk commodities experience and a track record of taking mineral projects from concept to production.

On 14 September 2011, the Company completed the acquisition of an additional 12% of DMC Iron (Congo) SA. As a consequence of the acquisition, the Company now owns 92% of the Mayoko iron ore project. The consideration for the acquisition comprised:

• $5,800,000 in cash;

• 22,315,436 fully paid ordinary African Iron shares (subject to escrow restrictions for a period of 13 months from the date of issue) at a deemed issue price of $0.298 per share; and

• a deferred consideration of A$0.150 for each dry metric tonne of iron ore sold from the Mayoko Project.

Apart from the above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group or the state of affairs of the Group in future financial years.

LIKELy DEVELOpmENTS AND ExpECTED RESULTSThe Group will continue its mineral exploration activity at its exploration projects with the object of identifying commercial resources.

ENVIRONmENTAL REGULATIONThe Group operates within the resources sector and aims to conduct its exploration activities in such a manner that ensures the highest standard of environmental care is achieved, and that it complies with all relevant environmental legislation.

DIRECTORS’ REpORTCONTINUED


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INFORmATION ON DIRECTORS IN OFFICE AS AT ThE DATE OF ThIS REpORT

DR IAN bURSTON

mR JOE ARITI

qUALIFICATIONS

qUALIFICATIONS

ExpERIENCE

ExpERIENCE

INTEREST IN ShARES AND OpTIONS


FORmER DIRECTORShIpS hELD IN pAST ThREE yEARS

CURRENT DIRECTORShIpS


Degree in Mechanical Engineering, Diploma in Aeronautical Engineering, Honorary Doctor of Science

Bachelor of Science and Diploma in Mineral Science from Murdoch University; Masters Degree in Business Administration from the Edinburgh Business School (UK); and Member of the Australasian Institute of Mining and Metallurgy and Australian Institute of Company Directors.

Dr Ian Burston has more than 30 years of experience in Western Australian and international mining. Formerly, Ian Burston held positions as Managing Director of Hamersley Iron Pty Limited, Aurora Gold Limited and Portman Limited and Chief Executive Officer of Kalgoorlie Consolidated Mines Pty Limited. Previously he worked for the CRA Group (now part of Rio Tinto plc) for 22 years in various senior executive positions. Dr Burston was Non-Executive Chairman of Imdex Limited from 2000 to 2009 and served as Executive Chairman and Chief Executive Officer of Aztec Resources Limited between June 2003 and February 2006.

Mr Joe Ariti is a Metallurgist with over 25 years experience in technical, management and executive roles in assessing, developing and managing mining projects and companies in Australia and overseas. Mr Ariti has been involved in the development and management of both open cut and underground mining projects in Australia, Africa, Indonesia and Papua New Guinea.

4,000,000 unlisted options (exercisable at $0.30 each on or before 31 December 2012) (escrowed for 24 months from the date of re-quotation of the Company on ASX).

300,000 ordinary shares 6,000,000 unlisted options (exercisable at $0.30 each on or before 31 December 2012) (escrowed until 14 January 2013). 100,000 listed options (exercisable at $0.20 each on or before 1 December 2013)

Carrick Gold Limited (November 2009 to August 2010), Condor Nickel Limited (March 2010 to August 2010), Cape Lambert Resources Limited (July 2006 to August 2008), Auvex Resources Limited (January 2009 to September 2009), Imdex Limited (November 2000 to October 2009), Forescue Metals Group (October 2008 to August 2011).

Current directorships include Broome Port Authority (Chairman), Kanzai Mining Corporation (Director), NRW Holdings Limited (Chairman and Non-Executive Director since July 2007) and Mincor Resources NL (Non-Executive Director since January 2003).

Non-executive director of ASX listed entities Swick Mining Services Limited and Matrix Metals Limited.

non-eXeCutiVe Chairman (appointeD on 10 january 2011)

non-eXeCutiVe DireCtor (appointeD on 10 january 2011)


Territory Resources Limited (from August 2008 to July 2011), Azumah Resources Limited (from September 2007 to October 2009), DMC Mining Limited (from August 2009 to September 2010), ABM Resources NL (from July 2008 to December 2008).


AFRICAN IRON LTDDIRECTORS’ REpORTCONTINUED

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mR TONy SAGE

ThE hON. JOhN mOORE AO

qUALIFICATIONS

qUALIFICATIONS

ExpERIENCE

ExpERIENCE






Bachelor of Commerce, FCPA, CA, FTIA

Bachelor of Commerce and Associate in Accountancy from the University of Queensland.

Mr Tony Sage has in excess of 24 years experience in the fields of corporate advisory services, funds management and capital raising. Mr Sage is based in Western Australia and has been involved in the management and financing of listed mining companies for the last 15 years.

The Hon. John Moore AO has had a distinguished career in Australian politics: John was the Federal Minister of Defence, the Minister for Industry, Science and Tourism and Vice President of the Executive Council.

Prior to entering politics, John was a stockbroker and member of the Brisbane Stock Exchange for 12 years. John has served on the board of many broking and banking related companies including Citinational Limited, Merril Lynch (Aust) Pty Ltd and Grindlays (Aust) Pty Ltd.

500,000 ordinary shares 8,000,000 unlisted options (exercisable at $0.30 each on or before 31 December 2012) (escrowed for 24 months from the date of re-quotation of the Company on ASX).

500,000 ordinary shares

ASX listedCape Lambert Resources Limited (December 2000 to present)Fe Limited (August 2009 to present)Chameleon Mining NL (September 2010 to present)Cauldron Energy Limited (June 2009 to present)Matrix Metals Limited (Dec 2010 to present)International Goldfields Limited (February 2009 to present)NSX listedInternational Petroleum Limited (January 2006 to present)African Petroleum Corporation Limited (October 2007 to present)

Chairman of ASX listed entities Cape Lambert Resources Limited, Cauldron Energy Limited, International Goldfields Limited, Fe Limited and NSX listed International Petroleum Limited. Non-Executive Deputy Chairman of NSX listed African Petroleum Corporation Limited. Non-Executive director ASX listed Chameleon Mining NL and Matrix Metals Limited.

Herencia Resources plc




International Goldfields Limited (2006 to 30 June 2011)

COmpANy SECRETARyMs Claire Tolcon was appointed 10 January 2011. Ms Tolcon holds a Bachelor of Law and Bachelor of Commerce (Accounting) degree and is a member of FINSIA and has 14 years experience in the legal profession, primarily in the areas of equity capital markets, mergers and acquisitions, corporate restructuring, corporate governance and mining and resources. Ms Tolcon was a partner of a corporate law firm for a number of years before joining the Company.



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REmUNERATION REpORT (AUDITED)The board has not established a separate remuneration committee. Remuneration policies are adopted by the board as a whole. A remuneration committee will be formed once the Group has reached a size that warrants a separate remuneration committee.

The remuneration policy of the Group has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain appropriately skilled directors to run and manage the Group, as well as create goal congruence between directors and shareholders.

The board’s policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The executive directors in consultation with independent advisors determine payments to the non-executive directors and review their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting.

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. This has been achieved by the issue of options to the majority of directors and executives to encourage the alignment of personal and shareholder interest.

DETAILS OF REmUNERATIONDetails of the remuneration of the directors and executives of the Group are set out below:

CASh SALARy AND FEES

30 JUNE2011

Short term employee benefitS

poSt employment

benefitS

NON mONETARy bENEFITS

ShARE-bASED pAymENTS (OpTIONS)

RENUmERATION REpRESENTED by OpTIONS

TOTALSUpERANNUATION

DIRECTORS

Non-executive directors

Executive directors

Executives

Total

Dr Ian Burston1

Mr Antony Sage1

Mr Joe Ariti1

Mr Jason Bontempo2

Mr Stephen Brockhurst2

37,936

30,823

87,727

12,903

12,903

31,613

213,905

24,000

237,905

37,564

1,389,883 1,641,44213,654

61,564

13,654 1,352,319 1,579,878 86%

61%

85%

3,959 35,572-

-

-

-

-

- -

300,515

601,031

450,773

-

-

338,451

631,854

546,396

13,578

14,028

-

-

7,895

675

1,125

89%

95%

82%

-

-

-

-

-

-

-

Mr Tony King2

Claire Tolcon1

$ $ $ $ $ %

Notes1 Appointed on 10 January 20112 Resigned on 10 January 20113 The Hon. John Moore AO was appointed as a director subsequent to 30 June 2011 and is consequently not reflected in the above table.4 Rebecca Sandford resigned on 10 January 2011. Up to the date of her resignation, fees of $36,513 were payable to Grange Consulting Pty Ltd for the provision of Ms

Sandford’s company secretarial services. Mr King was a director of Grange Consulting Services Pty Ltd as at that date of his resignation as a director of African Iron.



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SERVICE AGREEmENTSDuring the current year, the following directors entered into service agreements with the Company:

Ian Burston (Non-Executive Chairman);Joe Ariti (Non-Executive Director); andAntony Sage (Non-Executive Director).

Summarised below are the key terms of the service agreements:

Agreement with Ian BurstonThe Company has entered into an agreement with Dr Ian Burston for his appointment as Non-Executive Chairman. Pursuant to this agreement, the Company will pay Dr Burston $80,000 per year for his role as Non-Executive Chairman. Additionally, Dr Burston received (following receipt of shareholder approval) 4,000,000 Options exercisable at $0.30 on or before 31 December 2012.

Agreement with Joe AritiThe Company has entered into an agreement with Mr Joe Ariti for his appointment as a Non-Executive Director. Pursuant to this agreement, the Company will pay Mr Ariti $65,000 per year for his role as Non-Executive Director. During the period in which Mr Ariti acts as the Chief Executive Officer of the Company, he will be paid an additional fee of $10,000 per month. Additionally, Mr Ariti received (following receipt of shareholder approval) 6,000,000 Options exercisable at $0.30 on or before 31 December 2012.

Agreement with Antony SageThe Company has entered into an agreement with Mr Antony Sage for his appointment as a Non-Executive Director. Pursuant to this agreement, the Company will pay Mr Sage $65,000 per year for his role as Non-Executive Director. Additionally, Mr Sage received (following receipt of shareholder approval) 8,000,000 Options exercisable at $0.30 on or before 31 December 2012.

Notes1 Fees of $69,300 were payable to Grange Consulting Pty Ltd for the provision of Ms Sandford’s company secretarial services. Mr King was a director of Grange Consulting

Services Pty Ltd as at 30 June 2010.

CASh SALARy AND FEES

30 JUNE2010

Short term employee benefitS

poSt employment

benefitS

NON mONETARy bENEFITS

ShARE-bASED pAymENTS (OpTIONS)

RENUmERATION REpRESENTED by OpTIONS

TOTALSUpERANNUATION

DIRECTORS

Non-executive directors

Executive directors

Total

Mr Jason Bontempo

Mr Stephen Brockhurst

15,000

15,000

1,350

1,350

90,000 - 98,1008,100 --

-

-

16,350

16,350

-

-

-

-

Mr Tony King

$ $ $ $ $ %

60,000 - 5,400 - 65,400 -



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The assessed fair value at grant date has been determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Further information on the inputs to the Black-Scholes option pricing model is set out in note 20.

No options were granted or vested during the previous financial year.

End of remuneration report

NO. OF OpTIONS GRANTED

DIRECTORS AND KEy

mANAGEmENTpERSONNEL

GRANT DATE ExERCISE pRICEFAIR VALUE OF ShARE bASED

pAymENT

FAIR VALUE pER OpTIONExpIRy DATE

Dr Ian Burston

Mr Antony Sage

Mr Joe Ariti

4,000,000

8,000,000

6,000,000

10 Jan 2011

10 Jan 2011

10 Jan 2011

31 Dec 2012

31 Dec 2012

31 Dec 2012

$0.30

$0.30

$0.30

$0.075

$0.075

$0.075

$300,515

$600,031

$450,773

ShARE-bASED COmpENSATION Details of options over ordinary shares provided as remuneration to directors and key management personnel or the year ended 30 June 2011 are set out below. The options vested on issue. When exercisable, each option is convertible into one ordinary share of African Iron Ltd.

DIRECTORS mEETINGSThe number of directors’ meetings held and the number of meetings attended by each of the directors of the Company during the period the director held office during the financial year are:

DIRECTOR

NUmbER OF mEETINGS ATTENDED

NUmbER OF mEETINGS ELIGIbLE TO ATTEND

NUmbER OF mEETINGS DIRECTORS ATTENDED

Dr Ian Burston (appointed on 10 January 2011)

Mr Antony Sage (appointed on 10 January 2011)

Mr Joe Ariti (appointed on 10 January 2011)

Mr Tony King (resigned on 10 January 2011)

Mr Jason Bontempo (resigned on 10 January 2011)

Mr Stephen Brockhurst (resigned on 10 January 2011)

1

1

1

2

2

2

1

1

1

2

2

2

DATE OpTIONS ISSUED DESCRIpTION ExpIRy DATE ExERCISE pRICE NUmbER OF OpTIONS ON ISSUE

23 December 2009

10 January 2011

7 April 2011

1 December 2013

31 December 2012

31 December 2012

$0.20

$0.30

$0.30

24,450,265

40,000,000

2,700,000

Listed

Unlisted

Unlisted

ShARES UNDER OpTIONUnissued ordinary shares under option at the date of this report are as follows:



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ShARES ISSUED ON ThE ExERCISE OF OpTIONSThere were no options exercised during the financial year (2010: nil).

INSURANCE OF OFFICERSDuring the financial year, African Iron Limited paid the required premiums to insure the directors and officers of the Group.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for them or someone else or to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

pROCEEDINGS ON bEhALF OF ThE GROUpNo person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001.

NON-AUDIT SERVICESThe Board of Directors is satisfied that the provision of any non-audit services by the Company’s auditors is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 because:

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

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

During the current year $20,000 was paid (2010: Nil) to the auditor for non-audit services provided.



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COmpETENT pERSON STATEmENTThe information in this report that relates to Exploration Results and Mineral Resources is based on information reviewed and compiled by Mr Patrick Vekemans, who is a Member of the Australian Institute of Geosciences. Mr Vekemans is a contractor to African Iron Limited and has sufficient experience which is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr Vekemans consents to the inclusion in this report of this information in the form and context in which it appears.

Auditor’s Independence Declaration

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 17.

This report of Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of Directors.

Joe Ariti

Perth, Western Australia, 30 September 2011



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To The Board of Directors

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 This declaration is made in connection with our audit of the financial report of African Iron Limited and Controlled Entities for the year ended 30 June 2011 and in accordance with the provisions of the Corporations Act 2001. We declare that, to the best of our knowledge and belief, there have been: no contraventions of the auditor independence requirements of the Corporations Act

2001 in relation to the audit; no contraventions of the Code of Professional Conduct of the Institute of Chartered

Accountants in Australia in relation to the audit. Yours faithfully BENTLEYS CHRIS WATTS CA Chartered Accountants Director DATED at PERTH this 30th day of September 2011


AFRICAN IRON LTDAUDITOR’SINDEpENDENCEDECLARATION

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The accompanying notes form part of this financial report.

NOTE 20102011

Revenue

Other income

Directors remuneration and employee benefits expense

Share based payments expense

External contractors expense

Loss on fair value of financial assets through profit and loss

Agreement termination payment

Compliance and regulatory costs

Travel expenses

Occupancy costs

Depreciation expense

Impairment of capitalised exploration expenditure

Other expenses

Profit/ (loss) before income tax

Income tax expense

Profit/ (loss) for the year

Other Comprehensive losses net of tax

Foreign exchange differences arising on translation of foreign operations

Total Comprehensive Income / (loss) for the year

Profit/ (loss) for the period is attributable to:

Members of African Iron Limited

Non-controlling interest

Total Comprehensive income / (loss) is attributable to:

Members of African Iron Limited

Non-controlling interest

(Loss) / earnings per share (cents per share)

Diluted earnings per share (cents per share)

2

2

20

3

4

5

5

1,213,072

1,074,679

(465,494)

(1,926,827)

(529,064)

(491,316)

(3,600,000)

(148,627)

(388,429)

(248,687)

(66,310)

(441,614)

(693,679)

(6,712,296)

(174,215)

(6,886,511)

(154,662)

(7,041,173)

(6,636,051)

(250,460)

(6,886,511)

(6,790,713)

(250,460)

(7,041,173)

(2.7)

(2.7)

303,797

995,764

(102,714)

-

(69,300)

-

-

(39,583)

-

-

-

-

(44,817)

1,043,147

(70,058)

973,089

-

973,089

973,089

-

973,089

973,089

-

973,089

2.3

1.7

$$


AFRICAN IRON LTDSTATEmENT OFCOmpREhENSIVE INCOmEFOR THE YEAR ENDED 30 JUNE 2011

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NOTE 20102011

Current Assets

Cash and cash equivalents

Trade and other receivables

Other current assets

Financial assets at fair value through profit and loss

Total Current Assets

Non-Current Assets

Exploration and evaluation expenditure

Property, plant & equipment

Total Non Current Assets

TOTAL ASSETS

Current Liabilities

Trade and other payables

Employee benefits

Income tax payable

Total Current Liabilities

Non Current Liabilities

Deferred Tax Liability

Total Non Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued Capital

(Accumulated losses) / retained earnings

Reserves

Equity attributable to members of African Iron Limited

Non-controlling interests

TOTAL EQUITY

6

7

8

9

10

11

12

13

4

14

15

16

39,206,075

493,770

64,201

483,539

40,247,585

107,254,678

819,398

108,074,076

148,321,661

2,176,999

-

197,106

2,374,105

39,199

39,199

2,413,304

145,908,357

130,342,687

(6,334,565)

3,124,484

127,132,606

18,775,751

145,908,357

5,545,635

15,995

15,451

1,110,021

6,687,102

427,775

-

427,775

7,114,857

48,945

22,436

-

71,381

46,860

46,860

118,241

6,996,616

6,695,130

301,486

-

6,996,616

-

6,996,616

$$assets

liaBilities


AFRICAN IRON LTDSTATEmENT OFFINANCIAL pOSITIONAS AT 30 JUNE 2011

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NOTE 20102011

Cash flows from operating activities

Payments to suppliers and employees

Interest received

Proceeds from underwriting

Net cash flows generated from operating activities

Cash flows from investing activities

Payments for acquisition of financial assets

Proceeds from sale of financial assets

Loans advanced

Payment received for loans advanced

Payments for exploration and evaluation

Purchase of property, plant and equipment

Purchase of controlled entity

Payment of costs associated with the acquisition of controlled entity

Cash balance acquired on acquisition of controlled entity

Net cash flows used in investing activities

Cash flows from financing activities

Proceeds from issue of shares and options

Payment of share issue costs

Repayment of loan assumed on acquisition of controlled entity

Net cash flows from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

25

19

19

19

6

(923,434)

947,079

-

23,645

(545,849)

1,846,719

(250,000)

-

(4,342,439)

(602,753)

(47,000,000)

(3,748,052)

248,061

(54,394,313)

96,000,000

(6,984,892)

(984,000)

88,031,108

33,660,440

5,545,635

39,206,075

(270,316)

303,797

11,777

45,258

(1,427,244)

1,890,053

(379,500)

379,500

(11,795)

-

-

-

-

451,014

2,989,998

(40,908)

-

2,949,090

3,445,362

2,100,273

5,545,635

$$


AFRICAN IRON LTDCONSOLIDATED STATEmENTOF CASh FLOWSFOR THE YEAR ENDED 30 JUNE 2011

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BALANCE AT 1 JULY 2011

Loss for the year

Other comprehensive losses

Total comprehensive loss

Transaction with owner, directly recorded in equity:

Issue of shares pursuant to a capital raising

Share issue costs

Deferred tax movements recognised directly in equity

Acquisition of business combination

Share based payments

BALANCE AT 30 JUNE 2011

6,996,616

(6,886,511)

(154,662)

(7,041,173)

96,000,000

(8,337,211)

(15,232)

55,026,211

3,279,146

145,908,357

6,695,130

-

-

-

96,000,000

(8,337,211)

(15,232)

36,000,000

-

130,342,687

301,486

(6,636,051)

-

(6,636,051)

-

-

-

-

-

(6,334,565)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

3,279,146

3,279,146

-

-

(154,662)

(154,662)

-

-

-

-

-

(154,662)

-

(250,460)

-

(250,460)

-

-

-

19,026,211

-

18,775,751

ISSUEDCApITAL

ACCUmULATED(LOSSES)/RETAINEDEARNINGS

NON-CONTROLLING

INTERESTSOpTION

RESERVE

ShARE bASEDpAymENTRESERVE

FOREIGNCURRENCy

TRANSLATIONRESERVE TOTAL

$ $ $ $ $ $ $


BALANCE AT 1 JULY 2010

Profit for the year

Other comprehensive income

Total comprehensive income

Transaction with owner, directly recorded in equity:

Issue of shares

Transferred expired listed options to issued capital

Deferred tax movements recognised directly in equity

Transferred expired listed options to retained earnings

BALANCE AT 30 JUNE 2010

3,587,840

-

-

-

2,949,092

135,000

23,198

-

6,695,130

(740,449)

973,089

-

973,089

-

-

-

68,846

301,486

3,051,237

973,089

-

973,089

2,949,092

-

23,198

-

6,996,616

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

68,846

-

-

-

-

-

-

(68,846)

-

135,000

-

-

-

-

(135,000)

-

-

-

ISSUEDCApITAL

ACCUmULATED(LOSSES)/RETAINEDEARNINGS

NON-CONTROLLING

INTERESTSOpTION

RESERVE

ShARE bASEDpAymENTRESERVE

FOREIGNCURRENCy

TRANSLATIONRESERVE TOTAL

$ $ $ $ $ $ $


AFRICAN IRON LTDCONSOLIDATED STATEmENTOF ChANGES IN EqUITyFOR THE YEAR ENDED 30 JUNE 2011

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1. SUmmARy OF SIGNIFICANT ACCOUNTING pOLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

A) bASIS OF pREpARATION

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

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets.

The financial report is presented in Australian dollars.

The financial report covers African Iron Limited and its controlled entities (“the Group”). African Iron Limited is a public listed company, incorporated and domiciled in Australia.

Compliance with IFRS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).

b) bASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of African Iron Limited (“African Iron” or “Company”) and its subsidiaries (as outlined in note 22) as at and for the period ended 30 June each year.

Subsidiaries are those entities over which African Iron has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether African Iron controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as African Iron, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profits and losses resulting from intra-group transactions have been eliminated in full.

Investments in subsidiaries held by African Iron are accounted for at cost in the separate financial statements of the parent less any impairment charges.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and liabilities assumed are measured at their fair values at the date of acquisition. Any difference between the fair value of the consideration and the fair values of the identifiable net assets acquired is recognised as goodwill or a discount on acquisition.

A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.


AFRICAN IRON LTDNOTES TO FINANCIALSTATEmENTSFOR THE YEAR ENDED 30 JUNE 2011

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Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented with equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.

If African Iron loses control over a subsidiary, it: • Derecognises the assets (including goodwill) and liabilities of the subsidiary; • Derecognises the carrying value of any non-controlling interest; • Derecognises the cumulative translation differences recorded in equity; • Recognises the fair value of the consideration received; • Recognises the fair value of any investment retained; • Recognises and surplus or deficit in the statement of comprehensive income; • Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.

C) TRADE AND OThER RECEIVAbLES

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

D) INCOmE TAx

Current TaxCurrent tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred TaxDeferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

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


AFRICAN IRON LTDNOTES TO FINANCIALSTATEmENTSFOR THE YEAR ENDED 30 JUNE 2011

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Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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

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

The Group has implemented the tax consolidation legislation. As a consequence, the members of the tax consolidated group are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.

E) pROpERTy, pLANT AND EqUIpmENT

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

Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows:

Plant and equipment – over 6 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

F) ExpLORATION AND EVALUATION ExpENDITURE

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.


AFRICAN IRON LTDNOTES TO FINANCIALSTATEmENTS (CONT)FOR THE YEAR ENDED 30 JUNE 2011

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G) INVESTmENTS & FINANCIAL INSTRUmENTS

Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group has the following financial assets:

i. Financial assets at fair value through profit or loss Shares and options held for trading have been classified as financial assets at fair value through profit or loss.

Financial assets held for trading purposes are stated at fair value, with any resultant gain or loss recognised in profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. Assets in this category are classified as current assets if they are expected to be realised within 12 months otherwise they are classified as non-current assets.

ii. Loans and receivables Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. They are recorded at amortised cost less impairment. Impairment is determined by review of the nature and recoverability of the loan or receivable with reference to its terms of repayments and capacity of the debtor entity to repay the debt. If the recoverable amount of a receivable is estimated to be less than its carrying amount, the carrying amount of receivable is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. They are included in current assets, other than those with maturities greater than 12 months from reporting date which are classified as non-current assets.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

h) FOREIGN CURRENCy

Foreign currency transactions and balances

All foreign currency transactions occurring during the financial year are recognised at the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Exchange differences are recognised in the profit or loss in the period in which they arise except those exchange differences which relate to assets under construction for future productive use which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings.

Functional and presentation currency

Items included in the financial statements of each of the companies within the Group are measured using the currency of the primary economic environment in which they operate (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is African Iron’s functional and presentation currency.



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h) FOREIGN CURRENCy (CONT)

Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

i. assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position;

ii. income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

iii. all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is sold, a proportionate share of such exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

I) ImpAIRmENT OF ASSETS

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired.

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

J) EmpLOyEE bENEFITS

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date.

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.



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Share-based paymentsEquity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

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

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

K) TRADE AND OThER pAyAbLES

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

L) pROVISIONS

Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

Site restorationCosts 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.

m) CASh AND CASh EqUIVALENTS

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.



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N) REVENUE AND OThER INCOmE

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

Interest revenueInterest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.

Dividend revenueDividend revenue is recognised when the right to receive a dividend has been established.

Other revenues and incomesOther revenues are recognised on the receipt of funds.

O) GOODS AND SERVICES TAx (GST)

Revenues, expenses and assets are recognised net 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 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 included in operating cash flows.

p) COmpARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the presentation for the current financial year.

q) EARNINGS pER ShARE

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

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interests and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.



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R) bUSINESS COmbINATIONS

The acquisition method of accounting is used to account for business combinations. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to the former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Costs directly attributable to the acquisition are expensed.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling shareholders’ interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group’s share of the fair value of the identifiable net assets acquired, the difference is recognised directly in the statement of comprehensive income, but only after a reassessment of the identification and measurement of the net assets acquired.

Any contingent consideration to be transferred by the acquiree is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured.

If the Consolidated Entity recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the Group’s net profit after tax.

S) LEASES

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

T) SEGmENT REpORTING

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision makers to make decisions about resources to be allocated to the segments and assess their performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues.

Operating segments have been identified based on the information presented to the chief operating decision makers – being the executive management team.

Information about other business activities and operating segments that do not meet the quantitative criteria set out in AASB 8 “Operating Segments” are combined and disclosed in a separate category called “other”.

The Group operates in one industry, being mineral exploration and in one main geographical segment, being the Republic of Congo in the current year and Australia in the prior year.

U) 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.



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V) pARENT ENTITy FINANCIAL INFORmATION

The financial information for the parent entity, African Iron Limited, disclosed in note 27 has been prepared on the same basis as the consolidated financial statements, except as set out below:

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the financial statements of African Iron Limited.

Tax consolidation legislation

African Iron Limited and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, African Iron Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

W) CRITICAL ACCOUNTING ESTImATES AND JUDGmENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below.

Income taxesThe Group is subject to income taxes in Australia and jurisdictions where it has foreign operations.

Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the tax laws in the relevant jurisdictions. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

The Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped.

Share based paymentsThe Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options issued is determined by an internal valuation using Black-Scholes option pricing model.

Exploration and Evaluation Expenditure The Group’s accounting policy for exploration and evaluation is set out at Note 1(f). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves may be determined. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure, it is determined that recovery of the expenditure by future exploitation or sale is unlikely, then the relevant capitalised amount is written off in the statement of comprehensive income.

Business combinationDuring the current financial year, the Company completed the acquisition of DMC Mining. Management have made a number of assumptions in determining the fair values of the assets acquired and the liabilities assumed pursuant to this business combination. Refer to note 19 for further information.



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x) NEW ACCOUNTING STANDARDS AND INTERpRETATIONS

The accounting policies adopted are consistent with those of the previous financial year except for the following standards and interpretations which have been applied by the Group during the current year:

REFERENCE TITLE AppLICATION DATE OF STANDARD

AppLICATION DATE FOR ThE GROUp

AASB 2009-5

AASB 2010-3

Further amendments arising from the second annual improvements project

Amendments to Australian Accounting Standards arising from the Annual Improvements Project

1 January 2010

1 July 2010

1 July 2010

1 July 2010

REFERENCE TITLE NATURE OF ChANGE AppLICATION DATE

AASB 9

AASB 2009-11

AASB 9 improves and simplifies the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below.

(a) Financial assets are classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows. This replaces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria.

(b) AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

The amendments arise from the issuance of AASB 9 Financial Instruments that sets out requirements for the classification and measurement of financial assets.

This Standard shall be applied when AASB 9 is applied.

Financial Instruments

Amendments to Australian Accounting Standards arising from AASB 9[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]

1 January 2013

1 January 2013

The standards and amendments that are mandatory for the first time for the financial year beginning 1 July 2010 did not have any impact on the current period or any prior period and are not likely to affect future periods.

Accounting Standards and interpretations issued but not yet effective

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting period ended 30 June 2011 are set out below. Unless otherwise stated, it is expected that there will be no impact on the Group on applying the new standards and interpretations once they are effective.



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AASB 124 (Revised)

AASB 2009-12

AASB 1054

AASB 2010-4

AASB 2010-2

The revised AASB 124 simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition, including:

(a) The definition now identifies a subsidiary and an associate with the same investor as related parties of each other.

(b) Entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other.

(c) The definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other.

This amendment makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations.In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.

This standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas:

(a) Compliance with Australian Accounting Standards

(b) The statutory basis or reporting framework for financial statements

(c) Whether the financial statements are general purpose or special purpose

(d) Audit fees

(e) Imputation credits

Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments.

Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions.Clarifies that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account.

This Standard makes amendments to many Australian Accounting Standards, reducing the disclosure requirements for Tier 2 entities, identified in accordance with AASB 1053, preparing general purpose financial statements

Related Party Disclosures (December 2009)

Amendments to Australian Accounting Standards[AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]

Australian Additional Disclosures

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]

Amendments to Australian Accounting Standards arising from reduced disclosure requirements

1 January 2011

1 January 2011

1 January 2011

1 July 2011

1 July 2013



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AASB 2010-5

AASB 2010-6

AASB 2010-7

AASB 12

AASB 2011-7

AASB 13

AABS 10

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.

These amendments have no major impact on the requirements of the amended pronouncements.

The amendments increase the disclosure requirements for transactions involving transfers of financial assets. Disclosures require enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognised and introduce new disclosures for assets that are derecognised but the entity continues to have a continuing exposure to the asset after the sale.

The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows:

• The change attributable to changes in credit risk are presented in other comprehensive income

• The remaining change is presented in profit or loss

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.

Consequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments in Associates as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities.

AASB 13 establishes a single source of guidance under Australian Accounting Standards for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under Australian Accounting Standards when fair value is required or permitted by Australian Accounting Standards. Application of this definition may result in different fair values being determined for the relevant assets.AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and Interpretation 112 Consolidation – Special Purpose Entities.

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group.

Amendments to Australian Accounting Standards[AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]

Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7]

Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127]

Disclosure of Interests in Other Entities

Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards

Fair Value Measurement

Consolidated Financial Statements

1 January 2011

1 July 2011

1 January 2013

1 January 2013

1 January 2013

1 January 2013

1 January 2013



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AASB 2011-8

AASB 2011-9

Consequential amendments to existing Australian Accounting Standards as a result of the adoption of AASB 13 Fair Value Measurement.

The main change resulting from the amendments relates to the ‘Statement of Profit or Loss and Other Comprehensive Income’ and the requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not remove the option to present profit or loss and other comprehensive income in two statements.

The amendments do not change the option to present items of other comprehensive income either before tax or net of tax. However, if the items are presented before tax then the tax related to each of the two groups of other comprehensive income items (those that might be reclassified to profit or loss and those that will not be reclassified) must be shown separately.

Amendments to Australian Accounting Standards arising from the Fair Value Measurement Standard

Amendments to Australian Accounting Standards -Presentation of Items of Other Comprehensive Income

[AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]

1 January 2013

1 July 2012



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20102011

2. Revenue and Other Income

Revenue

Bank interest

Interest on convertible note

Short term loan interest

Other Income

Other Income

Profit on sale of shares and options

Gain on fair value of financial assets through profit and loss

3. Other expenses

Other expenses include the following:

Loss on disposal of shares and options

Realised foreign exchange losses

4. Income Tax

Income tax expense

Current tax

Deferred tax

Deferred income tax expense included in income tax expense comprises:

(Decrease)/ increase in deferred tax assets

(Decrease)/ increase in deferred tax liabilities

1,136,919

76,153

-

1,213,072

4,228

1,070,451

-

1,074,679

8,853

11,138

197,106

(22,891)

174,215

39,406

(62,297)

(22,891)

163,519

-

140,278

303,797

11,564

555,080

429,120

995,764

-

-

-

70,058

70,058

(58,269)

128,327

70,058

$$



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20102011

4. Income Tax (cont’d)

Profit / (loss) from continuing operations before income tax

Tax expense / (credit) at the Australian tax rate of rate of 30%

Tax effect of amounts which are not deductible in calculating taxable income:


Other non-deductible expenses

Impairment of capitalised exploration costs

Other non-assessable revenue

Accounting profit in excess of capital gain

Losses attributable to foreign jurisdiction not recognised

Deferred tax movement accounted for directly in equity

Deferred tax assets and losses not recognised

Losses utilised where deferred tax asset not previously recognised

Prior year unders / overs

Income tax expense at the effective rate of 4.9% (2010: 6.7%)

Numerical reconciliation of income tax expense to prima facie tax payable:

(6,712,296)

(2,013,689)

578,048

61,410

132,484

-

(66,378)

375,690

(15,232)

1,121,882

-

-

174,215

1,043,147

312,944

-

5,084

-

(128,736)

(5,032)

-

-

-

(178,091)

63,889

70,058

$$

Deferred tax liabilities

Timing differences

Offset of deferred tax assets

Net deferred tax liabilities

Deferred tax assets

Tax losses

Timing differences

Expenses taken to equity

Offset of deferred tax liabilities

66,030

(26,831)

39,199

-

18,864

7,967

26,831

(26,831)

128,327

(81,467)

46,860

46,745

11,524

23,198

81,467

(81,467)



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20102011

6. Cash and Cash Equivalents

Cash at bank and in hand

Cash held on deposit

4,206,075

35,000,000

39,206,075

5,545,635

-

5,545,635

$$

20102011

NUmbER NUmbER

Profit/(Loss) after income tax

Basic profit/ (loss) per share attributable to equity holders

Diluted profit/ (loss) per share attributable to equity holders

Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS

Weighted average number of dilutive options outstanding

Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS

$$

5. Earnings per Share

Basic earnings per share amounts are calculated by dividing net profit/ (loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares on issue during the year.

The following reflects the income and share data used in calculating basic and diluted earnings / (loss) per share:

(6,886,511)

(0.027)

(0.027)

257,266,046

-

257,266,046

973,089

0.023

0.018

43,000,001

13,722,504

56,722,505

There have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

Cash at bank and in hand earns interest at floating rates based on daily bank rates.Cash held on deposit earns interest at the average rate of 5.88% per annum.



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20102011

7. Trade and Other Receivables

Interest Receivable

Loans to ASX-listed entities1

GST Receivable

Other receivables

210,666

201,221

49,174

32,709

493,770

-

-

15,995

-

15,995

$

$

$

$

1 Loans to ASX listed entities comprises 5 convertible loan notes in Coretrack Limited (ASX: CKK) at $50,000 each which the Company subscribed for in August 2010. The convertible loan notes can be converted at any time prior to the repayment date, which is 18 months after date of issue.

20102011

8. Other Assets

Prepayments

Deposits paid

33,901

30,300

64,201

15,451

-

15,451

$$

At inception, the conversion option embedded within the convertible loan agreement was fair valued using a Black-Scholes Option Pricing Model. The fair value of the option was recognised as a financial asset at fair value through profit and loss and reduced the carrying value assigned to the loan receivable balance. Subsequent to its initial recognition, the loan receivable has been measured at amortised cost using the effective interest rate method.

Risk ExposureAs at 30 June 2011, no trade and other receivable balances are past due or considered impaired (30 June 2010: nil).

20102011INTEREST RATE

CARRyING VALUE OF LOAN

Convertible loan note

Fair value of loan at inception

Interest receivable recognised using the effective interest rate

Interest received at the coupon rate

Carrying value at amortised cost at balance date

201,221

145,894

76,153

(20,826)

201,221

9.5% -

-

-

-

-



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20102011

9. Financial Assets at fair value through profit and loss

Financial Assets at fair value through profit and loss 483,539

483,539

1,110,021

1,110,021

$$

20102011

10. Exploration and evaluation expenditure


Movement

Opening balance

Exploration expenditure acquired through a business combination (a)

Exploration Expenditure capitalised during the year

Impairment of capitalised exploration expenditure (b)

Closing balance

107,254,678

427,755

102,926,099

4,342,438

(441,614)

107,254,678

427,755

415,961

-

11,794

-

427,755

$$

20102011

11. Property, plant and equipment

Cost

Accumulated depreciation

Movements analysis

Plant and equipment

Opening balance

Property, plant and equipment acquired through a business combination

Property, plant and equipment purchased

Depreciation charge for the year

Closing balance

885,708

(66,310)

819,398

-

282,955

602,753

(66,310)

819,398

-

-

-

-

-

-

-

-

$$

(a) During the current year, the Company acquired an 80% interest in the Mayoko iron ore project pursuant to the acquisition of DMC Mining Ltd. Refer to note 19 for further information.

(b) The directors have assessed the carrying value of the Company’s Quidong Project, and have recognised an impairment loss of $441,614 in the Statement of Comprehensive Income.

The value of the Group’s interest in exploration expenditure is dependent upon:

• the continuance of the Group’s rights to tenure of the areas of interest;• the results of future exploration; and• the recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale.

Financial assets comprise investments in various ASX listed entities. There are no fixed returns or fixed maturity dates attached to these investments.



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20102011

12. Trade and Other Payables

Trade creditors

Other creditors and accruals

2,037,833

139,166

2,176,999

30,899

18,046

48,945

$$

Opening balance

Issue of placement 1 shares

Issue of placement 2 shares

Share issue costs

Recognition of lapsed options

Deferred tax recognised directly in equity

Share consolidation

Issue of placement shares

Share issue costs

Shares based payment

Deferred tax recognised directly in equity

Closing balance

23 Dec 2009

23 Dec 2009

23 Dec 2009

30 Jun 2010

30 Jun 2010

20 Dec 2010

7 Jan 2011

7 Jan 2011

10 Jan 2011

30 Jun 2010

14. Issued Capital

58,500,001

(19,012,467)

320,000,000

-

120,000,000

479,487,534

6,695,130

-

96,000,000

(8,337,211)

36,000,000

(15,232)

130,342,687

27,500,001

14,000,000

17,000,000

-

-

-

58,500,001

3,587,840

1,120,000

1,870,000

(40,908)

135,000

23,198

6,695,130

20102011

13. Provisions

Balance at beginning of year

Provision for annual leave recognised during the year

Annual leave taken or paid out

Balance at end of year

22,436

2,307

(24,743)

-

17,822

4,614

-

22,436

$$

Trade creditors are non-interest bearing and are normally settled on 30-day terms. Other creditors and accruals are non-interest bearing and have an average term of 45 days.

DATE

2011 2010

NO. OF ShARESNO. OF ShARES $$DETAILS

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.



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15. Accumulated (loses) / Retained earnings

Balance at beginning of year

Net profit / (loss) for the year

Fair value of expired options transferred to retained earnings

Balance at end of year

301,486

(6,636,051)

-

(6,334,565)

(740,449)

973,089

68,846

301,486

$$

16. Reserves

a) Reserves

Share based payments reserve

Foreign currency translation reserve

3,279,146

(154,662)

3,124,484

-

-

-

Capital risk management

The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group’s capital includes ordinary share capital and financial liabilities, supported by financial assets.

The Group’s capital includes mainly ordinary share capital and financial liabilities supported by financial assets.

Due to the nature of the Group’s activities being mineral exploration, the Group does not have ready access to credit facilities. Consequently, the primary source of funding is equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position compared to the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required.

The Group currently has $39,206,075 of cash and cash equivalents and no debt which is sufficient working capital to fund its exploration commitments in the near future.


The share-based payments reserve is used to record the value of equity benefits which may be provided:

• to employees and directors as part of their remuneration; and • to advisers and consultants as payments for services rendered.

During the year, the Group issued 42,700,000 options to directors, consultants, employees and brokers exercisable at $0.30 on or before the 31 December 2012. 36,000,000 of these options are escrowed till 14 January 2013, being 24 months from the date of re-quotation of the Company on ASX. A further 4,000,000 of these options are escrowed till 14 January 2012, being 12 months from the date of re-quotation of the Company on the ASX.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of financial statements of foreign subsidiaries.



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Financial Risk Management

The Groups activities expose it to a variety of financial risks including interest rate risk, price risk, credit risk and liquidity risk. The Group does not use derivative financial instruments; however the Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks and aging analysis for credit risk.

Risk management is carried out by the Board of Directors with assistance from suitably qualified external advisors.

(a) Market risk

• Foreign exchange risk As a result of operations based overseas, the Group is exposed to foreign exchange risk from commercial transactions and

recognised assets and liabilities denominated in a currency that is not the Group’s functional currency.

The Group also has transactional currency exposures. Such exposure arises from purchases by an operating entity in currencies other than the Group’s functional currency.

• Price risk The parent entity is exposed to equities securities price risk. This arises from investments held by the parent and classified

as at fair value through profit and loss. The parent entity’s equity investments are publicly traded on the ASX.

• Cash flow and fair value interest rate risk The Group’s only interest rate risk arises from cash and cash equivalents. Term deposits and current accounts held with

variable interest rates expose the Group to cash flow interest rate risk.

Interest rate sensitivity analysis

The following table illustrates sensitivities to the Group’s exposures to changes in interest rates and equity prices. The tables indicates the impact of how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.

Change in profit/ (loss)

Increase in interest rate by 200 basis points

Decrease in interest rate by 200 basis points

Change in equity

Increase in interest rate by 200 basis points

Decrease in interest rate by 200 basis points

+447,517

-447,517

-

-

(6,129,864)

(7,024,898)

130,342,687

130,342,687

+110,913

-110,913

-

-

1,084,002

862,172

6,695,130

6,695,130

2011 2010bALANCE AFTER

ChANGEbALANCE AFTER

ChANGE ChANGEChANGE

$$ $$

The above interest rate sensitivity analysis has been performed on the assumption that all other variables remain unchanged.

17. Financial Instruments



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(B) Price risk

The Group and the parent entity are exposed to equity securities price risk. This arises from investments held by the Group and classified as fair value through profit or loss.

To manage its price risk arising from investments in equity securities, management have a short term position in the investments.

Management have performed sensitivity calculations over the equities held at year end and the impact on earnings is considered to be immaterial due to the short term nature of these holdings.

(c) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. The Group does not have any significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics.

The carrying amount of trade and other receivables recorded in the financial statements, net of any provisions for losses, represents the Group’s maximum exposure to credit risk without taking account of the fair value of any collateral or other security obtained.

(d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by monitoring forecast and actual cash flows. As at that reporting date the Group had sufficient cash reserves to meet its requirements. The Group therefore had no credit standby facilities or arrangements for further funding in place.

The financial liabilities of the Group at reporting date were trade payables incurred in the normal course of the business. These were no-interest bearing and were due within the normal 30-60 days terms of creditor payments. The Group does not consider this to be material to the Group and have therefore not undertaken any further analysis of risk exposure.

Financial Assets

Cash


Other assets


Total financial assets

Financial Liabilities

Trade payables and accruals

Total financial liabilities

4,206,075

-

-

-

4,206,075

-

-

35,000,000

201,221

-

-

35,201,221

-

-

-

292,549

64,201

483,539

840,289

2,176,999

2,176,999

39,206,075

493,770

64,201

483,539

40,247,585

2,176,999

2,176,999

5.38%

9.5%

n/a

n/a

-

-

-

-

-

-

-

-

-

-

-

-

-

-

FLOATING INTEREST

RATE

1 yEAR OR LESS

OVER 1 TO 5 yEARS

mORE ThAN 5 yEARS

NON-INTEREST bEARING

TOTAL

WEIGhTED AVERAGE

EFFECTIVE INTEREST

RATE

FINANCIAL INSTRUmENT

2011 FIxED INTEREST RATE mATURING IN



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Financial Assets

Cash


Other assets


Total financial assets

Financial Liabilities

Trade payables and accruals

Total financial liabilities

5,545,635

-

-

-

5,545,635

-

-

-

15,995

15,451

1,110,021

1,141,467

48,945

48,945

5,545,635

15,995

15,451

1,110,021

6,687,102

48,945

48,945

3.20%

n/a

n/a

n/a

n/a

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

FLOATING INTEREST

RATE

1 yEAR OR LESS

OVER 1 TO 5 yEARS

mORE ThAN 5 yEARS

NON-INTEREST bEARING

TOTAL

WEIGhTED AVERAGE

EFFECTIVE INTEREST

RATE

FINANCIAL INSTRUmENT

2010 FIxED INTEREST RATE mATURING IN

(e) Fair value estimation

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

The fair value of financial instruments traded in active markets, such as trading and available for sale securities, is based on current quoted market prices at reporting date. The quoted market price used for financial assets held by the Group is the current market price.

The fair value of financial instruments that are not traded in an active market such as unlisted investments and subsidiaries is determined using valuation techniques where applicable. Where this is unable to be done they are carried at cost.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature.

Financial Instruments Measured at Fair Value

The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels:

• quoted prices in active markets for identical assets or liabilities (Level 1);• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices)

or indirectly (derived from prices) (Level 2); and• inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).



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Financial Assets

Financial assets at fair value through profit and lossinvestments held for trading 483,589 - - 483,539

2011 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL

$$ $$

Financial Assets

Financial assets at fair value through profit and lossinvestments held for trading 1,110,021 - - 1,110,021

2010 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL

$$ $$

The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors in assessing performance and in determining the allocation of resources. The Group has one main operating segment being mineral exploration which comprises the costs associated with acquiring mineral assets and the costs incurred in carrying out exploration work at key projects.

Segment Performance

Revenue

Interest revenue

Total segment revenue

Segment net loss after tax

Segment net operating loss includes the following significant items

Agreement termination payment


Impairment loss

Segment assets

Segment assets include:



Property, plant and equipment


Other assets

Segment liabilities

Cashflow information

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

-

-

(1,244,214)

-

-

-

108,365,473

183,721

107,254,678

819,398

-

107,676

108,365,473

(1,371,762)

(484,318)

(4,938,233)

-

1,213,072

1,213,072

5,220,683

3,600,000

1,926,827

-

39,956,188

39,022,354

-

-

483,539

450,295

39,956,188

(1,041,542)

507,963

(49,449,122)

-

1,213,072

1,213,072

(6,886,511)

3,600,000

1,926,827

(441,614)

148,321,661

39,206,075

107,254,678

819,398

483,539

557,970

148,321,661

(2,413,304)

23,645

(54,394,314)

88,031,108

-

-

(441,614)

-

-

(441,614)

-

-

-

-

-

-

-

-

-

(6,959)

88,301,108

2011 mAyOKO pROJECT

qUIDONGpROJECT OThER TOTAL

$$ $$

18. Segment Information



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Segment Performance (CONT)

Geographical segment information

Revenue

Interest revenue

Total segment revenue

Segment net profit after tax

Segment net operating loss includes the following significant items

Profit on disposal of financial assets

Gain on fair value of financial assets through profit and loss

Segment assets

Segment assets include:



Financial assets

Other assets

Segment liabilities

Cashflow information

Net cash from in operating activities

Net cash from in investing activities

Net cash from financing activities

-

-

-

-

-

-

-

427,755

-

-

427,755

-

-

(11,795)

-

303,797

303,797

973,089

555,080

429,120

7,114,857

5,545,635

-

1,110,021

31,446

6,687,102

(118,241)

45,258

462,809

2,949,090

303,797

303,797

973,089

555,080

429,120

7,114,857

5,545,635

427,755

1,110,021

31,446

7,114,857

(118,241)

45,258

451,014

2,949,090

$$$

2010 qUIDONG pROJECT OThER TOTAL

20102011

The analysis of the location of non-current assets is as follows:

Australia

Congo

441,614

108,074,076

108,515,690

427,755

-

427,755

$$



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Property, plant and equipment

Capitalised exploration expenditure

Total assets

Trade and other payables

Borrowings

Total liabilities

Net assets

Non-controlling interest in net assets

Net assets attributable to African Iron

248,061

115,201

282,955

16,244,197

16,890,413

(562,105)

(984,000)

(1,546,105)

15,344,308

248,061

115,201

282,955

102,926,099

103,572,316

(562,105)

(984,000)

(1,546,105)

102,026,211

(19,026,211)

83,000,000

CARRyING VALUE OF ASSETS AND LIAbILITIES ACqUIRED

FAIR VALUE OF ASSETS AND LIAbILITIES ACqUIRED

African Iron successfully completed the acquisition of 100% of DMC Mining Ltd (“DMC Mining”) on 10 January 2011. The consideration paid consisted of:

The fair value assigned to capitalised exploration expenditure is based on an independent valuation dated 10 November 2010. Full details of the valuation methods and assumptions are set out in the valuation report which was published in the Company’s notice of shareholder meeting released to ASX on 17 November 2010.

Costs of $3,748,052 were incurred in relation to the acquisition of DMC Mining.

$Cash

Issue of 120,000,000 fully paid ordinary shares (at 30 cents per share)

47,000,000

36,000,000

83,000,000

African Iron is also required to pay a deferred consideration in the form of a production royalty of $1 per tonne of iron ore shipped (whether direct ship ore (“DSO”), beneficiated DSO or magnetite concentrate).

The fair values of assets and liabilities acquired pursuant to the acquisition of DMC Mining are as follows:

19. Business Combination



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(A) Employee Incentive Scheme

The Employee Incentive Scheme is designed to provide long term incentives for senior managers, executive directors and non-executive directors and to attract and retain experienced employees, board members and executive officers and provide them with the motivation to make the Group more successful. Under the plan, participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.

An option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise are satisfied. The options remain exercisable for a period between two or five years from listing date or on cessation of employment. Options are granted under the plan for no consideration.

Options granted under the plan carry no dividend or voting rights. When exercisable, shares allotted pursuant to the exercise of options will be allotted following receipt of all the relevant documents and payments and will rank equally with all other shares.

The exercise price of options will be 125% of the market value of the Group’s Shares on the date on which the Employee Options are issued; or $0.20 or any greater price determined by the board.

There were no options issued under the Employee Incentive Scheme during the year.

(B) Other share based payments

The following options were awarded to directors, employees and consultants during the year ended 30 June 2011. All options granted are for ordinary shares in African Iron Limited, which confer a right of one ordinary share for every option held. All options vested on issue.

10/01/2011

07/04/2011

31/03/2007

10/01/2011

07/04/2011

30/06/2010

31/12/2012

31/12/2012

$0.20

$0.30

$0.30

2,150,000

-

-

-

-

-

40,000,000

2,700,000

42,700,000

$0.30

-

40,000,000

2,700,000

42,700,000

$0.30

-

-

-

-

-

2,150,0002

-

-

-

-

-

40,000,0001

2,700,000

42,700,000

$0.30

31/12/2012

31/12/2012

$0.30

$0.30

40,000,0001

2,700,000

42,700,000

GRANT DATE

GRANT DATE ExpIRy DATE ExERCISE pRICE

bALANCE AT START OF

yEAR

GRANTED DURING ThE

yEAR

ExERCISED DURING ThE

yEAR

FORFEITED DURING ThE

yEAR

bALANCE AT END OF ThE

yEAR

VESTED & ExERCISAbLE

AT END OF ThE yEAR

ExpIRy DATE ExERCISE pRICE NUmbER OF OpTIONS GRANTED DURING ThE yEAR

1. Options are subject to escrow conditions, with 36,000,000 exercisable from 14 January 2013 and 4,000,000 exercisable from 14 January 2012.

Details of options on issue at 30 June 2011 are set out below:

numBernumBernumBernumBernumBernumBer

Weighted average exercise price

2. 2,150,000 listed options issued under the Employee Incentive Scheme expired on the 30 June 2010.

20. Share-Based Payments



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The fair value at grant date has been determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The Black Scholes model inputs included the following:

Fair value of options granted during the year ended 30 June 2011

The assessed fair value at grant date of options granted during the year is as follows:

10 January 2011

7 April 2011

40,000,000

2,700,000

$0.075 per option

$0.101 per option

GRANT DATE GRANTED FAIR VALUE

Exercise price

Expiry date

Share price on grant date

Expected share price volatility

Expected dividend yield

Risk-free interest rate

$0.30

31 December 2012

$0.24

65.12%

0%

4.99%

$0.30

31 December 2012

$0.29

65.12%

0%

5.00%

GRANT DATE OF 10 JANUARy 2011 GRANT DATE OF 7 ApRIL 2011

(C) Expenses arising from sharebased payment transactions

Share based payments expense recognised in respect of options issued during the year was $1,926,827 (2010: nil). An amount of $1,352,319 (2010: nil) was recognised within equity as part of capital raising costs.

(A) Exploration Expenditure Commitments

In order to maintain its Australian mining tenements, the Company is required to meet the prescribed conditions under which tenements were granted. The Company is in the process of reviewing its 100% owned Quidong gold and base metals project, which is located near Bombala, New South Wales. The aim of the review is to determine whether the tenements are to be divested or relinquished.

During the year, the government of the Republic of Congo renewed the Mayoko-Lekoumou iron ore exploration permit for a further period of two years to April 2013 and the Company was granted an exemption from the requirement to relinquish up to 50% of the permit surface area on the first renewal. As part of the renewal application process, the Company is required to submit a work plan. The government of the Republic of Congo does not stipulate minimum expenditure amounts to be incurred in relation to the permit area, however it does require the submitted work plan to be adhered to.

(B) Contingent Liabilities

Pursuant to the terms of the acquisition of DMC Mining, African Iron is required to pay a deferred consideration in the form of a production royalty of $1 per tonne of iron ore shipped (whether direct ship ore (“DSO”), beneficiated DSO or magnetite concentrate).

21. Commitments, Contingent Liabilities and Contingent Assets



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The consolidated financial statements include the financial statements of African Iron and the subsidiaries listed in the following table.

(A) Parent entities

African Iron Limited is the ultimate Australian parent entity.

(B) Other related party transactions

Mr Anthony King (who resigned as a director on 10 January 2011) was also a director of Grange Consulting Pty Ltd during the year. $73,004 (2010: $86,575) was paid to Grange Consulting Pty Ltd for corporate advisory and company secretarial services provided to the Company. The services were provided on normal commercial terms and conditions.

Pursuant to the terms of the Share Sale Agreement which governed the Company’s acquisition of 100% of the shares of DMC Mining from Cape Lambert Resources Limited, the Company repaid a total of $4,919,428 to Cape Lambert immediately after settlement. The amount paid was the repayment of transitional funding (as defined in the agreement) provided by Cape Lambert during the period between 4 November 2010 (the date of execution of the Heads of Agreement) and the date prior to the Company being readmitted to official quotation on ASX. Mr Antony Sage is a director of Cape Lambert and as at 30 June 2011, Cape Lambert held a 25% interest in the Company.

In July 2011, the independence of the board was strengthened the appointment of the Hon. John Moore AO as an independent, Non-Executive Director.

In August 2011, the Company secured, through a new 85% owned Congolese subsidiary, an Authority to Prospect for iron ore in the Republic of Congo, West Africa (“Ngoubou-Ngoubou Permit”). The Ngoubou-Ngoubou permit covers an area of 944km2 and is the northern extension of the Company’s Mayoko-Lekoumou Exploration Permit, which hosts the Mayoko iron ore project.

The Company appointed Mr Simon Youds as its Chief Executive Officer with effect from 5 September 2011. Mr Youds is a professional mining engineer with extensive African and bulk commodities experience and a track record of taking mineral projects from concept to production.

On 14 September 2011, the Company completed the acquisition of an additional 12% of DMC Iron (Congo) SA. As a consequence of the acquisition, the Company now owns 92% of the Mayoko iron ore project. The consideration for the acquisition comprised:

• $5,800,000 in cash;

• 22,315,436 fully paid ordinary African Iron shares (subject to escrow restrictions for a period of 13months from the date of issue) at a deemed issue price of $0.298 per share; and

• a deferred consideration of A$0.150 for each dry metric tonne of iron ore sold from the Mayoko Project.

Apart from the above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group or the state of affairs of the Group in future financial years.

Quidong Minerals Pty Ltd

DMC Mining Pty Ltd

DMC Iron Congo SA

Australia

Australia

Republic of Congo

100%

100%

80%1

100%

-

-

COUNTRy OF INCORpORATION % EqUITy INTEREST2010

% EqUITy INTEREST2011

1. Subsequent to balance date, African Iron increased its interest in DMC Iron Congo from 80% to 92%.

22. Related Party Disclosure

23. Subsequent Events



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Non Cash Financing and Investing activities

In January 2011, African Iron successfully completed the acquisition of 100% of DMC Mining. The consideration was partially satisfied through the issue of 120,000,000 fully paid ordinary shares.

During the year, 42,700,000 unlisted options with an exercise price of $0.30 and an expiry date of 31 Dec 2012 were issued to directors, employees and consultants.

2010

2010

2011

2011

Amounts paid or due and payable to Bentleys Audit and Corporate (WA) Pty Ltd for:

Preparation of an investigating accountants report

An audit or review of the financial report of the entity

Reconciliation of Cash Flow from Operations with Profit after Income Tax

Profit / (Loss) after income tax for the period

Adjustments for:

Effective interest on convertible notes

Finance cost for the year

Depreciation


Profit on sale of shares and options

Loss on fair value of financial assets through profit and loss

Impairment loss

Reclassification of termination payment to investing activities

Decrease/(increase) in trade and term receivables

Increase/(decrease) in trade payables and accruals

Increase/(decrease) in tax liabilities

Net cash inflow from operating activities

20,000

35,350

55,350

(6,886,511)

(76,153)

-

66,310

1,926,827

(1,070,451)

500,169

441,614

3,748,052

(189,277)

1,388,852

174,213

23,645

973,089

-

616

-

-

-

-

-

-

(1,027,853)

93,853

5,553

45,258

-

22,400

22,400

$

$

$

$

24. Auditor’s Remuneration

25. Cash Flow Information



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The following table discloses the remuneration of the directors and executives of the Group:

20102011

Short-term employee benefits

Post- employment benefits


Total

237,905

13,654

1,389,883

1,641,442

90,000

8,100

-

98,100

$$

Detailed remuneration disclosures are provided in the remuneration report on pages 8 to 10.

Option holdings

Details of unlisted options over ordinary shares of African Iron Limited held by directors and executives are set out below:

Dr Burston

Mr Sage

Mr Ariti

Mr King1

Mr Bontempo1

Mr Brockhurst1

Executives

Ms Tolcon

Total

Mr King

Mr Bontempo

Mr Brockhurst

Total

Directors

Directors

-

-

-

1,237,933

600,000

187,500

-

2,025,433

1,743,333

1,250,000

192,500

3,185,833

4,000,000

8,000,000

6,000,000

-

-

-

500,000

-

-

-

-

-

-

-

-

(1,237,933)

(600,000)

(187,500)

-

(2,025,433)

(505,400)

(650,000)

(5,000)

(1,160,400)

4,000,000

8,000,000

6,000,000

-

-

-

500,000

18,500,000

1,237,933

600,000

187,500

2,025,433

-

-

-

-

-

-

-

-

-

-

-

-

4,000,000

8,000,000

6,000,000

-

-

-

500,000

18,500,000

1,237,933

600,000

187,500

2,025,433

NAmE

NAmE

bALANCE AT ThE START OF ThE

yEAR

bALANCE AT ThE START OF ThE

yEAR

GRANTED AS REmUNERATION

GRANTED AS REmUNERATION

ExERCISED

ExERCISED

OThER ChANGES

OThER ChANGES

bALANCE AT END OF ThE yEAR


VESTED AND ExERCISAbLE

VESTED AND ExERCISAbLE

Notes:1. These directors resigned on 10 January 2011. The option balances reflected above show the number of options theses directors held on the date they resigned.2. Mr Ariti also holds 100,000 listed options which he acquired on market.

2011

2010

26. Key Management Personnel Remuneration



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20102011

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Total liabilities

Contributed equity

Retained earnings/ (accumulated losses)


Total equity

Profit/ (loss) after income tax

Other comprehensive income/ (loss) for the year

Total comprehensive income/ (loss) for the year

39,955,387

89,342,269

129,297,656

990,257

39,201

1,029,458

130,342,687

(5,353,635)

3,279,146

128,268,198

(5,341,110)

-

(5,341,110)

6,687,100

195,213

6,882,313

71,381

128,327

199,708

6,695,130

(12,525)

-

6,682,605

973,088

-

973,088

$$

Dr Burston

Mr Sage

Mr Ariti

Executives

Ms Tolcon

Total

Mr King

Mr Bontempo

Mr Brockhurst

Total

Directors

Directors

-

-

-

-

-

2,885,865

700,000

385,000

3,970,865

-

-

-

-

-

-

-

-

-

-

500,000

300,000

148,333

948,333

(393,890)

500,000

(10,000)

96,110

-

500,000

300,000

148,333

948,333

2,491,975

1,200,000

375,000

4,066,975

NAmE

NAmE

bALANCE AT ThE START OF ThE yEAR

bALANCE AT ThE START OF ThE yEAR



pURChASE ON mARKET

pURChASE ON mARKET

ACqUITED ON ThE ExERCISE OF OpTIONS

ACqUITED ON ThE ExERCISE OF OpTIONS

Share holdings

Details of fully paid ordinary shares of African Iron Limited held by directors and executives are set out below:

2011

2010

On 10 January 2011 Mr King, Mr Bontempo and Mr Brockhurst resigned as directors of African Iron Limited. Upon resignation Mr King held 1,682,043 African Iron shares; Mr Bontempo held 810,000 African Iron shares and Mr Brockhurst held 253,125 African Iron shares.

The individual financial statements of the parent entity show the following aggregate amounts:

27. Parent Entity Information



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In accordance with a resolution of the directors of African Iron Limited, I state that:

1. In the opinion of the directors:

(a) the financial statements and notes of African Iron Limited for the financial year ended 30 June 2011 are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of the Consolidated Entity as at 30 June 2011 and of its performance, for the period ended on that date; and

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

(iii) complying with International Financial Reporting Standards as disclosed in Note 1.

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

2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the year ended 30 June 2011.

Signed in accordance with a resolution of the Directors:

Joe Ariti

Perth, Western Australia, 30 September 2011


AFRICAN IRON LTDDIRECTORS’DECLARATION

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Independent Auditor's Report To the Members of African Iron Limited We have audited the accompanying financial report of African Iron Limited (“the Company”)

and Controlled Entities (“the Consolidated Entity”), which comprises the consolidated

statement of financial position as at 30 June 2011, and the consolidated statement of

comprehensive income, consolidated statement of changes in equity and consolidated

statement of cash flows for the year then ended, notes comprising a summary of significant

accounting policies and other explanatory information, and the directors’ declaration of the

Company and the Consolidated Entity, comprising the Company and the entities it

controlled at the year’s end or from time to time during the financial year.

Directors Responsibility for the Financial Report

The directors of the Company are responsible for the preparation and fair presentation of

the financial report 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 Standards 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 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

judgment, including the assessment of the risks of material misstatement of the financial

report, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the

financial report in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by the

directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.


AFRICAN IRON LTDINDEpENDENTAUDITOR’S REpORT

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Independent Auditor’s Report To the Members of African Iron Limited(Continued) Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical

pronouncements and the Corporations Act 2001.

Auditor's Opinion

In our opinion:

a. The financial report of African Iron Limited is in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the Consolidated Entity’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;

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 included in directors’ report of 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.

Auditor’s Opinion

In our opinion, the Remuneration Report of African Iron Limited for the year ended 30 June 2011, complies with

section 300A of the Corporations Act 2001.

BENTLEYS CHRIS WATTS CA Chartered Accountants Director DATED at PERTH this 30th day of September 2011


AFRICAN IRON LTDINDEpENDENTAUDITOR’S REpORT (CONT)

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The Board of Directors of African Iron Limited (African Iron) is responsible for establishing the corporate governance framework of the Company having regard to the ASX Corporate Governance Council’s (CGC) Corporate Governance Principles and Recommendations (Recommendations) and CGC published guidelines.

In accordance with ASX Listing Rule 4.10.3, this corporate governance statement discloses the extent to which the Company has followed the Recommendations by detailing the Recommendations that have not been adopted by the Company and the reasons why they have not been adopted. The Company is pleased to advise that the Company’s practices are largely consistent with CGC guidelines. However, in areas where they do not correlate, the Company is working toward compliance or do not consider that the practices are appropriate for the current size and scale of operations.

African Iron was previously named Stirling Minerals Limited and changed its name as part of the acquisition of 100% of DMC Mining Limited (DMC Transaction). Amended corporate governance policies were adopted in January 2011 as part of the DMC Transaction. Where corporate governance practices were in place for only part of the year ended 30 June 2011 that fact is noted. The current corporate governance policies are posted in a dedicated corporate governance information section of the Company’s website at www.africanironlimited.com.

ADhERENCE TO ThE GUIDE ON bEST pRACTICE RECOmmENDATIONSReccomendation Comply Yes/No

Principal 1 – Lay solid foundations for management and oversight

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

1.2 Disclose the process for evaluating the performance of senior executives.

1.3 Provide the information indicated in the guide to reporting on Principle 1.

Principal 2 – Structure the Board to add value

2.1 A majority of the Board should be independent directors.

2.2 The chairperson should be an independent director.

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

2.4 The Board should establish a nomination committee.

2.5 Disclose the process for evaluating the performance of the Board, its committees and individual directors.


Principal 3 – Promote ethical and responsible decision-making

3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:

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

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

3.1.3 The responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

3.2 Establish and disclose the policy concerning trading in Company securities by directors, senior executives and employees.


Yes

Yes

Yes

No from January 2011

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes


AFRICAN IRON LTDCORpORATE GOVERNANCESTATEmENT

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Reccomendation Comply Yes/No

Principal 4 – Safeguard integrity in financial reporting

4.1 The Board should establish an audit committee.

4.2 The audit committee should be structured so that it:

4.2.1 consists only of non-executive directors;

4.2.2 consists of a majority of independent directors;

4.2.3 is chaired by an independent chairperson, who is not chairperson of the Board; and

4.2.4 has at least three members.

4.3 The audit committee should have a formal charter.


Principal 5 – Make timely and balanced disclosure

5.1 Companies should established written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.


Principal 6 – Respect the rights of shareholders

6.1 Companies should design a communication policy for promoting effective communication with shareholders and encourage their participation at general meetings and disclose their policy or a summary of that policy.


Principal 7 – Recognise and manage risk

7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

7.2 The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.

7.3 The Board should disclose whether it has received assurances from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.


Principal 8 – Remunerate fairly and responsibly

8.1 The Board should establish a remuneration committee.

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


No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes


AFRICAN IRON LTDCORpORATE GOVERNANCESTATEmENT (CONT)

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ThE bOARD OF DIRECTORSThe Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and it is the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the final responsibility for the successful operations of the Company.

To assist the Board in carrying out its functions, it has developed a Code of Conduct to guide the Directors, the management and other key executives in the performance of their roles.

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. Full details of the Board’s role and responsibilities are contained in the Board Charter, a copy of which is available on the Company’s website at www.africanironlimited.com.

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following:

• Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board.

• Strategy Formulation: to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.

• Overseeing Planning Activities: the development of the Company’s strategic plan.

• Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.

• Monitoring, Compliance and Risk Management: the development of the Company’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company.

• Company Finances: approving expenses and approving and monitoring acquisitions, divestitures and financial and other reporting.

• Human Resources: appointing, and, where appropriate, removing the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as well as reviewing the performance of the CEO and monitoring the performance of senior management in their implementation of the Company’s strategy.

• Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems to ensure the well-being of all employees.

• Delegation of Authority: delegating appropriate powers to the CEO to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board.

STRUCTURE OF ThE bOARDTo add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations. The names of the Directors and their qualifications and experience are stated in the Directors’ Report. Directors are appointed based on the specific skills required by the Company and on other attributes such as their decision-making and judgment skills.



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The Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer. Mr Jason Bontempo and Mr Stephen Brockhurst were Non-Executive Directors until January 2011 at which time there was a complete board change as part of the DMC Transaction. Mr Ian Burston, Mr Joe Ariti and Mr Tony Sage were appointed at that time and are all Non-Executive Directors. Mr Ian Burston is an independent Director as he meets the following criteria for independence adopted by the Company.

An Independent Director is a Non-Executive Director and:

• is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;

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

• within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided;

• is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;

• has no material contractual relationship with the Company or other group member other than as a Director of the Company;

• has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and

• is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

From 30 June 2010 to January 2011, the role of Chief Executive Office of the Company was discharged by Mr Tony King. From January 2011 until 30 June 2011, this role was discharged by Mr Joe Ariti. Since 30 June, the Company appointed a Chief Executive Officer. As a result of Mr Ariti’s position as acting Chief Executive Officer, he does not satisfy the definition of being an independent Director. As a result of Mr Sage’s role as Executive Chairman of Cape Lambert Resources Limited, a substantial shareholder of the Company, Mr Sage does not satisfy the definition of being an independent Director. On 1 July 2011, the Company appointed the Hon. John Moore AO an independent Non-Executive Director.

There are procedures in place, agreed by the Board, to enable directors, in furtherance of their duties, to seek independent professional advice at the Company’s expense.

The term in office held by each Director in office at the date of this report is as follows:

Mr Ian Burston 9 months (Non-Executive Chairman)Mr Joe Ariti 9 months (Non-Executive Director)Mr Tony Sage 9 months (Non-Executive Director)The Hon. John Moore AO 3 months (Non-Executive Director)

pERFORmANCE REVIEW / EVALUATION

It is the policy of the Board to conduct evaluation of its performance. The objective of this evaluation is to provide best practice corporate governance to the Company.

The performance of the Chief Executive Officer is monitored by the Board. A formal performance review of the Chief Executive Officer did not occur during the year as this role was performed by Mr Joe Ariti as acting Chief Executive Officer until the appointment of Mr Simon Youds as Chief Executive Officer on 1 September 2011.

The performance of senior management is monitored by the Board as a whole.



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The Board have established formal practices to evaluate the performance of the Board, committees, non-executive Directors, the Chief Executive Officer, and senior management. Details of these practices are available on the Company’s website. No formal performance evaluation of the Board, individual directors of senior management took place during the year. In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifically, Directors are provided with the resources and training to address skill gaps where they are identified.

SECURITIES TRADING pOLICy

In December 2010, the Company adopted a new Securities Trading Policy (which was then updated on 8 July 2011) in compliance with the ASX Listing Rules, which is located on the Company’s website: www.africanironlimited.com.

Under the Company’s Securities Trading Policy, a Director, executive or other employee must not trade in any securities of the Company at any time when they are in possession of unpublished, price-sensitive information in relation to those securities. Additionally, the Board and other employees may not deal in the Company’s securities 2 days preceding the release of annual results and half year results.

Before commencing to trade outside of those black-out periods, a Director, executive or other employee must notify the Chairman or Company Secretary of their intention to do so.

As is required by the ASX Listing Rules, the Company notifies the ASX of any transaction conducted by a Director in the securities of the Company.

Further information regarding African Iron’s Securities Trading Policy can be found on the Company’s website, www.africanironlimited.com.

ATTESTATIONS by ChIEF ExECUTIVE OFFICER AND ChIEF FINANCIAL OFFICER

It is the Board’s policy, that the Chief Executive Officer and the Chief Financial Offier make the attestations recommended by the CGC as to the Company’s financial condition prior to the Board signing the Annual Report. However, the Company did not have a designated Chief Executive Officer for the financial year. This role was performed by Mr Joe Ariti as acting Chief Executive Officer. A Chief Executive Officer was appointed on 5 September 2011. The certification required in accordance with section 295A of the Corporations Act is provided by the relevant Director and Chief Financial Officer prior to acceptance by the Board as a whole.

AUDIT AND RISK COmmITTEE

As at 30 June 2011 the Company did not have a separate Audit Committee as the Board only consisted of 3 members and discharged this function as a whole in accordance with the guidelines set out in the Board’s Charter and the Audit Committee Charter. The Board reviewed the audited annual and half yearly financial statements and any reports which accompany published financial statements and recommends their approval. The Board reviews the appointment of the external auditor, their independence, the audit fee and any questions of resignation or dismissal.

The Board as a whole was also responsible for establishing policies on risk oversight and management.

Since 30 June 2011, the Board has appointed an Audit and Risk Committee which is comprised of:

The Hon. John Moore AO (Chairman)Mr Joe AritiMr Ian Burston

All members of the Audit and Risk Committee are Non-Executive Directors. The qualifications and experience of the Audit and Risk Committee members are stated in the Directors’ Report.

Further information regarding African Iron’s Audit and Risk Committee charter can be found on the Company’s website.



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RISK mANAGEmENT pOLICIES

The Board’s Charter clearly establishes that it is responsible for ensuring there is a good sound system for overseeing and managing risk. The Board has established a formal policy for risk management and a framework for monitoring and managing material business risks on an ongoing basis. During the year, this role was performed by the Board as a whole. Since the formation of the Audit Committee subsequent to 30 June, this role has been delegated to the Audit and Risk Committee. In accordance with Recommendation 7.1, the Board has established a formal policy for monitoring and reviewing the material business risks determined and reported by executive management on a regular basis. The policies and procedures adopted are directed at meeting the following objectives:

• effectiveness and efficiency in the use of the Company’s resources.• compliance with applicable laws and regulations.• preparation of reliable published financial information.

REmUNERATION COmmITTEE

During the year, the Company did not have a separate remuneration committee. Due to the size of the Board, the Board considered that this function is effectively achieved by the Board as a whole, in accordance with the guidelines set out in the Board’s charter.

The Board is responsible for setting policies for senior officers’ remuneration, setting the terms and conditions of employment for the Chief Executive Officer, reviewing and amending the Company’s incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and making recommendations on any proposed changes and undertaking reviews of the Chief Executive Officer’s performance, including, setting the Chief Executive Officer’s goals and reviewing progress in achieving those goals.

REmUNERATION pOLICy

Directors’ Remuneration has been approved by resolutions of the Board when Directors have been appointed to the Company.

SENIOR ExECUTIVE REmUNERATION pOLICy

The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, the remuneration of senior executive may be comprised of the following:

• fixed fee that is determined from a review of the market and reflects core performance requirements and expectations;

• a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;

• participation in any share/option scheme with thresholds approved by shareholders; and

• statutory superannuation.

By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.

The value of shares and options were they to be granted to senior executives would be calculated using the Black-Scholes option pricing model.

The objective behind using this remuneration structure is to drive improved Company performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders.

The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments.



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NON-ExECUTIVE DIRECTOR REmUNERATION pOLICy

Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors.

CURRENT DIRECTOR REmUNERATION

Full details regarding the remuneration of Directors, is included in the Directors’ Report.

NOmINATION COmmITTEE

The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times. As the whole Board only consisted of 3 members for the year, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on these specific issues.

RESpONSIbILITIES

The responsibilities of a Nomination Committee would include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee would also oversee management succession plans including the CEO and his/her direct reports and evaluate the Board’s performance and make recommendations for the appointment and removal of Directors. Currently the Board as a whole performs this role.

CRITERIA FOR SELECTION OF DIRECTORS

Directors are appointed based on the specific governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with relevant industry experience. In addition, Directors should have the relevant blend of personal experience in accounting and financial management and Director-level business experience.

DIVERSITy

In December 2010, the Company adopted a diversity policy which provides a framework for the Company to achieve:• a diverse and skilled workforce, leading to continuous improvement in service delivery and achievement of corporate goals;

• a workplace culture characterised by inclusive practices and behaviors for the benefit of all staff;

• improved employment and career development opportunities for women;

• a work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and perspectives through improved awareness of the benefits of workforce diversity and successful management of diversity; and

• awareness in all staff of their rights and responsibilities with regards to fairness, equity and respect for all aspects of diversity.

The Board is primarily responsible for setting achievable objectives on gender diversity and monitoring the progress of the Company towards them on an annual basis. Due to the size and scale of operations of the Company, the Board has determined that a long term gender diversity objective is more appropriate.



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Additional information required by the ASX Limited Listing Rules not disclosed elsewhere in this Annual Report is set out below.

1. ShAREhOLDINGS

The issued capital of the Group as at 23 September 2011 is 501,802,970 ordinary fully paid shares and 24,450,265 listed options (0.20 cents, 1 December 2013). All issued ordinary fully paid shares carry one vote per share.

ORDINARy ShARES

LISTED OpTIONS (20 CENTS, 1 DECEmbER 2013)

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001-9,999,999

Total

20

126

179

828

190

1,343

1,740

414,898

1,486,252

33,013,646

466,886,434

501,802,970

0

0.08

0.30

6.58

93.04

100.00

hOLDERSShARES RANGE %UNITS

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001-9,999,999

Total

4

56

62

129

45

296

533

182,446

490,476

5,218,654

18,558,156

24,450,265

0

0.75

2.01

21.34

75.90

100.00

hOLDERSShARES RANGE %UNITS

UNmARKETAbLE pARCELS

As at 23 September 2011 there were 53 holders of less than a marketable parcel of ordinary shares.


AFRICAN IRON LTDASx ADDITIONALINFORmATION

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2. TOp 20 ShAREhOLDERS AS AT 23 SEpTEmbER 2011

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Cape Lambert Resources Limited

Equatorial Resources Limited

National Nominees Limited

HSBC Custody Nominees (Australia) Limited

Pan Australian Nominees Pty Limited

HSBC Custody Nominees (Australia) Limited-GSCO ECA

HSBC Custody Nominees (Australia) Limited – A/C 2

Colbern Fiduciary Nominees Pty Ltd

Citicorp Nominees Pty Limited

Les Etablissements Congolais MGM

Foster Stockbroking Nominees Pty Ltd <No 1 Account>

Merrill Lynch (Australia) Nominees Pty Limited

Winchester Investments Group Pty Limited

Mr Robert Sorbello

Mr Russell Neil Creagh

J & J Bandy Nominees Pty Ltd <J & J Bandy Super Fund A/C>

Mr John Finlay McKenzie Rowley

Kuarka Pty Ltd

JP Morgan Nominees Australia

Cape Lambert Resources Ltd

Total

124,200,000

81,500,000

73,119,005

30,801,630

21,760,713

20,050,795

11,858,798

9,400,000

7,907,129

7,340,604

4,500,000

3,913,667

3,500,000

3,150,000

3,109,000

2,500,000

2,500,000

2,400,000

2,053,832

2,000,000

417,565,173

24.75

16.24

14.57

6.14

4.34

4.00

2.36

1.87

1.58

1.46

0.90

0.78

0.70

0.63

0.62

0.50

0.50

0.48

0.41

0.40

83.21

NAmE %UNITS



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3. TOp 20 OpTIONhOLDERS AS AT 23 SEpTEmbER 2011

4. SUbSTANTIAL ShAREhOLDERS AS AT 23 SEpTEmbER 2011

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

J & J Bandy Nominees Pty Ltd <J & J Bandy Super Fund A/C>

Tongaat Pty Ltd <Blue Seas A/C>

Ravenhill Investments Pty Ltd <House of Equity A/C>

Mr Adonis Kiritsopoulos & Ms Jennifer Anne Ford

HSBC Custody Nominees (Australia) Limited – A/C 2

Matthew Parrish Pty Ltd <The Parrish Family A/C>

Investwise Enterprises Pty Ltd

A22 Pty Limited

Jameker Pty Ltd <AKJ Family A/C>

Mr Keith Stuart Liddell and Mrs Shelagh Jane Liddell

Mr Ian Russell Coffey

Generation Capital Pty Ltd

Kouta Bay Pty Ltd <The Houndy Family A/C>

Mrs Tiziana Battista <Morriston A/C>

Walter Mick George Yovich

Mr Paul David Murphy and Mrs Judy Murphy

Newton6 Pty Limited <The Newton Super Fund A/C>

Mr Nicholas Bruce Thomas

Cornela Pty Ltd <Macliver Family A/C>

Icon Holdings Pty Ltd <The K & A Paganin S/F A/C>

Total

2,430,000

1,994,318

1,600,000

1,500,000

869,419

850,000

750,000

737,251

464,355

450,000

440,325

371,250

371,250

337,500

300,000

298,643

255,075

254,667

250,000

242,666

14,766,719

9.94

8.16

6.54

6.13

3.56

3.48

3.07

3.02

1.90

1.84

1.80

1.52

1.52

1.38

1.23

1.22

1.04

1.04

1.20

0.99

60.39

NAmE %NUmbER OF OpTIONS

1

2

Cape Lambert Resources Limited

Equatorial Resources Limited

126,200,000

95,400,000

25.25

19.01

NAmE %NUmbER OF OpTIONS

5. RESTRICTED SECURITIES SUbJECT TO ESCROW pERIOD

(a) 120,000,000 Shares are subject to escrow conditions which expire on 10 January 2012.

(b) 36,000,000 options exercisable at 30 cents each on or before 31 December 2012 are subject to escrow conditions until 14 January 2013.

(c) 4,000,000 options exercisable at 30 cents each on or before 31 December 2012 are subject to escrow conditions until 10 January 2012.



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2011annual report - asx2011/10/31 · annual report for the year ended 30 june 2011 3 chairman’s...

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