June 2011 Annual Report

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					                       annual
                       report 2011
coAL   iRon oRe        mAngAnese




                  Annual Report 2011: Aquila Resources Limited   1
iron ore                                                   Coal
A world class iron ore project in the                      Resumption of production at the isaac Plains
Pilbara region of Western Australia.                       coal mine following the record wet season in
                                                           Queensland.
                                                           A world class underground coal mine for the
                                                           eagle Downs Hard coking coal Project in the
                                                           Bowen Basin region.




Corporate DireCtory
DIRECTORS                                OTHER OFFICES                         AUDITORS
Tony Poli         (Executive Chairman)   Queensland                            KPMG
Charles B. Bass   (Non-Executive)        Level 18, 10 Eagle Street             235 St Georges Terrace
Derek T. Cowlan   (Non-Executive)        Brisbane QLD 4000                     Perth WA 6000
Gordon T. Galt    (Non-Executive)        Telephone: +61 7 3229 5630            Telephone: +61 8 9263 7171
Zhihao Dai        (Non-Executive)        Facsimile: +61 7 3229 5631            Facsimile: +61 8 9263 7129
COMPANY SECRETARY                        South Africa                          SHARE REGISTRY
J. Raymond Wood                          Johannesburg                          Computershare Investor Services Pty Ltd
                                         Block C, Ground Floor                 Level 2, Reserve Bank Building
AUSTRALIAN BUSINESS NUMBER (ABN)
                                         28 Sloane Street                      45 St Georges Terrace
81 092 002 769
                                         Bryanston 2191                        Perth WA 6000
REGISTERED & PRINCIPAL OFFICE            Telephone: +27 11 463 1340            Telephone: +61 8 9323 2000
Level 2, Aquila Centre                   Facsimile: +27 11 463 5083            Facsimile: +61 8 9323 2044
1 Preston Street                                                               SOLICITORS
Como WA 6152                             Thabazimbi
                                         C/O Lood & Platina Avenue             Mallesons Stephen Jaques
Telephone: +61 8 9423 0111                                                     Level 10, Central Park
Facsimile: +61 8 9423 0133               Thabazimbi 0380
                                         Telephone: +27 14 772 3337            152 - 158 St Georges Terrace
Email:     mail@aquilaresources.com.au                                         Perth WA 6000
Website: www.aquilaresources.com.au      Facsimile: +27 86 644 1367
                                                                               Telephone: +61 8 9269 7000
POSTAL ADDRESS                           Northern Cape                         Facsimile: +61 8 9269 7999
PO Box 1038                              Stand 585 Opwag                       BANKERS
South Perth WA 6951                      Groblershoop 8850
                                         Telephone: +27 54 833 0027            National Australia Bank Limited
HOME EXCHANGE                            Facsimile: +27 86 683 8065            Level 4, 100 St Georges Terrace
Australian Securities Exchange                                                 Perth WA 6000
2 The Esplanade                          Indonesia
                                                                               Commonwealth Bank of Australia
Perth WA 6000                            Wisma Rahaja, Level 2 Zone B
                                                                               Level 3, 150 St Georges Terrace
ASX Trading Code: AQA                    JL. TB. Simatupang, Kav. 1
                                                                               Perth WA 6000
                                         Jakarta Selatan 12560
                                         Telephone: +62 21 7884 7214           Westpac Banking Corporation
                                         Facsimile: +62 21 7884 7215           Level 17, 109 St Georges Terrace
                                                                               Perth WA 6000
                                                                               ANZ Banking Group Limited
                                                                               Level 7, 77 St Georges Terrace
                                                                               Perth WA 6000
manganese                                                                   Corporate
A high quality manganese project in the                                     cash and liquid investments of
Kalahari region of south Africa.                                            $210.9 million as at 30 June 2011.




Contents
Chairman’s Review ............................................ 2
Our People ......................................................... 4
Sustainability Matters ....................................... 6
Financing and Corporate Review ..................... 8
Our Markets....................................................... 9
Operational Highlights
   Iron Ore ......................................................... 10
   Coal .............................................................. 18
   Manganese .................................................... 32
Schedule of Tenements ................................... 36
Directors’ Report ............................................. 40
Auditor’s Independence Declaration ............. 51
Consolidated Statement of
Comprehensive Income................................... 52
Consolidated Balance Sheet ........................... 53
Consolidated Statement of
Changes in Equity............................................ 54
Consolidated Statement of Cash Flows ......... 55
Notes to the Consolidated
Financial Statements ....................................... 56
Directors’ Declaration ..................................... 89
Independent Audit Report ............................. 90
Shareholder Information ................................ 91




                                                                                  Annual Report 2011: Aquila Resources Limited   1
    Chairman’s
    review 2011
    tony poli
    executive chairman




2
i am pleased to report on our company’s activities
for the financial year and the progress we have made
subsequent to year end.

Strategically, the Directors have made the         From an operational perspective, our                 Pilbara Iron Ore Project and the Eagle Downs
decision to focus the Company’s future plans       Company has had a challenging year with              Hard Coking Coal Project and is progressing
on the development of its interests in the         production at the Isaac Plains Coal Mine             the divestment of its Washpool Hard Coking
West Pilbara Iron Ore Project and the Eagle        being severely affected by flooding at its           Coal Project in Queensland’s Bowen Basin
Downs Hard Coking Coal Project.                    Queensland operations.                               region and the Avontuur Manganese Project
These exciting developments are large capital      At year end, dewatering was continuing               in South Africa. Following an increasing
intensive projects with long mine lives and        and encouraging progress was being made              level of interest expressed by potential
significant scalability with which to build the    towards finalising the insurance claim for           acquirers of these projects during the year,
foundation for strong earnings growth for          damages and loss of earnings. It is anticipated      the Company appointed investment banks
the Company.                                       that this insurance process will take some           to coordinate discussions relating to possible
                                                   time to conclude, however the Company                sale transactions.
In order to fund the construction of
these projects, management has established         expects to fully recoup its financial loss arising   A divestment of these advanced projects
strategic relationships with key banking           from the flood event.                                will enable the Company to concentrate on
partners, including China Development Bank         Regrettably, the Company’s relationship              ensuring the prudent and timely completion
and more recently, National Australia Bank         with Vale has deteriorated further following         of operational mine, rail and port facilities for
and the Commonwealth Bank of Australia.            its continuing refusal to execute rail and           its key iron ore and coal mine developments
                                                   port logistics contracts for the Company’s           in Western Australia and Queensland.
Over the last twelve months, the Company
has executed new funding arrangements              preferred mine development solution for the          Construction is expected to commence on
with both National Australia Bank and              Eagle Downs Hard Coking Coal Project. As             both projects during 2012 and in doing so,
the Commonwealth Bank of Australia,                a consequence, this significant project is still     significantly advance the Company towards
relating to a $250m cash advance loan facility     without a contracted rail and port logistics         its goal of becoming an important supplier
and $80m guarantee and performance bond            solution. Despite Vale’s recent appeal against       of raw materials to the global steel industry.
facility. Such relationships with financiers are   an injunction, our Company will continue to          Over the medium term, it is forecast that
important to ensure that our Company has           make every effort to allow this large scale          commodity prices will continue to be
the financial flexibility to obtain maximum        underground mine to be developed with a              “stronger for longer” thereby underwriting
value from its advancing portfolio of mineral      contracted logistics solution in place.              the repayment of the associated debt
projects.                                          In relation to the Belvedere Hard Coking Coal        funding facilities for these world class project
After an extensive review, it was determined       Project, the decision by the Supreme Court           developments and enabling payment of
that the construction of the West Pilbara Iron     of Queensland on 20 June 2011 to strike out          dividends to our shareholders.
Ore Project would be predominantly funded          in its entirety, the claim in the proceedings        On behalf of our Board, I would like to
through limited recourse project finance and       commenced by Vale last year, has                     thank our employees for their contribution
at the time of writing this review, negotiations   subsequently been appealed by Vale. Whilst           and dedication, all stakeholders and our
are well advanced to secure a debt facility on     the proceedings are delaying the settlement          shareholders and I look forward to an exciting
this basis in excess of US$2 billion.              of the sale transaction, the Company expects         period of transformation for our Company
                                                   the matter to be concluded by the end of the         over the next 12 months.
Baosteel, the Company’s third largest
                                                   current financial year, resulting in Vale paying
shareholder, has provided strong support
                                                   Fair Market Value determined as set out in
in our project financing negotiations and
                                                   the Belvedere Joint Venture Agreement for
discussions are being held with Baosteel
                                                   the Company’s interest in the Belvedere Hard
about other synergies relating to our key
                                                   Coking Coal Project.
mine developments.                                                                                      Tony Poli
                                                   Looking forward, the Company will be
                                                   focussed on the development of the West              Executive Chairman

                                                                                                Annual Report 2011: Aquila Resources Limited           3
our
people




Chairman anD DireCtors
From left to right: Zhihao Dai, tony poli, charles Bass, Gordon Galt, Derek cowlan.

tony poli                                              Charles Bass                                     Derek Cowlan
B.com, cPA, mAicD                                      B.sc (geol), m.sc (mining & mineral              independent non-executive Director
executive chairman and chief executive                 Processing), FAusimm, FAig, mAicD                Derek has considerable experience in financial
officer                                                non-executive Director                           and business management and currently
Tony completed a double major at the                   Charles has over 35 years experience in          presides as the Chairman of the Ross North
University of Western Australia graduating             exploration, development and production in       Group, a large project home building
with a Bachelor of Commerce. After                     Australia, Canada and the United States.         company operating in Western Australia.
graduating, Tony spent 15 years working as             He was an Executive Director and co-founder
an accountant; initially at Deloitte Haskin and                                                         Zhihao Dai
                                                       of Eagle Mining Corporation NL, which
Sells, and later as a partner in a private practice.                                                    B.eng (metallic materials engineering),
                                                       discovered, developed and operated the
During this time, he gained extensive general                                                           m.Arts (economics)
                                                       Nimary Gold Mine until 1997, when it was         non-executive Director
management and corporate experience.                   acquired by Great Central Mines Limited.
Tony was the Executive Chairman of Eagle                                                                After graduating with a major in Metallic
                                                       Charles is a co-founder of the Company           Materials Engineering from Shanghai Jiao
Mining Corporation NL, which discovered,               and a Non-Executive Director of ASX-listed
developed and operated the Nimary Gold                                                                  Tong University, Mr Dai joined Baosteel
                                                       Geopacific Resources Limited, which is           in 1983, where he acquired substantial
Mine until it was acquired by Great Central            exploring for copper and gold in Fiji. He is a
Mines Limited in 1997.                                                                                  experience in production, marketing and
                                                       Director and CEO of ESI Exploration Syndicate    management in the steel industry.
Tony has been the Executive Chairman of the            Inc, a North American unlisted company
Company since its formation and listing on             exploring for copper and other base metals.      In 2002, he was appointed as Deputy General
the Australian Securities Exchange in 2000.                                                             Manager of Baoshan Iron and Steel Co. Ltd, a
                                                       gorDon galt                                      publicly listed company and steel production
                                                       B.eng (mining, Hons), B.com, gDip AppFin         centre of the Baosteel Group. Since then, he
                                                       (Finsia), mAusimm, mAicD                         has held several senior positions within the
                                                       independent non-executive Director               Baosteel Group, including CEO of Baosteel
                                                       Gordon is a senior mineral resources executive   International Economic & Trading Co. Ltd.
                                                       and experienced Director with international      In 2007, he was appointed Vice President
                                                       mineral industry experience. Throughout          of Baosteel Group Corporation, where he
                                                       his career, Gordon has worked in executive,      is now primarily responsible for Baosteel’s
                                                       management, technical and operational            marketing and overseas investment.
                                                       roles in mining companies with a focus on
                                                       coal and gold. He also spent a period in
                                                       the banking industry, servicing the wider
                                                       mining sector. Gordon is currently engaged
                                                       in funds management and corporate
                                                       advisory activities and is a Director of five
                                                       public companies.




4
key management
From left to right: Jason pavy, howard rae, Brent Green, ray Wood, russell tipper, martin alciaturi, Stephen pilcher.

martin alCiaturi                                   Before joining the Company, he was Executive        howarD rae
B.sc (eng) (Hons), cA                              General Manager - Project Development for           B.com, cA
general manager – Finance and corporate            Vale Coal in Australia. Prior to that, Stephen      chief Financial officer
                                                   was Business Development Manager
Martin’s experience in corporate finance                                                               Howard is a qualified Chartered Accountant
                                                   with AMCI. He also held operational roles
spans more than 20 years. He was Director at                                                           with over 20 years experience in financial
                                                   managing a number of underground coal
Macquarie Capital Advisers from 2006 where                                                             management across the resources industry.
                                                   mines, including West Cliff Colliery, Kestrel
he headed the Perth business, and was                                                                  His expertise covers commercial management,
                                                   Mine and Oaky North Mine.
involved in a number of capital markets and                                                            mineral project evaluation, corporate
M&A transactions in the resources sector.          Jason pavy                                          development and debt and equity financing.
Prior to that, Martin was the partner-in-          LL.B (Hons), B.com                                  Howard spent the early part of his career
charge of Ernst & Young’s corporate finance        general manager - Legal                             with Ernst & Young, later joining Aurora Gold
practice in Western Australia for 10 years. He                                                         Limited, where he was responsible for financial
                                                   Jason is a legal practitioner admitted in
is a qualified Chartered Accountant, a Senior                                                          management as the company expanded
                                                   Western Australia, New South Wales
Fellow of FINSIA and a member of the Federal                                                           operations into Indonesia.
                                                   and Victoria. He has over 10 years of
Government’s Takeovers Panel.                      in-house experience with Rio Tinto, where           More recently he was involved in strategy
                                                   he worked on a wide range of activities             and business development with Kumba
russell tipper
                                                   in corporate, M&A, joint ventures,                  Resources Limited for nine years, managing
B.eng (mining), mBA, mAusimm                                                                           growth opportunities across Australasia.
                                                   exploration, procurement, IT, shipping and
general manager – iron ore
                                                   treasury areas.                                     ray wooD
During his career of more than 30 years,
                                                   Jason was also a key member of Rio Tinto’s          LL.B (Hons), mBA
Russell has worked in mining operations,
                                                   team responsible for negotiation of the             Barrister & solicitor, general counsel and
finance and project development throughout
                                                   Investment Agreement for the Oyu Tolgoi             company secretary
Australia. As a mining engineer, he held
                                                   Copper Project in Mongolia. Immediately             Ray’s legal experience comprises over
senior management and operational roles in
                                                   prior to joining the Company, he was                20 years in senior in-house roles in the
steel raw materials operations producing iron
                                                   the Legal Manager for Ivanhoe Australia,            resources industry and more than 10 years
ore, coal and manganese for Rio Tinto, Robe
                                                   establishing and leading the legal function of      as a commercial partner in a private practice,
River and BHP Billiton.
                                                   that business.                                      advising on a wide range of commercial
Russell also has experience in leading project
teams in producing bankable feasibility studies    Brent green                                         matters.
for projects such as the Hope Downs Iron Ore       m.sc (Hons), mAig, mseg                             His experience includes management of
Project and the Karara Magnetite Project.          Head of exploration                                 the legal function for Hamersley Iron’s
                                                   Brent is a qualified geologist with over 20         Pilbara operations as Chief Legal Officer
stephen pilCher                                                                                        and Company Secretary of the Hamersley
                                                   years experience in the mining industry. His
B.eng (mining, Hons), B.ec                                                                             Holdings Group of Companies. More
                                                   roles have encompassed the identification
general manager – coal                                                                                 recently, he was part of a small management
                                                   of new projects and establishment of new
Stephen has over 25 years experience in            mineral businesses.                                 team in Hancock Prospecting Pty Ltd, which
mining operations and project development                                                              was involved in the finalisation of the Hope
                                                   Brent previously held technical positions
in the coal industry.                                                                                  Downs joint venture between Rio Tinto and
                                                   with Asarco Australia and is experienced in
                                                                                                       Hancock Prospecting Pty Ltd.
                                                   managing exploration teams across a broad
                                                   range of commodities.


                                                                                               Annual Report 2011: Aquila Resources Limited         5
sustainaBility matters
aquila is committed to safety and sustainability across the entire company and within the communities in which it operates.

safety management                                                         CarBon management
The Company is committed to providing a safe working environment          The Company acknowledges that it is important to understand the
for all employees and the ongoing maintenance of an injury, illness       sources and scope of greenhouse gas emissions across its operations
and disease free workplace.                                               and believes it is possible to reduce emissions from mining activities
The continued company-wide focus on improving the Occupational            and from the use of mined minerals.
Health and Safety (OHS) processes and policies contributed to a strong    The Company has identified Carbon Management as one of its
OHS performance during the year with only one lost time injury across     corporate priorities and is committed to:
the entire Company.                                                       •	 ongoing	 measurement	 of	 carbon	 emissions	 across	 all	 of	 its	
Specific milestones included:                                                operations;
•	 company-wide	 communication	 of	 key	 OHS	 documents,	 namely:	        •	 ensuring	that	emissions	data	collection	and	reporting	is	transparent,	
   the OHS Policy, OHS Standards and Management System Manual;               accurate and compliant with all legislation;
•	 completion	of	a	comprehensive	review	of	OHS	industry	standards	        •	 reporting	on	carbon	emissions	internally	and	externally;
   and legal obligations to ensure the Company OHS Management             •	 identifying	costs	and	risks	related	to	carbon	in	the	Company’s	value	
   System remains current;                                                   chains;
•	 increasing	the	number	of	qualified	Site	Senior	Executives	under	the	   •	 communicating	the	Company’s	approach	to	Carbon	Management	
   Queensland Coal Mining Safety and Health Act from one to four;            and seeking stakeholder involvement;
•	 an	annual	statutory	compliance	audit	of	the	OHS	Management	Plan	       •	 identifying	opportunities	for	reducing	energy	use	and	greenhouse	
   for operations in Queensland, forming the basis of a continuous           gas emissions and implementing appropriate changes;
   action plan;
                                                                          •	 fostering	a	company	culture	that	supports	energy	efficiency;	
•	 development	of	a	Business	Risk	Register	and	a	Legal	Compliance	
                                                                          •	 participating	 in,	 supporting	 and	 contributing	 to	 research	 and	
   Register to identify any OHS issues and ensure continuous safety
                                                                             development of technologies that lead to the safe, sustainable
   performance improvement;
                                                                             production and use of mineral resources; and
•	 recruitment	 of	 a	 Senior	 Health,	 Safety,	 Environmental	 and	
                                                                          •	 identifying	 abatement	 projects	 and	 quantifying	 their	 carbon	
   Community (HSEC) Adviser in Queensland and a Senior OHS
                                                                             reduction benefits and costs.
   Adviser in South Africa;
                                                                          Key achievements during the year include:
•	 implementation	of	a	Contractor	OHS	Management	Program	across	
   projects in South Africa; and                                          •	 formation	of	a	Carbon	Management	Committee;
•	 strengthening	 safety	 knowledge	 among	 management	 through	          •	 development	of	a	Carbon	Management	Policy;
   their participation in mine health and safety training courses         •	 participation	in	the	Carbon	Disclosure	Project;	
   in respect of South Africa’s Mine Health and Safety Act and            •	 registration	 of	 the	 Isaac	 Plains	 Coal	 Mine	 to	 participate	 in	 the	
   Regulations.                                                              Energy Efficiency Opportunities Program;
                                                                          •	 carbon	emission	modelling	for	the	Eagle	Downs	Hard	Coking	Coal	
                                                                             Project; and
                                                                          •	 greenhouse	gas	studies	on	the	West	Pilbara	Iron	Ore	Project	and	
                                                                             the Washpool Hard Coking Coal Project as part of environmental
                                                                             impact assessment processes.



6
environment                                                                    Community affairs
The Company is determined to minimise its impact on the environment            The Company is committed to supporting the communities in
and is committed to operating in line with environmental best practice         which it operates. The Company openly communicates with
in order to reduce its environmental impact by:                                communities, governments and other stakeholders, ensuring
•	 delaying	or	stopping	activities	where	there	are	inadequate	effective	       appropriate community involvement, with the aim of:
   environmental controls;                                                     •	 enhancing	transparency	and	public	accountability;	
•	 assessing	 the	 potential	 environmental	 impact	 of	 all	 projects	 and	   •	 facilitating	community	inclusive	decision	making;	
   operations in which it participates and implementing strategies that        •	 ensuring	that	strategic	planning,	project	development	and	service	
   minimise environmental risks;                                                  delivery meet community needs and expectations; and
•	 minimising	emissions,	discharges,	wastes,	energy	use	and	resource	          •	 improving	organisational	efficiencies	by	enhancing	public	trust.
   consumption;
                                                                               The Company aims to conduct its business with transparency, integrity
•	 complying	with	all	applicable	environmental	legislation;	                   and respect for the community by:
•	 promoting	 environmental	 awareness	 amongst	 employees	 and	               •	 building	constructive,	collaborative	relationships	with	communities	
   contractors;                                                                   and stakeholders;
•	 maintaining	systematic	environmental	management	frameworks;                 •	 ensuring	that	community	involvement	supports	equity	and	diversity	
•	 setting	and	reviewing	environmental	objectives	and	targets;                    of input;
•	 monitoring	environmental	performance	and	taking	action	where	               •	 considering	 community	 needs	 and	 interests	 when	 developing	
   necessary;                                                                     community involvement processes;
•	 communicating	 the	 Company’s	 environmental	 performance	 to	              •	 promoting	the	value	of	community	involvement	in	the	Company’s	
   staff, shareholders, other stakeholders and the community; and                 activities and decision making;
•	 fostering	 a	 culture	 that	 encourages	 employees	 and	 contractors	       •	 allocating	resources	for	community	involvement;	and
   to follow the Company’s Environmental Policy and sustainability             •	 integrating	the	outcomes	of	community	involvement	into	decisions.	
   values.
                                                                               Highlights during the year included:
The Company will continue to develop programs and processes to
                                                                               •	 commencement	of	implementation	of	new	land	access	legislative	
ensure responsible management of its business activities.
                                                                                  requirements in Queensland for interactions between explorers and
Significant environmental milestones during the year were:                        landowners;
•	 managing	 flood	 water	 in	 compliance	 with	 the	 temporary	               •	 appointment	of	a	Community	Relations	Manager	and	the	opening	
   environmental permit conditions at the Isaac Plains Coal Mine                  of an office in Karratha to ensure consultation with stakeholders in
   during flooding in central Queensland;                                         the West Pilbara Iron Ore Project and to identify opportunities for
•	 receipt	 of	 Environmental	 Approval	 for	 the	 Eagle	 Downs	 Hard	            community partnerships and support;
   Coking Coal Project;                                                        •	 ongoing	relationship	building	with	the	Traditional	Owners	of	land	
•	 completion	 of	 the	 Washpool	 Hard	 Coking	 Coal	 Project	                    comprising the proposed West Pilbara Iron Ore Project, including
   Environmental Impact Statement;                                                collaborative environmental surveys, commencement of field
•	 completion	of	the	West	Pilbara	Iron	Ore	Project	Public	Environmental	          staff recruitment from each group and consideration of joint
   Review for the mine, rail and port developments; and                           management proposals for heritage and conservation value areas;
•	 submission	 of	 the	 Environmental	 Impact	 Assessment	 and	 the	           •	 recruitment	of	a	Sustainability	Officer	for	the	Corporate	Office	in	
   Environmental Management Program Report for the Avontuur                       South Africa; and
   Manganese Project Mining Right Application.                                 •	 ratification	of	Social	and	Labour	Plan	projects	by	the	Joe	Morolong	
                                                                                  Local Municipality for the Avontuur Manganese Project in the
                                                                                  Northern Cape Province of South Africa.




                                                                                                Annual Report 2011: Aquila Resources Limited         7
                               finanCing anD Corporate
                               review 2011
                               martin alCiaturi
                               General manaGer – Finance anD corporate


the 2011 financial year has seen a significant amount of activity on a number of financing matters which are expected
to reach their conclusion within the next few months.

The decision was taken early in the year that the scale and strategic
significance of the West Pilbara Iron Ore Project was such that         the Company’s projected share of product
retention and funding of this project interest was a priority for the
Company.
A combination of factors, including the magnitude of the funding
required and reduced liquidity in western financial markets have
                                                                        iRon oRe               West Pilbara
meant that the Company has focused its debt funding activities                                 and Hardey up to 25mtpa
primarily on the Chinese market where the vast majority of the          up to 27mtpa
                                                                                               Thabazimbi 2mtpa
project’s product is expected to be sold. Extensive negotiations and
due diligence activities took place during the year (and continue)
aimed at establishing a substantial limited recourse project finance
facility before the scheduled commencement of construction in
mid 2012.
The decision was also taken during the year that, subject to price
outcomes, the Washpool Hard Coking Coal (Washpool) and
Avontuur Manganese (Avontuur) Projects would be divested in order
to help generate the Company’s equity contribution required for
development of the West Pilbara Iron Ore Project. Both the Washpool     coAL                   isaac Plains 1.4mtpa
and Avontuur Projects have been progressing through the final stages    9.25mtpa               eagle Downs 2.25mtpa
of the feasibility study process and broad-reaching sales processes                            Washpool 2.6mtpa
have been progressed in parallel with this. Final bids are due for
                                                                                               Talwood 3mtpa
Washpool in the final quarter of calendar 2011 and the sales process
for Avontuur is expected to conclude by early 2012.
During the year, a significant amount of effort had to be devoted
to various disputes with Vale. Further, it is disappointing to note
that as a result of Court action pursued by Vale, the expeditious
price-discovery process as set out in the Belvedere Joint Venture
Agreement is yet to be finalised, notwithstanding that Vale exercised
its option to purchase the Company’s interest in that project over a
year ago.
Eagle Downs Hard Coking Coal Project remains the Company’s other
major development asset and whilst the vast majority of studies         mAngAnese              Avontuur up to 2mtpa

for this project have now been completed with preliminary interest      up to 2mtpa
expressed by a number of banks, project funding for this asset cannot
commence in earnest until a clear logistics pathway has been secured.
The next few months promise to see substantial progress towards
simplifying the Company’s portfolio and funding of the West Pilbara
Iron Ore Project.



8
our markets
The company assumed responsibility for marketing and selling its share of coal from the isaac Plains coal mine in
november 2010 and has since committed the majority of its sales of that coal to long term contracts.

isaac plains Coal sales by Destination 2010/11               isaac plains Coal sales
                                                             financial year 2010/2011
                          Japan        45%                                                Pci       56%
                          china        21%                                                Thermal   23%
                          india        10%                                                coking    21%
                          south America 9%
                          other Asia    8%
                          Taiwan        5%
                          europe        2%




                                       europe
                                                                                                      Japan
                                                                                 China

                                                                 india

                                                                                        taiwan




         south america




                                                                                                              Queensland




                                                                         Annual Report 2011: Aquila Resources Limited   9
 iron ore



 a WorlD claSS iron ore proJect
                      cAPe LAmBeRT          WesT PiLBARA iRon oRe PRoJecT
     AnKeTeLL PoinT


                                                         loCation
                                                         stage 1 of the Project is 70km south of Pannawonica
                                                         in the Pilbara region of Western Australia and the
                                                         Hardey Deposit is 60km north-west of Paraburdoo
                                                         estimated mine Life: more than 20 years

                                                         resourCes & reserves (JorC)
                                                         1.22Bt Resources:
                       PRoPoseD RAiL Line                264mt measured;
                                                         500mt indicated;
                                                         459mt inferred
                                                         445mt Proved and Probable Reserves

                                                         proDuCts
     PAnnAWonicA                                         Direct ship channel iron and bedded
                                                         iron fines

                                                         aQuila interest
                                                         50%



                                                         proJeCteD
                                                         proDuCtion rate
                                                         up to 50 mtpa from stage 1 and Hardey




                                  sTAge 1




                                  HARDey


                          PARABuRDoo




10
west pilBara iron ore proJeCt
highlights 2011                                       the West pilbara iron ore project (the project) is based
                                                      on a substantial tenement holding in the West pilbara
                                                      region of Western australia, highly prospective for
> updated Resource (JoRc) for the West Pilbara
  iron ore Project increased to 1.22Bt.               iron ore presenting as Bedded, Detrital and channel
                                                      iron mineralisation.
> maiden Reserve statement of 445mt of Proved
                                                      The 30Mtpa Stage 1 development of the Project involves eight mesa-
  and Probable Reserves (JoRc) issued for             type Channel Iron Deposits south-west of Pannawonica and a 282km
  stage 1 of the West Pilbara iron ore Project.       railway line from the mine site to a new port on the Pilbara coast at
                                                      Anketell Point.
> mine development conditionally approved for         The Project is underwritten by a Resource (JORC) of 1.22Bt. The
  stage 1 of the West Pilbara iron ore Project.       Resource contains Proved and Probable Reserves (JORC) of 445Mt
                                                      in the eight Stage 1 deposits, ensuring an initial 15-year mine life at
                                                      target production of 30Mtpa.
> exploration continues with drilling programs        Development
  at the Hardey Deposit and the Weckl, Downey,        Additional testing of the West Pilbara Fines (WPF®) has consistently
  Farquhar and Buckland Hills prospects.              reinforced the economic addition of up to 20% of WPF® in the sinter
                                                      feed blends of Asian steel mills.
> Public environmental Review documents for           There are now 40 Memoranda of Understanding signed with steel
  the West Pilbara iron ore Project mine, rail        mills from China, Korea, Japan and Taiwan for the testing of WPF®.
                                                      The Company expects to contact these steel mills shortly to review the
  and port facilities have completed their public     results of all test work and to commence negotiations for Letters of
  comment periods.                                    Intent to take ore from the Stage 1 development.
                                                      mining
> 40 memoranda of understanding have now              The Company has developed an optimised mining and blending
  been signed with chinese, Korean, Japanese          schedule for the Reserves identified for the Stage 1 mine development.
  and Taiwanese steel mills for testing of the        The infrastructure proposed for Stage 1 has been designed to facilitate
  West Pilbara iron ore Project ore.                  blending operations as proposed in the mining schedule. This entails
                                                      production of a consistent product throughout the life of the
                                                      Stage 1 mine, with more marginal material stockpiled for sale at the
> A positive Prefeasibility study completed for the   end of Stage 1 or for blending with additional resources identified by
  Hardey Deposit proposing a 10mtpa direct ship       future exploration activities.
  fines project expanding upon the infrastructure
  built for stage 1.




                                                                       Annual Report 2011: Aquila Resources Limited        11
iron ore
WesT PiLBARA
iRon oRe
PRoJecT




     mine
     PRoPoseD inFRAsTRucTuRe
     to enable the mine to produce 30mtpa of iron ore fines, significant
     infrastructure is required to provide accommodation and air services
     for personnel, a pipeline connecting to the Dampier to Goldfields gas
     pipeline to deliver gas to an on-site power station and a bore field to
     deliver both process and potable water.
     there is also a requirement for processing facilities, rail facilities,
     buildings and workshops, as well as an access road connecting with
     the nanutarra-munjina road and an extensive network of site roads.

                                                                               cenTRAL PRocessing FAciLiTy (cPF)
                                                                               ore will be transported to the cpF by truck from
                                                                               the central deposits and by rail shuttles from the
                                                                               northern and southern deposits. ore from all of the
                                                                               deposits will be blended to create a final product
                                                                               at the mine site.




        TRAin LoADouT                                                          ViLLAge & AiRsTRiP
        after blending and processing through the cpF,                         mine site personnel will commute on a fly-in
        product stockpiled at the mine will be reclaimed                       fly-out basis, using a jet capable airstrip to be
        at a rate of 10,000tph and loaded into trains                          built adjacent to the mine village. the village will
        consisting of two locomotives and 126 ore cars. the                    accommodate 1,400 personnel during construction
        journey to the anketell port, 282km away, will take                    and 700 personnel during operations.
        approximately four hours.




12
west pilBara iron ore proJeCt – iron ore resourCe statement

Channel iron resource
                            tonnes           fe             sio2              al2o3          p               s              loi
 JorC Classification          mt              %              %                  %           %               %                %
measured                      209            57.8           5.29               3.55        0.079           0.017            7.95
indicated                     440            56.3           6.19               3.69        0.064           0.018            8.90
inferred                      418            56.0           8.13               3.12        0.101           0.016            7.89
total                       1,067            56.5           6.77               3.44        0.081           0.017            8.32


Bedded iron resource
                            tonnes           fe             sio2              al2o3          p               s              loi
 JorC Classification          mt              %              %                  %           %               %                %
measured                      55             61.8           3.31               2.43        0.143           0.006            5.33
indicated                     60             61.4           3.76               2.45        0.132           0.007            5.36
inferred                      41             61.0           3.98               2.46        0.123           0.010            5.67
total                        156             61.5           3.66               2.45        0.134           0.008            5.43



stage 1 Development proved and probable reserve statement
                            tonnes           fe             sio2              al2o3          p              loi
JorC Classification           mt              %              %                  %            %               %
Proved                       166             58.0           5.11               3.38         0.08            7.99
Probable                     279             56.5           6.13               3.48         0.06            8.90
total                        445             57.1           5.75               3.44         0.07            8.56




approvals                                                              hardey prefeasibility costs
The 30Mtpa Stage 1 development of the West Pilbara Iron Ore Project    Capital                                                     a$ million
has received Joint Venture Participant conditional approval.           mine                                                            570
The mine and rail Public Environmental Review (PER) was completed      rail                                                            700
without receiving major objections and responses were submitted to     port                                                            140
the Office of the Environmental Protection Authority (OEPA). The EPA   subtotal                                                      1,410
Report, which recommended approval of the mine and rail subject to     epcm                                                             60
a number of conditions, was released on 3 August 2011.                 contingency                                                     130
The port PER has also completed its public comment period, with        total                                                      1,600
responses to the OEPA under preparation.                               operating                                               a$ per tonne
                                                                       mining                                                      8.90
The Project team continues to liaise with Government to secure
                                                                       processing                                                     4.90
the development role for Stage 1 port facilities and will commence
                                                                       rail                                                           3.80
negotiations on a State Rail Agreement, which will be an Act of
                                                                       port                                                           2.70
Parliament, requiring the assent of both Houses of the Parliament of
Western Australia.                                                     administration                                                 1.70
                                                                       total                                                         22.00
geology anD resourCe
Exploration continues at a number of sites, including Weckl, Downey,   These results are based on the evaluation of the Hardey Deposit as
Farquhar and Buckland Hills, with potential for further resources to   an incremental expansion of the Stage 1 development, achieving
use the infrastructure installed for Stage 1.                          economies of scale from increased throughput on the installed
                                                                       Stage 1 rail and port infrastructure.
harDey proJeCt                                                         Further studies will evaluate alternative development scenarios for the
A Prefeasibility Study of the Hardey Deposit indicates the potential   delivery of ore to the Stage 1 railway.
to increase production by 10Mtpa by extending the Stage 1 rail and
port infrastructure.

                                                                                        Annual Report 2011: Aquila Resources Limited            13
iron ore
WesT PiLBARA
iRon oRe
PRoJecT




                                                             anketell point
                                                             PRoPoseD inFRAsTRucTuRe
                                                             anketell point has been identified by the State as a suitable site for a new
                                                             deep-water, bulk loading port for the West pilbara area.
                                                             the West pilbara iron ore project has completed extensive technical
                                                             and environmental studies to develop an expandable facility, capable of
                                                             growing to 350mtpa capacity as required.
                                                             the initial development contemplates the construction of a 20km deep-
                                                             water channel to allow capesize vessels of up to 250,000dwt to depart the
                                                             port fully laden. a causeway and jetty is required to transport ore from the
                                                             mainland to the ship loader at the end of the jetty.
                                                             there is also a requirement for stockpile facilities to store ore unloaded
                                                             from trains arriving from the mine site. train operations and maintenance
                                                             facilities are also planned.
                                                             a small desalination plant is proposed for the supply of process and potable
                                                             water and power for the site will be drawn from the north West grid.




      RAiL WoRKsHoPs
      a total fleet of 15 locomotives and 520 mainline
      ore cars will be serviced and maintained at rail
      workshops located in the port area. arrival and
      departure tracks will allow loaded trains to be held
      ready for unloading and empty trains prepared for
      the return journey to the mine.




                                                                              TRAin unLoADeR
                                                                              loaded ore cars will be tipped two at a time through
                                                                              a two-celled rotary tippler. ore from under the train
                                                                              unloader will be conveyed to stockpiles in the port at a
                                                                              rate of 10,000tph. an unloader of this kind is capable
                                                                              of up to 50mtpa of throughput.




14
                                                          JeTTy AnD sHiP LoADeR
                                                          a 2.6km causeway and driven pile jetty will
                                                          transport the ore from the stockpiles to a ship
                                                          loader that is capable of loading ships at rates of
                                                          over 12,500tph. the berth pocket, dredged to 20m
                                                          depth, will allow a loaded vessel to wait for the
                                                          high tide to access the channel to depart the port.




PRoDucT sTocKPiLes
ore is stacked in longitudinal stockpiles of around
200,000 tonnes each. When a ship arrives at the
loading berth, a bucket wheel reclaimer will recover
the ore at rates of over 12,500tph for transfer through
a sample plant and along the jetty, where it will be
loaded onto the ship.




                                                           Annual Report 2011: Aquila Resources Limited         15
iron ore




 thaBaZimBi iron ore proJeCt
                   THABAzimBi iRon oRe PRoJecT

                               loCation
                               Adjacent to the township of Thabazimbi in the
                               Limpopo Province of south Africa



                               resourCes (JorC)
                               48mt: 16mt indicated;
                               32mt inferred

                               proDuCts
                               Direct ship lump and fine hematite products

                               aQuila interest
                               74%


                               potential
                               proDuCtion rate
                               2mtpa



     THABAzimBi                 meLeTse ResouRce




16
meletse Deposit resource statement

                          tonnes        fe         sio2       al2o3        p           s         mno         mgo         loi
resource Classification     mt          %           %          %           %           %          %           %           %
indicated                   15.9       63.6        6.22        1.07       0.031      0.045       0.783       0.076       1.00
inferred                    31.7       62.5        8.89        0.82       0.044      0.041       1.078       0.054       1.19
total                       47.6       62.9        8.00        0.91       0.040      0.043       0.979       0.061       1.13




the thabazimbi iron ore project (the project) is situated near thabazimbi, an established township and iron ore
production area in the limpopo province of South africa.

The Company holds the tenements on behalf of a joint venture with       at 62.9% Fe. This deposit remains open both at depth and along
Rakana Consolidated Mines (Proprietary) Limited, a Black Economic       strike, with exploration drilling ongoing and an upgraded Resource
Empowerment company.                                                    Statement anticipated next year.
sCoping stuDy                                                           The Company has purchased the Donkerpoort farm, which hosts the
                                                                        current resource and also finalised the purchase of the neighbouring
The Company completed a Scoping Study (the Study) for the
                                                                        Randstephne farm, which is expected to host the down dip extension
development of the Meletse Deposit. The Study contemplates
                                                                        of the Meletse Deposit.
a 2Mtpa development of the current deposit, either for export
through the port of Maputo, located on the east coast of Africa in
Mozambique, or for domestic sale.
The Study also recognises that a larger ore body could support higher
production rates (up to 4Mtpa), benefiting the Project through
economies of scale.
Geotechnical studies are underway to gather information to
support future mine planning. Environmental baseline studies and
geo-hydrology were completed to support the environmental impact
assessment for this project. The Company will undertake further
mine studies following the upgraded Resource Statement expected
in calendar 2012.
geology anD resourCe
The Company has continued drilling on the Meletse Deposit located
to the east of Thabazimbi, completing 70 drill holes totalling
19,897 metres. The Meletse Deposit Resource Statement was
upgraded during the year, resulting in a Resource (JORC) of 47.6Mt




                                                                                        Annual Report 2011: Aquila Resources Limited      17
 Coal



 queenSlanD coal proJectS
        TALWooD                            isAAc PLAins




                             eAgLe DoWns




                  WAsHPooL




                                                          50       0        50
                                                               Kilometres




18
               loCation                     resourCes &                   proDuCts                aQuila          proJeCteD
                                            reserves (JorC)                                      interest         proDuCtion rate



isAAc PLAins   7km east of moranbah in      resources (JorC)              semi-hard coking       50%              2.8mtpa
               Queensland’s Bowen Basin     isaac Plains north            coal, Pci coal and                      (saleable coal)
coAL mine      region                       39.1mt: 23.7mt measured;      thermal coal
               estimated mine Life          5.6mt indicated;
               15 years                     9.8mt inferred
                                            isaac Plains south
                                            88.8mt: 32.3mt measured;
                                            33.1mt indicated;
                                            23.4mt inferred
                                            reserves (JorC)
                                            isaac Plains north
                                            19.1mt: 17.5mt proved;
                                            1.6mt probable
                                            isaac Plains south
                                            30.6mt probable
                                            run of mine (rom)


eAgLe DoWns    25km south-east of           resources (JorC)              Hard coking coal       50%              initially up to 5.1mtpa
               moranbah in Queensland’s     959mt: 648mt measured;                                                and an average
HARD coKing    Bowen Basin region           171mt indicated;                                                      of 4.5mtpa from
coAL PRoJecT   estimated mine Life          140mt inferred                                                        one underground
               48 years                     reserves (JorC)                                                       longwall over the
                                            254mt: 206.6mt proved;                                                first 10 years
                                            47.5mt probable


WAsHPooL       24km north-west of           resources (JorC)              Hard coking coal       100%              2.6mtpa
               Blackwater in Queensland’s   196.7mt: 124.9mt measured;
HARD coKing    Bowen Basin region           9.7mt indicated;
coAL PRoJecT   estimated mine Life          62.1mt inferred
               15 years                     reserves (JorC)
                                            108.2mt: 94.7mt proved;
                                            13.5mt probable


TALWooD        24km north of moranbah in    resources (JorC)              semi-hard coking       100%             3mtpa
               Queensland’s Bowen Basin     246.5mt: 137.1mt indicated;   coal and
coKing coAL    region                       109.4mt inferred              thermal coal
PRoJecT




                                                                                      Annual Report 2011: Aquila Resources Limited          19
Coal




 isaaC plains Coal mine




20
highlights 2011                                      the isaac plains coal mine (the mine) is an operating
                                                     open-cut coal mine located east of moranbah in the Bowen
> The isaac Plains coal mine achieved a strong       Basin in central queensland in which the company holds
  safety performance during very challenging         a 50% interest. it produces a mix of metallurgical and
  circumstances, including flood recovery works.     thermal coals, which are exported through the Dalrymple
                                                     Bay coal terminal.
> Heavy rainfall from november 2010 to march
  2011 resulted in flooding at a number of pits      safety
  and significantly affected coal production.        The Isaac Plains Coal Mine had a rolling 12 month Lost Time Injury
  Temporary environmental Plans were                 Frequency Rate of zero for the second consecutive year.
  submitted to the Department of environment         proDuCtion
  and Resource management, enabling removal          Two principal contractors performed site operations during the year;
  of water from the flood-affected areas.            John Holland Queensland Pty Ltd (John Holland), which manages the
                                                     mining operations and Ausenco Pty Ltd, which manages the coal
                                                     beneficiation operations. The Ausenco contract was extended for
> Total mine production was 1.64mt.                  18 months to June 2012 to coincide with the completion of the John
                                                     Holland contract.
                                                     Overburden volume of 25.74Mbcm was moved during the financial
> Total coal sales were 1.56mt.                      year, only slightly down on the previous record year, despite the impact
                                                     of flooding. However, increased stripping of overburden in advance
                                                     due to the wet conditions limited run of mine (ROM) production to
> The company assumed responsibility for             2.16Mt for the year. This was washed at an average yield of 76% to
  marketing and sale of its share of coal enabling   produce 1.64Mt of product coal.
  term contracts to be achieved for the majority     The Bucyrus Erie 1370W dragline, commissioned in May 2011, was
  of that coal.                                      assembled by G&S Engineering and began operating in June 2011.
                                                     The Company expects that the new dragline will further improve
                                                     material movement efficiency and the site’s performance compared
> The dragline erection and commissioning            to existing truck and excavator operations.
  was completed within budget during the last
  quarter of the year.                               year ended June               2011     2010     2009     2008       2007
                                                     overburden (‘000bcm)          25,741   26,721   15,340   7,870      4,870
                                                     Rom coal
                                                                                    2,160   2,849     1,984   1,529        631
                                                     Production(‘000t)
                                                     saleable coal
                                                                                   1,638     2,120    1,375   1,229        520
                                                     Production(‘000t)
                                                     coal sales (‘000t)             1,562   2,478     1,271   1,057        410



                                                                          Annual Report 2011: Aquila Resources Limited          21
Coal
isAAc PLAins
coAL mine




22
isaac plains Coal sales By financial year

‘000t       0         250       500         750   1000   1250




                                                                         total = 1,562   Semi-harD cokinG coal         233
                                                                                         pci coal                      766
  2011                                                                                   thermal coal                  563
                                                                         total = 2,478   Semi-harD cokinG coal          664
                                                                                         pci coal                       634
  2010                                                                                   thermal coal                 1,180
                                                                         total = 1,271   Semi-harD cokinG coal         299
                                                                                         pci coal                      362
  2009                                                                                   thermal coal                  610
                                                                         total = 1,057   Semi-harD cokinG coal         146
                                                                                         pci coal                      540
  2008                                                                                   thermal coal                  371
                                                                         total = 410     Semi-harD cokinG coal           -
                                                                                         pci coal                      161
  2007                                                                                   thermal coal                  249




        semi HARD coKing coAL         Pci coAL    THeRmAL coAL




Coal transport anD logistiCs
The Isaac Plains Coal Mine has contracts with Dalrymple Bay Coal
Terminal, Queensland Rail and Pacific National to transport the Mine’s
coal production capacity of 2.8Mtpa.
Coal sales
Coal sales from the Mine for the year were 1.56Mt, representing a
37% decline in annual sales volume from the previous year, mainly
due to flooding and to a lesser degree, the dispute with Vale.
In the coming year, it is anticipated that the Mine will increase
production to 3.6Mtpa ROM to produce 2.8Mtpa of product
coal, which is in line with the revised Environmental Approval. The
Company’s entitlement will be 1.4Mtpa of product coal.
approvals
The process to obtain a Mining Lease for the Isaac Plains South
Deposit continued throughout the year. The joint venture participants
are currently considering a plan to construct infrastructure to access
this low stripping ratio area and commence mining operations at
Isaac Plains South in 2013.




                                                                                  Annual Report 2011: Aquila Resources Limited   23
Coal




 eagle Downs
 harD Coking Coal proJeCt




24
eagle Downs hard coking coal project (the project) is a proposed underground longwall coal mine located to
the south of moranbah in the Bowen Basin and adjacent to and down dip of Bhp Billiton mitsubishi alliance’s
peak Downs mine.


                                                                           mining
highlights 2011                                                            The mine will be an underground multi-seam longwall
                                                                           mine, initially producing up to 5.1Mtpa and an average of 4.5Mtpa
                                                                           of hard coking coal from one longwall over the first 10 years of
> Release of an upgraded Resource statement.                               operation. The mine plan involves systematic recovery of coal from
                                                                           the Harrow Creek Upper (HCU), Harrow Creek Lower (HCL) and
> Release of an upgraded Reserve statement.
                                                                           Dysart (DY) seams over a 48-year life of mine.
> completion of a study confirming the technical                           The mine design has been optimised using the results of the extensive
  and financial viability of the Project, conditional                      exploration program, including a 3D seismic program, conducted over
  upon securing rail and port logistics.                                   the mining area. Technical studies were also undertaken in relation
                                                                           to ventilation, gas drainage, geotechnical design and hydrogeology.
                                                                           Production schedules for the mine layout have been developed and
                                                                           benchmarked against leading Australian longwall coal mines.
                                                                           Capital Costs
Development                                                                The Study released in May 2011 indicates that under the schedule,
The Company’s preferred development schedule is driven by the first        the Project can be developed for a capital cost of $1,254 million,
available port capacity that the Project is likely to contract, which      which includes a contingency of $85 million.
is through the proposed Wiggins Island Coal Terminal (WICET) in            area                                           Capital Cost ($m)
Gladstone.                                                                 mine and processing costs                            1,130
The schedule is based on commencing construction of the mine               ePcm costs                                              39
to ensure the initial development production is aligned with the           contingency                                             85
anticipated commissioning of WICET in the September 2015 Quarter.          total                                                1,254
This would require Project sanction and the commencement of
construction in April 2012. This schedule provides sufficient certainty    Capital estimates are based on tendered prices for the Project work
that the Project will be able to deliver the coal product to the market.   packages, with appropriate allowances for contingency required for
The costs presented in this report are based on this schedule.             this level of study.
The estimated construction duration is 28 months from the date of the      operating Costs
Project commitment. The key dates for construction and production          The results of the Study indicate that, under the schedule, the mine
under the schedule are shown in the table below.                           will produce coal for approximately $94/tonne (FOB operating cost
                                                                           excluding State Royalties) with a mine life of approximately 48 years.
milestone                                            scheduled Date
Potential project sanction                              Apr 2012           area                                       operating Cost ($ per tonne)
construction of surface infrastructure complete         Jun 2014           mining operating costs                                 47
Drifts complete:                                                           Processing and support costs                           27
- First access to coal                                                     Logistics costs                                        20
                                                        oct 2015
  (Aligns with WiceT mechanical completion)                                total                                                  94
- cHPP commissioning
Practical completion                                    Dec 2015           The operating costs are based on the best estimates of logistics costs
Longwall production                                     oct 2016           as no firm contracts are currently in place.


                                                                                             Annual Report 2011: Aquila Resources Limited        25
Coal
eAgLe DoWns HARD
coKing coAL
PRoJecT




26
Coal transport anD logistiCs                                               This Resource contains a Reserve (JORC) of 254Mt ROM coal, as
Applications for port capacity at the proposed expansion for WICET         detailed below:
Stage 2 have been made and the Manager of the Project is also              reserve Statement
preparing applications for the proposed development of the Dudgeon                                                             rom
Point expansion adjacent to the Dalrymple Bay Coal Terminal.               Category                                             mt
                                                                                               Harrow creek upper seam (Hcu)
market assessment
                                                                           Proved                                               60.1
The proposed coal product has been assessed as low-volatile,
                                                                           Probable                                             13.5
standard-grade hard coking coal and the coal is expected to be well
                                                                           JorC reserves                                        73.6
received in the global metallurgical coal markets.
                                                                                               Harrow creek Lower seam (HcL)
geology anD resourCe                                                       Proved                                               91.1
The Project area contains a Resource (JORC) of 959Mt, of which 648Mt       Probable                                             21.9
is classified as Measured, 171Mt is classified as Indicated and 140Mt is   JorC reserves                                       113.0
classified as Inferred.                                                                              Dysart seam (Dy)
                                                                           Proved                                               55.4
resource Statement
                                                                           Probable                                             12.1
                                                                total
                                      total                  measured
                                                                           JorC reserves                                        67.5
                                   measured &               indicated &                                    Total
            measured   indicated    indicated   inferred      inferred
                                                                           Proved                                              206.6
seam          mt          mt           mt          mt            mt
                                                                           Probable                                             47.5
Q              73         20           93          15          108
                                                                           JorC reserves                                       254.1
Hcu           123         35          158          31          189
HcL           281         70          351          49          400         The mine Reserves are classified as predominantly hard coking coal.
HcL “pci”       -          3            3           8           11
Dy            164         13          177          16          193
Dy “pci”        7         30           37          21           58
total         648        171          819         140          959




                                                                                           Annual Report 2011: Aquila Resources Limited          27
Coal




     washpool
     harD Coking Coal proJeCt




28
the Washpool hard coking coal project (the project) is a proposed open-cut coal mine located north-west of Blackwater
in the Bowen Basin. once operational, the mine will produce 2.6mtpa of saleable hard coking coal for export through
the proposed Wiggins island coal export terminal at Gladstone.


                                                                            Coal transport anD logistiCs
highlights 2011                                                             The Project is one of the eight Stage 1 participants in the development
                                                                            of the WICET. During the June 2011 Quarter, WICET progressed
> completion of the Definitive Feasibility study.                           negotiations for the financing of the port development and
> Release of an upgraded Resource statement.                                subsequent to year end has completed this process, which included
                                                                            the allocation of a 1.6Mtpa capacity entitlement to the Project.
                                                                            The collective negotiations with Queensland Rail for the construction
The Definitive Feasibility Study (the DFS), which presents a business       of necessary rail infrastructure to support the new coal terminal
case and Project Execution Plan, has confirmed the Project’s                are well advanced with negotiations for the rail haulage services
technical and financial viability.                                          expected to be concluded in the December 2011 Quarter.
Development                                                                 approvals
Subject to approvals, which are on schedule, construction and               The Public Review period for the Environmental Impact Statement
production can commence in mid-2012 and 2013 respectively. The              (EIS) ended on 20 June 2011. The Department of Environment and
key dates identified for construction and production are as follows:        Resource Management has forwarded all submissions, which are
milestone                                             scheduled Date
                                                                            being addressed through a Supplementary Report. The Mining
                                                                            Lease approval remains on schedule for March 2012.
Definitive Feasibility study – Final Report              sept 2011
environmental impact studies                             Dec 2011           geology anD resourCe
mining Lease Approval                                    mar 2012           The target mining seam in the Project area is the Scorpio seam,
commencement of construction                             may 2012           which forms part of the Burngrove Coal Formation. The deposit lies
Hard coking coal production                              Apr 2013           within a perched basin, where the Scorpio seam continues, dipping
                                                                            at 3-5 degrees from the margins and flattening out towards the
mining                                                                      centre of the basin.
The DFS proposes a contractor-operated, open-cut mine producing             The basin extends approximately 7km along its east-west axis and
2.6Mtpa of hard coking coal using cast, doze and excavate mining            approximately 4km along its north-south axis. The coal seam is
methods. The mine will target the Scorpio seams of the Burngrove Coal       typically 6m thick and is intersected at an approximate depth of cover
Measures and will employ selective mining techniques to minimise            of 20m at the edges of the basin and a maximum depth of cover of
mining dilution. The expected life of mine is 16 years, inclusive of the    67m in the central portion of the perched basin. This will make the
initial ramp-up in production. There is also an opportunity to extend       Project one of the shallowest coal mining projects in Australia.
the life by 2–3 years by developing the deposit to the east.
                                                                            The Resource Statement (July 2011) has recently been upgraded
It is proposed that a large excavator fleet will mine the upper tertiary    and now totals 196.7Mt. It benefits from further knowledge
material, with a smaller dedicated coal fleet selectively mining the        gained in the exploration drilling program during the year. The
coal plies to reduce dilution.                                              Measured Resource (JORC) has increased from 108.8Mt (May
Coal BenefiCiation                                                          2010) to 124.9Mt as a result of infill drilling and ongoing coal
The proposed Coal Handling and Preparation Plant (CHPP) has been            quality analysis.
designed to produce a single product using a three-stage process at a       The present Reserves (JORC) as at May 2010 are 108.2Mt consisting of
plant feed rate of 1,060tph. Fine tailings will be dewatered and combined   94.7Mt of Proved and 13.5Mt of Probable coal. An updated reserves
with the coarse tailings to be deposed of in the mined overburden,          statement is yet to be completed on the new resources.
reducing the amount of water required to operate the CHPP.

                                                                                             Annual Report 2011: Aquila Resources Limited        29
Coal




 talwooD
 Coking Coal proJeCt




30
the talwood coking coal project (the project) is a proposed underground longwall mine located in the Bowen Basin in
queensland, adjacent to and down dip from the Bhp Billiton mitsubishi alliance’s operating Goonyella riverside and
Broadmeadow coal mines. the company holds 100% of the project.


                                                                     Coal transport anD logistiCs
highlights 2011                                                      The Project area is situated within 20km of the Goonyella –
                                                                     Abbot Point Queensland Rail infrastructure. The Study proposes
                                                                     the Goonyella – Abbot Point Expansion rail and the Abbot Point
> completion of the first stage exploration program                  Coal Terminal as the currently preferred logistics solution for the
  with identification of prospective mining horizons                 Project.
  in both the Rangal and moranbah coal measures
                                                                     The Prefeasibility Study will consider both Abbot Point and
  in the Bowen Basin.                                                Dalrymple Bay Coal Terminals in future studies to determine the
> Release of an upgraded Resource statement.                         optimum solution.
                                                                     geology anD resourCe
> completion of the concept study.                                   The exploration program identified three prospective coal
                                                                     seams with mineable targets within the Talwood exploration
                                                                     tenement, the Leichhardt and Vermont Seams from the Rangal
The Concept Study (the Study) contemplates a potential
                                                                     Coal Measures and the thick Middle Goonyella seam from the
underground longwall operation (a north and south mine with
                                                                     Moranbah Coal Measures.
two separate access points), producing an average of 4.4Mtpa of
ROM coking coal from one longwall unit in the Upper Leichhardt       The Study targeted the Upper Leichhardt seam as the preferred
coal seam of the Rangal Coal Measures.                               mining horizon. The Leichhardt seam is at a depth of 50m at its
                                                                     shallowest point and dips at approximately 1 in 10 throughout
As a result of the positive outcomes produced from the Study, the
                                                                     much of the tenement. Initial washability tests indicate that this
Company has decided to progress to a Prefeasibility Study which
                                                                     seam would produce a coking coal and a thermal coal.
will include a detailed exploration program targeting further
definition of both the Rangal and Moranbah Coal Measures.            The coal in the Middle Goonyella seam is a hard coking coal.
mining                                                               The total coal Resource (JORC) for the Project is 246.5Mt, with
                                                                     137.1Mt of Indicated Resource and 109.4Mt of Inferred Resource.
The mining target in the Study was limited to the Upper Leichhardt
Seam, where the longwall would operate in panels between             resource Statement
900m and 3.3km in length and in a seam thickness ranging from                                             total                total measured,
2m to 3.3m, with a designed panel width of 265m. There are                                             measured &                 indicated
                                                                                           indicated    indicated   inferred      & inferred
northern and southern mining areas, each of which will have          seam                     mt           mt          mt             mt
independent access due to the relatively shallow depth of the        upper Leichhardt         50.3        50.3        10.6          60.9
seam in the western area of the tenement.                            Vermont                  68.3        68.3        32.5         100.8
The Study contemplates annual production rates between               middle goonyella         18.5        18.5        66.3          84.8
3.4Mtpa and 5.7Mtpa ROM (an average of 4.4Mtpa), with                total                   137.1       137.1       109.4         246.5
variation dependent on the number of longwall moves per year.
Coal BenefiCiation
The proposed Coal Handling and Preparation Plant has been
designed to produce two coal products using a three-stage
process at a proposed plant feed rate of 800tph.



                                                                                        Annual Report 2011: Aquila Resources Limited         31
 manganese



 avontuur manganese proJeCt

 loCation                   resourCes (JorC)               proDuCt            aQuila     potential
                                                                              interest   proDuCtion rate
 25km north of Hotazel      109mt:                         High grade oxide   74%        up to 2mtpa
 in the northern cape       26mt measured;                 manganese                     (saleable product)
 Province of south Africa   35mt indicated;
                            48mt inferred




     gRAVenHAge ResouRce




                                     eeRsBeginT ResouRce




                                                                                                              HoTAzeL




32
 resource statement
                         tonnes       mn          fe         sio2          loi        Cao        mgo         al2o3       k2o          p
Category                   mt         %           %           %             %          %          %           %           %           %
gravenhage manganese Deposit
measured               26.2           39.25      12.48        8.96         8.06       6.82        3.48       0.34        0.19        0.03
indicated                   34.5      38.70      12.24        9.65         8.24       6.93        3.63       0.32        0.18        0.03
inferred                    46.3      37.95      11.41       10.31         8.68       7.38        3.94       0.33        0.14        0.03
subtotal               107.0          38.51      11.94        9.77         8.39       7.10        3.73       0.33        0.16        0.03
eersBegint manganese Deposit
inferred                 1.8          45.50      13.00        4.63         3.70        na         na         0.52        0.01        0.01
total                      108.8      38.63      11.96        9.69         8.31        na         na         0.33        0.16        0.03
na - not modelled




the avontuur manganese prospecting right is located 25km north-west of hotazel in the kalahari manganese Field
of the northern cape province of South africa.

The Company holds the tenement on behalf of a joint venture                  The Project is pre-qualified to participate in a reallocation of both the
with Rakana Consolidated Mines (Proprietary) Limited, a Black                existing and increased capacity on the Port Elizabeth export corridor,
Economic Empowerment company that has exercised an option                    the major transportation route for manganese ores destined for the
to participate up to 26% in the development of the Gravenhage                export market. This allocation process is for production commencing
Deposit.                                                                     in 2013, the target date for first production from the Project.
Development                                                                  The Company is also participating in the Ore Line Expansion Project,
                                                                             a study to assess the viability of expanding the Saldanha Bay export
A Definitive Feasibility Study is in progress for the development of the
                                                                             corridor to cater for increased iron ore and manganese exports.
Gravenhage Deposit, with mine studies considering the optimal open
pit design for the start of production.                                      geology anD resourCe
Underground operations are planned to commence later in the life             The Company has completed resource drilling on the Gravenhage
of the mine and the underground section of the ore body will be              Deposit, with 92 holes totalling 11,003 metres drilled. The deposit
accessible by declines from the final open pit.                              has an upgraded manganese Resource (JORC) of 107Mt at 38.5%
A Mining Right Application was submitted to the Department of                Mn, of which 56% is in the Measured and Indicated category.
Mineral Resources (DMR) in South Africa, which contains a Social             Exploration drilling is continuing south of the Gravenhage Deposit at
and Labour Plan that has been ratified by the Joe Morolong Local             targets within the Avontuur Basin, which is wholly contained within
Municipality Council. The Company also submitted an Environmental            the Company’s Avontuur Prospecting Right. Further south, within the
Impact Assessment Report to the DMR, as required under the Mining            lease and at the northern extents of the Kalahari Manganese Basin,
Right Application process. The Mining Right grant is expected by the         exploration drilling is testing extensions of the Eersbegint Manganese
end of calendar 2011.                                                        Deposit.




                                                                                              Annual Report 2011: Aquila Resources Limited          33
CompetenCy statements
west pilBara iron ore proJeCt                                                   isaaC plains Coal mine
•	 The	 information	 in	 this	 report	 that	 relates	 to	 Mineral	 Resources	   •	 The	information	in	this	report	that	relates	to	the	Isaac	Plains	Coal	
   within the West Pilbara Iron Ore Project was prepared under                     Mine Resource Statement has been compiled by Mr Mal Blaik.
   the supervision of Mr Stuart Tuckey, who is a member of the                     Mr Blaik is a Principal Consultant of JB Mining Services Pty Ltd. Mr
   Australasian Institute of Mining and Metallurgy. Mr Tuckey is a                 Blaik is a qualified geologist (BSc App Geol (Hons) University of
   full-time employee of API Management Pty Ltd. Mr Tuckey has                     Queensland, 1979) with over 30 years experience in coal geology
   sufficient experience that is relevant to the style of mineralisation           and over 20 years experience in resource evaluation. Mr Blaik is a
   and type of deposit under consideration and to the activity which               Member of the Australasian Institute of Mining and Metallurgy and
   he is undertaking to qualify as a Competent Person as defined in the            as such, qualifies as a Competent Person under the JORC code.
   2004 Edition of the Australasian Code of Reporting of Exploration               The Resource Statement has been prepared under the guidelines of
   Results, Mineral Resources and Ore Reserves (the JORC Code).                    the December 2004 edition of the Australasian Code for Reporting
   Mr Tuckey consents to the inclusion in the report of the matters                of Mineral Resources and Ore Reserves (the JORC Code). Fees for
   based on the information in the form and context in which it                    the preparation of this report are on a time and materials basis.
   appears.                                                                     •	 The	information	in	this	report	that	relates	to	the	Reserves	Estimate	
•	 The	information	in	this	report	that	relates	to	the	West	Pilbara	Iron	           for the Isaac Plains Coal Mine has been prepared by Mr Mark
   Ore Project Ore Reserves is based on information compiled by                    Bowater. The estimates of Coal Reserves for Isaac Plains North (ML
   Mr Steve Craig, Managing Director of ORElogy (Mining Consultants).              70342) and Isaac Plains South (MLa 70361) have been carried out
   Mr Craig is a Member of the Australasian Institute of Mining and                in accordance with the 2004 edition of the Australasian Code for
   Metallurgy and has sufficient experience which is relevant to the               Reporting of Mineral Resources and Ore Reserves (the JORC Code).
   style of mineralisation and type of deposit under consideration and             Mr Bowater is the Director of Echelon Mining Services Consultants
   to the activity he is undertaking, to qualify as a Competent Person             Pty Ltd. Mr Bowater has a Bachelor Degree in Civil Engineering
   as defined in the JORC Code. Mr Craig consents to the inclusion in              from Queensland University of Technology and a Bachelor Degree
   the report of the matters based on the information in the form and              in Business from the University of South Queensland. Mr Bowater
   context in which it appears.                                                    has over 20 years experience in the open cut mining industry,
                                                                                   including 19 years in Queensland coal.
thaBaZimBi iron ore proJeCt
                                                                                  Mr Bowater has substantial experience in mining operations,
The estimates of iron ore Resources for the Meletse Deposit presented
                                                                                  financial evaluations, including previously conducted Reserves
in this report have been prepared in accordance with the Australasian
                                                                                  Statements. Mr Bowater is a Member of the Australasian Institute
Code for Reporting of Exploration Results, Mineral Resources and Ore
                                                                                  of Mining and Metallurgy and as such, qualifies as a Competent
Reserves 2004. The estimates are based on information compiled
                                                                                  Person under the JORC Code. Fees for the preparation of this
by Mr Brent Green who is a member of the Australian Institute of
                                                                                  report are on a time and materials basis.
Geoscientists and a full-time employee of the Company. Mr Green
has sufficient experience that is relevant to the style of mineralisation       eagle Downs harD Coking Coal proJeCt
and type of deposit under consideration and to the activity which               •	 The	information	in	this	report	that	relates	to	the	Eagle	Downs	Hard	
he is undertaking to qualify as a Competent Person as defined in                   Coking Coal Project Resource Statement has been compiled by
the JORC Code. Mr Green holds shares in Aquila Resources Limited.                  Mr Mal Blaik. Mr Blaik is a Principal Consultant of JB Mining Services
Mr Green consents to the inclusion in the report of the matters based              Pty Ltd. Mr Blaik is a qualified geologist (BSc App Geol (Hons)
on the information in the form and context in which it appears.                    University of Queensland, 1979) with over 30 years experience in




34
  coal geology and over 20 years experience in resource evaluation.       •	 The	information	in	this	report	that	relates	to	the	Washpool	Hard	
  Mr Blaik is a Member of the Australasian Institute of Mining and           Coking Coal Reserves Statement was prepared by Mr Ross Haupt
  Metallurgy and, as such, qualifies as a Competent Person under             who is a Director of Xenith Consulting Pty Ltd. He has a Bachelor
  the JORC code. The Resource Statement has been prepared under              Degree in Mining Engineering from the University of Queensland
  the guidelines of the December 2004 edition of the Australasian            with over 25 years experience in the open cut coal mining industry
  Code for Reporting of Mineral Resources and Ore Reserves (the              and substantial experience in mining operations. Mr Haupt is a
  JORC Code). Mr Blaik has consented to the inclusion in the report          Member of the Australasian Institute of Mining and Metallurgy and
  of the matters based on the information in the form and context            as such, qualifies as a Competent Person under the JORC Code.
  in which it appears.                                                       Mr Haupt consents to the inclusion in the report of the matters
•	 The	information	in	this	report	that	relates	to	the	Eagle	Downs	Hard	      based on the information in the form and context in which it
   Coking Coal Project Reserves Statement has been prepared under the        appears.
   guidelines of the December 2004 edition of the Australasian Code for   talwooD Coking Coal proJeCt
   Reporting of Mineral Resources and Ore Reserves (the JORC Code).
                                                                          The information in this report that relates to the Talwood Coking Coal
   The information in this report to which this Statement is attached
                                                                          Resource Statement has been based on information compiled by
   that relates to Coal Reserves, is based on information reviewed by
                                                                          Mr Rod Doyle. He is a full-time employee of the Company and is a
   Mr J Steenekamp, who is a Fellow of the Australasian Institute of
                                                                          qualified Geologist (BSc Geology UOW 1978 and MAppSc UNSW
   Mining and Metallurgy. Mr Steenekamp has sufficient experience
                                                                          1988) with some 30 years experience in coal geology, coal mining and
   which is relevant to the style of mineralisation and type of deposit
                                                                          resource evaluation. He is a member of the Australasian Institute of
   under consideration and to the activity which he is undertaking to
                                                                          Mining and Metallurgy and as such, qualifies as a Competent Person
   qualify as a Competent Person as defined in the 2004 edition of
                                                                          under the JORC Code. Mr Doyle holds shares in Aquila Resources
   the JORC Code. Mr Steenekamp is a full time employee of Mining
                                                                          Limited.Mr Doyle consents to the inclusion in the report of the matters
   Consultancy Services (Australia) Pty Ltd and holds the position of
                                                                          based on the information in the form and context in which it appears.
   Managing Director. Mr Steenekamp has consented to the inclusion
   in the report of the matters relating to Coal Reserves based on the    avontuur manganese proJeCt
   information he has reviewed in the form in which it appears.           The information in this report that relates to the Gravenhage
washpool harD Coking Coal proJeCt                                         Manganese Resource was prepared under the supervision of Mr Brent
                                                                          Green, who is a member of the Australian Institute of Geoscientists
•	 The	information	in	this	report	that	relates	to	the	Washpool	Hard	
                                                                          and is a full-time employee of the Company. Mr Green has sufficient
   Coking Coal Project Resource Statement has been based on
                                                                          experience that is relevant to the style of mineralisation and type of
   information compiled by Mr Rod Doyle, who is a full-time employee
                                                                          deposit under consideration and to the activity which he is undertaking
   of the Company. He is a qualified Geologist (BSc Geology UOW
                                                                          to qualify as a Competent Person as defined in the JORC Code.
   1978 and MAppSc UNSW 1988) with some 30 years experience
                                                                          Mr Green holds shares in Aquila Resources Limited. Mr Green
   in coal geology, coal mining and resource evaluation. He is a
                                                                          consents to the inclusion in the report of the matters based on the
   member of the Australasian Institute of Mining and Metallurgy and
                                                                          information in the form and context in which it appears.
   qualifies as a Competent Person under the JORC Code. Mr Doyle
   holds shares in Aquila Resources Limited. Mr Doyle consents to the
   inclusion in the report of the matters based on the information in
   the form and context in which it appears.




                                                                                           Annual Report 2011: Aquila Resources Limited        35
      SchEdULE Of
      TENEMENTS

     Tenement No.                 Project Name              Mineral                Notes   Ownership
     WESTERN AUSTRALIA
     E45/2603            Mount Grant                      All minerals               1       100%
     E45/2647            Lever Well                       All minerals               1       100%
     E47/1376            Mount Bruce                      All minerals               1       100%
     E47/1411            Turner                           All minerals               1       100%
     E47/1412            Rocklea                          All minerals               1       100%
     E47/1413            Hardey                           All minerals               1       100%
     E47/1414            Hancock Range                    All minerals               1       100%
     E47/1415            Austin Creek East                All minerals               1       100%
     E47/1416            Nammuldi                         All minerals               1       100%
     E47/1417            Meteorite Bore                   All minerals               1       100%
     E47/1495            Juna                             All minerals               1       100%
     E52/1747            Snowy Mountain                   All minerals               1       100%
     E52/1775            Western Creek                    All minerals               1       100%
     E52/1776            Innawalley Pool                  All minerals               1       100%
     E47/1129            Balmoral                All Minerals excluding Diamonds     1       100%
     E47/1130            Balmoral                All Minerals excluding Diamonds     1       100%
     E47/1255            Balmoral                All Minerals excluding Diamonds    1,2      100%
     E47/1256            Balmoral                All Minerals excluding Diamonds     1       100%
     E47/1257            Balmoral                All Minerals excluding Diamonds     1       100%
     E47/1258            Balmoral                All Minerals excluding Diamonds     1       100%
     E47/1259            Balmoral                All Minerals excluding Diamonds    1,2      100%
     E47/1260            Balmoral                All Minerals excluding Diamonds    1,2      100%
     E47/1261            Hamersley Range         All Minerals excluding Diamonds    1,2      100%
     E47/1262            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1263            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1264            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1265            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1266            Hamersley Range         All Minerals excluding Diamonds    1,2      100%
     E47/1267            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1278            Hamersley Range         All Minerals excluding Diamonds    1,2      100%
     E47/1279            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1280            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1281            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1282            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1283            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1284            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1285            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1286            Hamersley Range         All Minerals excluding Diamonds     1       100%
     E47/1287            Hamersley Range         All Minerals excluding Diamonds     1       100%

36
Tenement No.                  Project Name              Mineral                    Notes                 Ownership
WESTERN AUSTRALIA (cONT.)
E47/1503            Balmoral                 All Minerals excluding Diamonds        1,2                     100%
E47/1504            Hamersley Range          All Minerals excluding Diamonds         1                      100%
E47/1505            Hamersley Range          All Minerals excluding Diamonds         1                      100%
E47/1506            Hamersley Range          All Minerals excluding Diamonds        1,2                     100%
E08/1135            Yanks Bore                          Iron Ore                     1                       70%
E08/1292            Mount Stuart                        Iron Ore                     1                       70%
E08/1330            Catho Well                          Iron Ore                     1                       70%
E08/1341            Cardo Bore                          Iron Ore                     1                       70%
E47/1169            Yalleen                             Iron Ore                     1                       70%
E47/1170            Yalleen                             Iron Ore                     1                       70%
E47/1171            Yalleen                             Iron Ore                     1                       70%
E08/1227            Cardo                               Iron Ore                     1              60%, earning up to 80%
E08/1283            Cane River                          Iron Ore                     1              60%, earning up to 80%
E08/1289            Red Hill North                      Iron Ore                     1              60%, earning up to 80%
E08/1293            White Gate                          Iron Ore                     1              60%, earning up to 80%
E08/1294            Red Hill North                      Iron Ore                     1              60%, earning up to 80%
E08/1295            Red Hill                            Iron Ore                     1              60%, earning up to 80%
E08/1430            Red Hill                            Iron Ore                     1              60%, earning up to 80%
E08/1473            Red Hill                            Iron Ore                     1              60%, earning up to 80%
E08/1516            Red Hill / Mt Stuart                Iron Ore                     1              60%, earning up to 80%
E08/1537            Red Hill                            Iron Ore                     1              60%, earning up to 80%
E47/1141            Upper Cane                          Iron Ore                     1              60%, earning up to 80%
E47/1693            Duck Creek                          Iron Ore                     1              60%, earning up to 80%
P47/1271            Madala Bore                       All minerals                  1,2                     100%
E08/2089            Chuerdoo Pool                     All minerals                  1,2                     100%
E08/2140            Cheela Plains North               All minerals                  1,2                     100%
E45/3562            Yowarda Pool                      All minerals                   1                      100%
E47/2205            Horse Well                        All minerals                  1,2                     100%
E47/2218            Boolgeega Creek South             All minerals                   1                      100%
E47/2332            Cheela Plains Central             All minerals                  1,2                     100%
E47/2341            Hamersley Range A                 All minerals                  1,2                     100%
E47/2342            Hamersley Range B                 All minerals                  1,2                     100%
E47/2375            Mango Bore                        All minerals                  1,2                     100%
E52/2596            Windell Pool                      All minerals                  1,2                     100%
E47/2501            Beasley River                     All minerals                  1,2                     100%
E47/2595            Cathedral Gorge                   All minerals                  1,2                     100%
E47/2596            Kalgan Creek A                    All minerals                  1,2                     100%
E47/2597            Kalgan Creek B                    All minerals                  1,2                     100%



                                                                               Annual Report 2011: Aquila Resources Limited   37
SchEdULE Of
TENEMENTS




     Tenement No.          Project Name         Mineral     Notes   Ownership
     QUEENSLANd
     EPC 783        Belvedere                     Coal                24.5%
     EPC 1035       Belvedere West                Coal                24.5%
     EPC 1075       Belvedere South               Coal                24.5%
     EPC 1100       Belvedere                     Coal                24.5%
     MLa 80148      Belvedere No 1                Coal        2       24.5%
     MLa 80149      Belvedere No 2                Coal        2       24.5%
     MLa 80150      Belvedere No 3                Coal        2       24.5%
     MLa 80153      Belvedere No 4                Coal        2       24.5%
     MLa 80154      Belvedere No 5                Coal        2       24.5%
     MLa 80155      Belvedere No 6                Coal        2       24.5%
     MLa 80158      Belvedere No 7                Coal        2       24.5%
     MLa 80159      Belvedere No 8                Coal        2       24.5%
     PLa 269        Belvedere No 1              Petroleum     2       24.5%
     PLa 270        Belvedere No 2              Petroleum     2       24.5%
     PLa 271        Belvedere No 3              Petroleum     2       24.5%
     PLa 290        Belvedere No 4              Petroleum     2       24.5%
     PLa 291        Belvedere No 5              Petroleum     2       24.5%
     PLa 292        Belvedere No 6              Petroleum     2       24.5%
     MDLa442        Exevale                       Coal        2       50%
     MDLa444        Isaac River                   Coal        2       50%
     EPC 752        Exevale                       Coal                50%
     EPC 755        Moranbah East                 Coal                50%
     EPC 795        Peak Downs East               Coal                50%
     MLa 70389      Eagle Downs                   Coal                50%
     EPC 830        Isaac River                   Coal                50%
     EPC 883        Mount Gotthardt               Coal                50%
     EPC 954        Mount Gotthardt South         Coal                50%
     EPC 1077       Peak Downs East Extension     Coal                50%
     ML 70342       Isaac Plains                  Coal                50%
     MLa 70361      Isaac Plains South            Coal        2       50%
     MLa 70380      Isaac Plains South 2A         Coal        2       50%
     MLa 70381      Isaac Plains South 3          Coal        2       50%
     MLa 70382      Isaac Plains South Access     Coal        2       50%
     EPC 958        Washpool                      Coal                100%
     MDL 403        Washpool                      Coal                100%
     MLa 80164      Washpool                      Coal        2       100%
     MLa 80176      Washpool B                    Coal        2       100%
     MLa 80177      Washpool C                    Coal        2       100%
     EPC 959        Wilpeena                      Coal                100%
     EPC 960        Duaringa                      Coal                100%
     EPC 965        Spring Vale                   Coal                100%
     EPC 966        Mt Crocker                    Coal                100%
     EPC 968        Bowen River                   Coal                100%
     EPC 985        Talwood                       Coal                100%




38
Tenement No.                         Project Name                              Mineral                         Notes                Ownership
EPC 995                    Dawson Vale                                          Coal                                                   100%
EPC 1013                   Walton                                               Coal                                                   100%
EPC 1032                   Speculation Creek                                    Coal                                                   100%
EPC 1153                   Adler Downs                                          Coal                                                   100%
EPC 1190                   Bendoba                                              Coal                                                   100%
EPC 1191                   Box Creek                                            Coal                                                   100%
EPC 1192                   Cornwall                                             Coal                                                   100%
EPC 1203                   Forest Vale                                          Coal                                                   100%
EPC 1211                   Blenheim                                             Coal                                                   100%
EPC 1214                   Stragglers                                           Coal                                                   100%
EPC 1219                   Blenheim Ext                                         Coal                                                   100%
EPC 1412                   Cabbagetree                                          Coal                                                   100%
EPCa 2179                  Washpool West                                        Coal                              2                    100%
EPC 2302                   Walton North                                         Coal                                                   100%
EPCa 2467                  Cabbagetree West                                     Coal                              2                    100%
NORThERN TERRITORY
EL28180                    Argadargada                                       All minerals                                              100%
EL28181                    Lake Nash                                         All minerals                                              100%
EL28182                    Mt Hogarth                                        All minerals                                              100%
BOTSWANA
P 53/2005                  Lechana                                              Coal                                                   50%
P 54/2005                  Tshimoyapula                                         Coal                                                   50%
P 55/2005                  Dukwe                                                Coal                                                   50%
P 56/2005                  W Mmamabula B                                        Coal                                                   50%
P 57/2005                  W Mmamabula A                                        Coal                                                   50%
SOUTh AfRIcA
LP30/5/1/1/2/547           Rotterdam                                           Iron Ore                           3                    100%
LP30/5/1/1/2/613           Klipgat                                             Iron Ore                           3                    100%
LP30/5/1/1/2/614           Vlaknek                                             Iron Ore                           3                    100%
LP30/5/1/1/2/1301          Donkerpoort                                         Iron Ore                           3                    100%
LP30/6/1/1/2/1730          Wachteenbietjiesdraai                               Iron Ore                           3                    100%
NC30/5/1/1/2/478           Avontuur                                          Manganese                            3                    100%
NC30/5/1/1/2/479           Kathu                                        Iron Ore/Manganese                        3                    100%
NC30/5/1/1/2/1023          Blackridge                                   Iron Ore/Manganese                        3                    100%
NC30/5/1/1/2/1048          Orange River                                        Iron Ore                           3                    100%
MR Farm703/114             Gravenhage                                   Iron Ore/Manganese                       2,3                   100%


NOTES
 1    Australian Premium Iron Joint Venture (The Company – 50%). The Joint Venture’s interest is only in relation to iron ore.
 2    Under application.
 3    The Company holds these tenements on behalf of the Thabazimbi Joint Venture in which the Company holds a 74% interest.




                                                                                                          Annual Report 2011: Aquila Resources Limited   39
     dIREcTORS’ REPORT
     The DirecTors of AquilA resources limiTeD (“The compAny”) presenT Their
     reporT TogeTher wiTh The consoliDATeD finAnciAl sTATemenTs for The
     consoliDATeD enTiTy, being The compAny AnD iTs conTrolleD enTiTies, for
     The yeAr enDeD 30 June 2011, AnD The AuDiTor’s reporT Thereon.


     cONTENTS
     1   Directors .....................................................................41      9    Likely developments ..................................................46
     2   Company Secretary ....................................................41               10   Directors’ interests .....................................................46
     3   Directors’ meetings ....................................................41             11   Share options .............................................................47
     4   Corporate Governance Statement ............................42                          12   Indemnification and insurance of Officers...............47
         - Board of Directors ....................................................42
                                                                                                13   Non-audit services .....................................................47
         - Nomination Committee ...........................................42
         - Remuneration Committee .......................................42                     14   Auditor’s independence declaration ........................47
         - Audit Committee .....................................................43              15   Rounding off ..............................................................47
         - Risk management ....................................................43
         - Ethical standards ......................................................43           16   Remuneration report – Audited................................48
         - Communication with shareholders .........................44                               16.1 Remuneration policies .....................................48
                                                                                                     16.2 Directors’ and Executive Officers’
     5   Principal activities ......................................................44                    remuneration ...................................................49
     6   Operating and financial review ................................45                           16.3 Analysis of bonuses included in
         - Coal ...........................................................................45             remuneration - granted as compensation .......50
         - Iron Ore ....................................................................45           16.4 Analysis of movements in option
         - Manganese ...............................................................46                    holdings - granted as compensation................50
                                                                                                     16.5 Analysis of exercise of option
     7   Dividends ....................................................................46
                                                                                                          holdings - granted as compensation................50
     8   Events subsequent to the reporting date ................46




40
1. dIREcTORS
   The Directors of the Company at any time during or since the end of the financial year are:

                                                                                                                              Directorships of external
   Name, qualifications and                                                                                                   listed companies held in the
   independence status                          Age       Experience and special responsibilities                             previous three years
   Tony Poli                                     52       A Director since 14 March 2000, Mr Poli is a qualified accountant   Nil
   B.Com, CPA, MAICD                                      and has extensive general management, corporate and
   Executive Chairman and                                 directorial experience. He has responsibility for the operations
   Chief Executive Officer                                of the consolidated entity and has overseen the growth of the
                                                          consolidated entity.
   Charles Bennett Bass                          61       A Director since 14 March 2000, Mr Bass is a qualified geologist    Exploration Syndicate, Inc.
   B.Sc(Geol), M.Sc(Mining Eng.),                         and mining engineer with 40 years experience in mineral             Geopacific Resources NL
   FAusIMM FAIG, MAICD                                    exploration, development and production in Australia, Canada
   Non-Executive Director                                 and the United States. Mr Bass is the Chairman of the Risk
                                                          Management Committee.
   Derek Thomas Cowlan                           77       A Director since 14 March 2000, Mr Cowlan has a wealth of           Nil
   Independent                                            experience in financial and business management. He currently
   Non-Executive Director                                 presides as the Chairman of the Ross North Group, a large
                                                          project home building company operating in Western Australia.
                                                          Mr Cowlan is the Chairman of the Audit Committee.
   Gordon Thomas Galt                            60       A Director since 22 August 2007, Mr Galt is a senior mineral        Navigator Resources Ltd.
   B. Eng (Mining, Hons), B.Com,                          resources executive and an experienced Director. He has worked      Discovery Metals Ltd.
   MAusIMM, MAICD                                         in senior management, technical and operational roles and           NuCoal Resources NL
   Independent                                            across a wide range of commodities, primarily in coal, gold and     US Masters Holdings Ltd.
   Non-Executive Director                                 magnesium, and to a lesser extent in copper, lead and zinc. Mr      Delta SBD Ltd.
                                                          Galt is the Chairman of the Remuneration Committee.
   Zhihao Dai                                    48       A Director since 27 November 2009, Mr Dai is a qualified engineer   Baoshan Iron & Steel Co. Ltd.
   B. Eng (Metallic Materials Eng.),                      with substantial experience in the production, marketing and        Baosteel Group Corporation
   M.Arts (Econ.)                                         management functions of iron and steel enterprises. He joined
   Non-Executive Director                                 Baosteel in 1983 and has held numerous roles within the Baosteel
                                                          Group prior to being appointed Vice President of Baosteel Group
                                                          Corporation in 2007.


2. cOMPANY SEcRETARY
   Mr J R Wood (LLB (Hons), MBA), the Company’s General Counsel, was appointed as the Company Secretary on 1 September 2007.
   Mr Wood, an Australian Legal Practitioner, has significant legal experience in the resources industry, both as an in-house counsel and as a partner in private
   practice.

3. dIREcTORS’ MEETINGS
   The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors of the
   Company during the year are:

                                                                                                     Risk Management
                                  Board Meetings                     Audit Committee                     Committee                  Remuneration Committee
                               Number of  Number of               Number of   Number of           Number of   Number of             Number of    Number of
                               meetings    meetings                meetings    meetings            meetings    meetings              meetings     meetings
   Name of Director              held      attended                 held       attended             held(ii)  attended(ii)             held       attended
   Mr T Poli                      5            5                      -(iii)       1(i)               2            1                    -(iii)        -
   Mr C B Bass                         5              5                2               2                2                2              1                1
   Mr D T Cowlan                       5              4                2               2                -   (iii)
                                                                                                                         -              1                1
   Mr G T Galt                         5              5                2               2                -(iii)           -              1                1
   Mr Zhihao Dai                       5              2                 -(iii)          -               -(iii)           -              -(iii)              -

   (i) Attended meeting by invitation of the relevant Committee.
   (ii) The Company’s Chief Financial Officer (CFO), Mr Howard Rae, is also a member of the Risk Management Committee. Mr Rae attended both meetings
        of this Committee held during the year.
   (iii) Messrs Poli and Dai are not members of the Audit Committee, Messrs Cowlan, Galt and Dai are not members of the Risk Management Committee
         and Messrs Poli and Dai are not members of the Remuneration Committee.




                                                                                                            Annual Report 2011: Aquila Resources Limited        41
dIREcTORS’
REPORT




4. cORPORATE GOVERNANcE STATEMENT                                                     The Director must consult with an adviser suitably qualified in the
                                                                                      relevant field, and obtain the Chairman’s approval of the fee payable
     This statement outlines the main corporate governance practices in
                                                                                      for the advice before proceeding with the consultation. This approval
     place throughout the financial year, which comply with the Australian
                                                                                      will not be unreasonably withheld. A copy of the advice received by the
     Securities Exchange (ASX) Corporate Governance Council’s (Council)
                                                                                      Director is made available to all members of the Board.
     recommendations, unless otherwise stated.
                                                                                      composition of the Board
     BOARd Of dIREcTORS                                                               The names of the Directors of the Company in office at the date of this
     Role of the Board                                                                report are set out in the Directors’ Report on page 41.
     The Board’s primary role is the protection and enhancement of long-              The composition of the Board is determined by applying the following
     term shareholder value. It guides and monitors the business and affairs          principles and guidelines:
     of the consolidated entity on behalf of the shareholders by whom they            •	 Directors	 appointed	 by	 the	 Board	 are	 subject	 to	 election	 by	
     are elected and to whom they are accountable.                                       shareholders at the following Annual General Meeting and thereafter
     To fulfill this role, the Board is responsible for the overall corporate            are	subject	to	re-election	every	three	years;
     governance of the consolidated entity including:                                 •	 The	 Board	 has	 resolved,	 pursuant	 to	 the	 Company’s	 Constitution,	
                                                                                         that the Board shall comprise five Directors. The Board may resolve
     •	 overseeing	corporate	strategy;
                                                                                         to increase this number if additional expertise is considered desirable
     •	 appointing,	remunerating	and	performance	assessment	of	the	Chief	                in	certain	areas;	and
        Executive	Officer	(CEO);
                                                                                      •	 The	Board	should	comprise	Directors	with	an	appropriate	range	of	
     •	 approving	major	capital	expenditures,	acquisitions,	divestments	and	             qualifications and expertise.
        capital	management	programmes;
                                                                                      The Board periodically reviews its composition to consider whether it
     •	 monitoring	the	achievement	of	corporate	objectives;                           has the appropriate mix of Directors with the expertise and experience
     •	 reviewing,	ratifying	and	monitoring	systems	of	internal	compliance,	          suitable for the purpose of fulfilling its collective responsibilities on
        risk management and legal compliance, ensuring the integrity and              behalf of shareholders. Where a vacancy exists, for whatever reason, or
        effectiveness	of	those	systems;	and                                           where it is considered that the Board would benefit from the services of
     •	 approving	the	consolidated	financial	statements.                              a new Director with particular skills, the Board will select candidates with
     The Board has delegated responsibility for the day-to-day operational,           the relevant qualifications, skills and experience.
     corporate and administrative activities of the consolidated entity               Of the five Directors, Mr Cowlan and Mr Galt are considered by the
     to the CEO (who is also the Chairman of the Board) and executive                 Board to constitute Independent Directors. Notwithstanding the
     management. Contrary to the Council’s recommendations 2.2 and 2.3,               Council’s recommendation 2.1 that the majority of the Board should
     which recommends that the Chairman should be independent and that                consist of Independent Directors, the Board is of the opinion that the
     the role of the Chairman and the CEO should not be the same individual,          objectives and current strategy of the consolidated entity are currently
     the Board has elected not to comply with these recommendations at this           best served and achievable by maintaining on the Board a majority
     point in time as it is of the opinion that the objectives and current strategy   of persons associated with the consolidated entity since its inception,
     of the consolidated entity are best served by the same person in the dual        irrespective of their degree of independence.
     role of CEO/Chairman, irrespective of his degree of independence.                It is the Board’s intention to continue to review and assess the benefits
     Board process                                                                    associated with the introduction of additional external Independent
     The Board currently holds regular meetings each year, plus any                   Non-Executive Directors.
     extraordinary meetings at such other times as may be necessary to
     address significant matters that may arise. Executives are regularly             NOMINATION cOMMITTEE
     invited to participate in Board discussions.                                     The Directors believe that the size of the Board does not currently justify
     The agenda for meetings is prepared by the Company Secretary and/or              the establishment of a separate Nomination Committee of the Board of
     the Executive Chairman and includes standing items such as financial             Directors as recommended by the Council’s recommendation 2.4.
     and operational reports, strategic matters, governance and compliance.           All matters which might otherwise be dealt with by a Nomination
     Board papers are circulated to the Directors in advance of all scheduled         Committee are considered at meetings of the full Board of Directors.
     meetings.                                                                        The Board will continue to review the necessity to establish a Nomination
     directors’ education                                                             Committee.
     The Company has a process to educate new Directors about the nature
     of the business, current issues, the corporate strategy, the culture and         REMUNERATION cOMMITTEE
     values of the Company and the expectations of the Company concerning             The Board established a Remuneration Committee effective August
     the performance of Directors.                                                    2010, the composition of which is consistent with the Council’s
     Directors are encouraged to undertake continuing education and                   recommendation 8.1. This Committee is comprised of Messrs Galt, Bass
     professional development, relevant to discharging their duties. All              and Cowlan, with Mr Galt acting as its Chair.
     reasonable costs of continuing Directors’ education and professional             The Remuneration Committee reviews and makes recommendations to
     development are met by the Company.                                              the Board on remuneration packages and policies applicable to Executive
                                                                                      Directors and Non-Executive Directors and the annual Remuneration
     Independent professional advice and access to information
                                                                                      Report. This responsibility extends to incentive performance packages,
     In fulfilling their obligations, each Director has the right of access to
                                                                                      share option schemes, termination entitlements and legal and regulatory
     all relevant information held by the Company and to the Company’s
                                                                                      compliance associated with remuneration matters.
     Executives and, subject to prior consultation with the Chairman, may
     seek independent professional advice from a suitably qualified adviser at        The Remuneration Committee meets as required. The CEO and the
     the consolidated entity’s expense.                                               General Manager – Finance and Corporate attend the Remuneration
                                                                                      Committee meetings by invitation, but are not present when their
                                                                                      remuneration is considered or discussed.



42
AUdIT cOMMITTEE                                                                 for the management of the risk and risk mitigation actions and plans,
The Company has had a separate Audit Committee since September                  and the framework by which the monitoring, assessing and reviewing
2006, pursuant to the ASX Listing Rule 12.7 and consistent with the             will be undertaken and communicated to the relevant stakeholders on
Council’s recommendation 4.1. The structure of the Audit Committee,             a regular basis.
as recommended by the Council’s recommendation 4.2, is comprised                The management of the Risk Management System, including assessing
of Messrs Cowlan, Bass and Galt, with Mr Cowlan acting as its Chair.            the effectiveness of the risk management processes and activities, is the
The operation of the Audit Committee is governed by a Charter which             responsibility of the Risk Management Committee.
specifies that its key responsibilities include:                                Board oversight of Risk Management
•	 monitoring	 compliance	 with	 new	 and	 existing	 regulatory	                The Board monitors and receives reports from the Chairman of the Risk
   requirements, including the Corporations Act 2001, ASX Listing               Management Committee on risk matters (operational and financial risk
   Rules	and	other	statutory	obligations;                                       areas) addressed by the Risk Management Committee via a standing
•	 reviewing	 the	 Company’s	 risk	 management	 systems	 in	 relation	          agenda item at each Board Meeting, and considers strategies for
   to audit, accounting, taxation and financial reporting risks and             appropriate risk management arrangements. Matters determined by
   obligations;                                                                 the Risk Management Committee are submitted to the full Board as
•	 evaluating	the	adequacy	of	the	accounting	system	and	the	associated	         recommendations for Board decisions as appropriate.
   internal	control	framework;                                                  Operational, financial reporting and regulatory compliance risks are
•	 reviewing	the	annual	and	half-year	consolidated	financial	statements;	       continually assessed, monitored and managed at management level,
                                                                                and any specific areas of significant risk are dealt with at Board level.
•	 approving	the	appointment,	reappointment,	rotation	or	replacement	
   of	the	external	auditors;                                                    Whilst the Board acknowledges that it is responsible for the overall
•	 reviewing	the	overall	scope	of	the	external	audit;	and                       internal control framework, it is also cognisant that no cost-effective
                                                                                internal control system will preclude all errors and irregularities.
•	 considering	 the	 effectiveness	 and	 independence	 of	 the	 external	
   auditors.                                                                    To manage the consolidated entity’s risk profile, the Board has established
                                                                                an internal control framework comprising:
The CEO and the CFO have declared in writing to the Board that the
financial records of the consolidated entity for the financial year have been   •	 monitoring	the	Risk	Management	Committee;	
properly maintained and that the consolidated entity’s financial statements     •	 monitoring	 financial	 reporting	 accuracy	 and	 compliance	 with	 the	
for the year ended 30 June 2011 comply with accounting standards and               financial reporting regulatory framework:
present a true and fair view of the consolidated entity’s financial condition      – there is a comprehensive budgeting system with an annual budget
and operational results. This statement is required annually.                        approved by the Directors. Monthly financial results are reported
                                                                                     against budget and forecasts for the remainder of the year are
RISK MANAGEMENT                                                                      revised	monthly;
Risk Management committee                                                          – cash flow statements are prepared and included within a package
The Board established a Risk Management Committee effective June                     of	information	reported	to	Directors	on	a	monthly	basis;	and
2006. Its structure is comprised of Messrs Bass, Poli and Rae, with Mr             – half-yearly and annual statutory reports, which are reviewed
Bass acting as its Chair.                                                            and audited respectively by the Company’s external auditors and
                                                                                     reported	to	the	ASX;
The key responsibilities of the Risk Management Committee include:
                                                                                •	 all	business	transactions	of	a	material	nature	are	properly	authorised	
•	 managing	 and	 overseeing	 an	 enterprise	 wide	 Risk	 Management	
                                                                                   and	executed;	and
   Policy	and	Risk	Management	System;
                                                                                •	 the	 recruitment	 and	 retention	 of	 personnel	 with	 due	 experience,	
•	 assessing	and	monitoring	significant	risks	faced	by	the	consolidated	
                                                                                   commitment and integrity.
   entity and the effectiveness of procedures implemented by
   management	to	mitigate	such	risks	on	an	ongoing	basis;                       The financial reporting risk management framework and associated
•	 reviewing	 and	 assessing	 material	 changes	 to	 risks	 faced	 by	 the	     internal controls are monitored by management to ensure they are
   consolidated	entity;                                                         operating effectively. The operational risk management procedures are
                                                                                reviewed on an ongoing basis to ensure they appropriately support
•	 reviewing	 the	 Risk	 Management	 System	 and	 Risk	 Register	 on	 a	
                                                                                corporate objectives.
   regular	basis;	and
•	 ensuring	 risk	 exposures	 relating	 to	 foreign	 exchange	 and	 interest	   Environmental regulation
   rate fluctuations are managed in accordance with the consolidated            The consolidated entity is committed to ensuring that safe and sound
   entity’s Foreign Exchange and Interest Rate Risk Management Policy           environmental practices are carried out while undertaking exploration,
   by determining, with the assistance of external treasury advisers,           development and mining activities and that such practices comply
   appropriate foreign exchange and interest rate hedging strategies to         with relevant statutory requirements under Commonwealth, State and
   manage these risks and ensure that such activities are conducted in          relevant overseas legislation. The Board is not aware of any significant
   compliance with this policy.                                                 or material breaches of environmental requirements during the period
Risk Management System                                                          covered by this report.
The consolidated entity’s Risk Management System aims to ensure that
risk management is undertaken in a holistic, co-ordinated approach in           EThIcAL STANdARdS
order to add value to the business. It is designed to identify, assess,         All Directors and employees are expected to act with the utmost
monitor and manage risks and monitor any material changes to risks              integrity and objectivity and comply at all times with laws governing the
faced by the consolidated entity. It was adopted to establish oversight         consolidated entity’s operations. In addition, they are also expected to
and management of significant business risks faced by the consolidated          conduct the consolidated entity’s activities in keeping with the highest
entity, pursuant to the Council’s recommendation 7.1 and 7.2.                   legal, moral and ethical standards.
The system includes a Risk Register, where all material risks faced by
the consolidated entity are identified and assessed, the accountabilities



                                                                                                 Annual Report 2011: Aquila Resources Limited            43
dIREcTORS’
REPORT




4. cORPORATE GOVERNANcE STATEMENT (cONT.)                                                cOMMUNIcATION WITh ShAREhOLdERS
                                                                                         The Board provides shareholders with information via its comprehensive
     EThIcAL STANdARdS (cONT.)                                                           Continuous Disclosure process which involves identifying matters that
     code of conduct                                                                     may have a material effect on the price of the Company’s securities,
     All Directors and employees are required at all times to act in accordance          notifying these matters to the ASX, posting them on the Company’s
     with the consolidated entity’s Code of Conduct, which prescribes                    website and issuing media releases.
     standards of behaviour to be maintained in relation to:                             The Continuous Disclosure process operates as follows:
     •	   compliance	with	laws	and	regulations;                                          •	 the	CEO	and	the	Company	Secretary	are	responsible	for	Continuous	
     •	   political	contributions;                                                          Disclosure	compliance	and	informing	the	Board	of	relevant	matters;		
     •	   unacceptable	payments;                                                         •	 the	CEO	is	responsible	for	all	communications	with	the	ASX;
     •	   giving	and/or	receiving	gifts;
                                                                                         •	 the	 annual	 report,	 which	 includes	 relevant	 information	 about	 the	
     •	   protection	of	assets;                                                             operations and financial results of the consolidated entity during
     •	   proper	accounting;                                                                the year, changes in the state of affairs and details of future
     •	   dealing	with	auditors;                                                            developments, is distributed electronically to all shareholders in
     •	   public	statements;                                                                October each year, unless a shareholder has specifically requested to
     •	   conflicts	of	interest;                                                            receive	a	hard	copy	annual	report;	
     •	   the	use	of	inside	information;                                                 •	 the	 half-yearly	 report,	 which	 contains	 summarised	 financial	
     •	   share	trading;                                                                    information and a brief review of the operations of the consolidated
                                                                                            entity during the period, is lodged with the ASX in March each year
     •	   alcohol	and	drug	abuse;
                                                                                            and	is	electronically	delivered	to	all	shareholders	who	request	a	copy;
     •	   equal	opportunity	and	discrimination;
                                                                                         •	 the	 quarterly	 reports,	 containing	 a	 review	 of	 the	 operations	 and	
     •	   environmental	responsibilities;
                                                                                            statement of cash flows of the consolidated entity are reported and
     •	   occupational	health	and	safety;	and                                               lodged with the ASX in January, April, July and October each year and
     •	   economy	and	efficiency.                                                           are	electronically	delivered	to	all	shareholders	who	request	a	copy;	
     conflict of interest                                                                •	 proposed	major	changes	to	the	consolidated	entity	which	may	impact	
     In accordance with the Corporations Act 2001 and the Company’s                         on	share	ownership	rights	are	submitted	to	a	vote	of	shareholders;
     Constitution, Directors must keep the Board advised, on an ongoing                  •	 all	 announcements	 made	 to	 the	 market	 and	 related	 information	
     basis, of any interest that could potentially conflict with those of the               (including information provided to analysts or the media during
     Company. Where the Board believes that a significant conflict exists for               briefings) are placed on the Company’s website after their release to
     a Director on a Board matter, the Director concerned does not receive                  the	ASX;
     the relevant Board papers and is not present at the meeting whilst the              •	 the	 full	 text	 of	 notices	 of	 meetings	 and	 associated	 explanatory	
     item is considered. Details of Director related party transactions with the            material	are	placed	on	the	Company’s	website;	and
     consolidated entity are set out in Note 32 to the consolidated financial
                                                                                         •	 the	 external	 auditor	 is	 requested	 to	 attend	 the	 Annual	 General	
     statements.                                                                            Meetings to answer any questions concerning the audit and the
     Share trading                                                                          contents of the auditor’s report.
     The Board encourages its Directors and employees to own securities in the           The above information is made available on the Company’s website
     Company but is also mindful of its responsibility that the consolidated entity      within two business days of public release and is emailed to all
     complies with the Corporations Act 2001 pertaining to “insider trading”.            shareholders who lodge their email contact details and consent to
     To ensure compliance with the relevant requirements of the Corporations             receiving electronic communication from the Company. Information
     Act 2001 and the Listing Rules of the ASX, the consolidated entity has              on lodging email addresses with the Company is available on the
     established a policy on share trading in the Company’s securities by                Company’s website.
     Directors and employees which requires that:                                        The Board encourages attendance and participation by shareholders at
     •	 Directors	 and	 employees	 must	 notify	 the	 Executive	 Chairman	 and	          the Annual General Meeting, to ensure a high level of accountability
        the Company Secretary of their intent to trade the Company’s shares              and identification with the consolidated entity’s strategy and goals. All
        and confirm that they are not in possession of any material inside               important issues are presented to the shareholders as specific resolutions.
        information;
     •	 trading	in	the	Company’s	shares	is	prohibited	at	the	following	times:         5. PRINcIPAL AcTIVITIES
          – ten days prior to the release of any quarterly report by the                 The principal activities of the consolidated entity during the course of the
            Company, which is normally one month following the end of each               year consisted of exploration for coal, iron ore and manganese resources
            calendar	quarter;	                                                           and mining of coal resources. There were no significant changes in the
          – four weeks prior to the release of the Company’s interim and full-           nature of these activities of the consolidated entity during the year.
            year	financial	statements;	and                                               The consolidated entity’s objective is to enhance shareholder value
          – when in possession of unpublished price sensitive information                through systematic exploration, evaluation and development of its
            (“inside information”) which might or might not be generally                 mineral projects.
            available, that may materially affect the price or value of the
            Company’s	shares;	and
     •	 active	trading	in	the	Company’s	shares,	with	a	view	to	derive	profit	
        related income, is prohibited at all times.




44
6. OPERATING ANd fINANcIAL REVIEW                                                 and type of deposit under consideration and to the activity which he is
                                                                                  undertaking to qualify as a Competent Person as defined in the 2004
   OVERVIEW Of ThE cONSOLIdATEd ENTITY                                            edition of the JORC Code. Mr Steenekamp is a full time employee of
                                                                                  Mining Consultancy Services (Australia) Pty Ltd and holds the position
   The net consolidated loss for the year attributable to members of the
                                                                                  of Managing Director. Mr Steenekamp has consented to the inclusion
   Company after income tax was $64,558,000 (2010: $33,072,000).
                                                                                  in the report of the matters relating to Coal Reserves based on the
                                                                                  information he has reviewed in the form in which it appears.
   REVIEW Of OPERATIONS
                                                                                  Talwood Coking Coal Project
   COAL                                                                           (Aquila Resources Limited -100%)
   Isaac Plains Coal Mine                                                         The Talwood Coking Coal Project has a total JORC compliant resource
   (Aquila Resources Limited -50%)                                                of 246.5Mt (137.1Mt Indicated and 109.4Mt Inferred) following a
   The consolidated entity has achieved a gross profit from the 50% owned         first stage exploration program with identification of prospective
   Isaac Plains Coal Mine of $29,659,000 (2010: $11,230,000). This result         mining horizons in both Rangal and Moranbah Measures in the Bowen
   was achieved despite a 37% decrease in annual sales volumes relative to        Basin. A completed Concept Study has identified a business case
   the 2010 financial year, with 1.56Mt shipped (2010: 2.48Mt).                   and the Company has approved the progression to the next stage of
   Coal production for the year was heavily impacted by adverse weather           development, being a Pre-Feasibility Study.
   conditions in Queensland. Force majeure was declared in December               The information in this report that relates to the Talwood Resource
   2010 due to the inability of the mine to process and deliver coal while        Statement has been based on information compiled by Mr Rod Doyle.
   recovery and repairs from significant flooding were undertaken. A              He is a full-time employee of Aquila Resources Limited. He is a qualified
   significant dewatering program was necessary in the second half of the         Geologist (BSc Geology UOW 1978 and MAppSc UNSW 1988) with
   financial year, which has also made a negative contribution to operating       some 30 years experience in coal geology, coal mining and resource
   costs. Work is continuing on a significant insurance claim which covers        evaluation. He is a member of the Australasian Institute of Mining and
   both property damage and business interruption.                                Metallurgy and qualifies as a Competent Person under the JORC Code.
   The 12-month rolling average Lost Time Injuries (LTI) Frequency Rate has       Mr Doyle consents to the inclusion of the information in this report,
   continued to be maintained at zero LTI per million man hours worked.           where the information presented is in the form and context in which
                                                                                  it appears.
   The Isaac Plains dragline was brought into production in June 2011,
   with operations commencing in the N1 pit following successful                  Washpool Hard Coking Coal Project
   commissioning trials. The dragline construction project was completed          (Aquila Resources Limited -100%)
   within budget and suffered only minor delays as a result of the poor           During the financial year, the JORC compliant resource was increased
   weather conditions encountered over the construction period.                   from 185.4Mt (108.8Mt Measured, 23.9Mt Indicated and 52.7Mt
   Eagle Downs Hard Coking Coal Project                                           Inferred) (in May 2010) to 196.7Mt (124.9Mt Measured, 9.7Mt Indicated
   (Aquila Resources Limited -50%)                                                and 62.1Mt Inferred). The Definitive Feasibility Study was completed
                                                                                  after the end of the current financial year and has confirmed Washpool
   The major milestone achieved during the year has been the completion
                                                                                  Hard Coking Coal Project’s technical and financial viability for production
   of the project Study which has confirmed the technical and financial
                                                                                  of 2.6Mtpa of hard coking coal over the mine life of 15 years.
   viability of the Eagle Downs Hard Coking Coal Project, subject to
   securing rail and port capacity and firm offtake agreements.                   The information in this report that relates to the Washpool Resource
                                                                                  Statement has been based on information compiled by Mr Rod Doyle,
   The Eagle Downs Hard Coking Coal Project has an estimated mine life
                                                                                  who is a full-time employee of Aquila Resources Limited. He is a
   of 48 years and a total JORC compliant resource of 959Mt (648Mt
                                                                                  qualified Geologist (BSc Geology UOW 1978 and MAppSc UNSW 1988)
   Measured, 171Mt Indicated and 140Mt Inferred) and a reserve of
                                                                                  with some 30 years experience in coal geology, coal mining and resource
   254Mt run of mine coal. The mine, once constructed with the longwall
                                                                                  evaluation. He is a member of the Australasian Institute of Mining and
   installed in the Harrow Creek Upper Seam, will produce an average of
                                                                                  Metallurgy and qualifies as a Competent Person under the JORC Code.
   4.5Mtpa of hard coking coal over the initial ten years of production.
                                                                                  Mr Doyle holds shares in Aquila Resources Limited. Mr Doyle consents
   The coal product has been assessed as low-volatile, standard-grade hard
                                                                                  to the inclusion in the report of the matters based on the information in
   coking coal and the brand is expected to be well received in the global
                                                                                  the form and context in which it appears.
   metallurgical coal market.
   The information in this report that relates to the Eagle Downs Resource        IRON ORE
   Statement is based on information verified by Mr Phillip Sides (BAppSc         West Pilbara Iron Ore Project
   (Geology), MAIG). Mr Sides is a Senior Geologist employed by JB Mining         (Aquila Resources Limited -50%)
   Services Pty Ltd and has sufficient experience that is relevant to the style   The Definitive Feasibility Study for Stage 1 of the West Pilbara Iron
   of mineralisation and type of deposit under consideration and as such          Ore Project (the WPIOP) has been progressing during the year, with
   qualifies as a Competent Person under the JORC Code. Mr Sides has              the outcomes of this study expected to be released during 2011.
   consented to the inclusion in the report of the matters based on the           The Stage 1 resource contains Proven and Probable Reserves of 445Mt
   information in the form and context in which it appears.                       in the eight Stage 1 iron ore deposits, providing an initial 15 years of
   The information in this report that relates to the Eagle Downs                 mine life at a target production of 30Mtpa.
   Reserves Statement has been prepared under and in accordance with              The Company and its co-venturer have agreed to undertake the mine
   the Guidelines of the Australasian Code for Reporting of Exploration           development for the Stage 1 development, subject to certain conditions.
   Results, Mineral Resources and Ore Reserves, prepared by the Joint Ore         Significant progress has been made towards key milestones during the
   Reserves Committee, December 2004. The information in this report              year including a recommendation for environmental approval of the
   to which this Statement is attached that relates to Coal Reserves, is          proposed mine and rail facilities from the Environmental Protection
   based on information reviewed by Mr J Steenekamp, who is a Fellow              Authority (subject to conditions), as well as substantial progress towards
   of the Australasian Institute of Mining and Metallurgy. Mr Steenekamp          project financing and native title agreements.
   has sufficient experience which is relevant to the style of mineralisation



                                                                                                   Annual Report 2011: Aquila Resources Limited            45
dIREcTORS’
REPORT




6. OPERATING ANd fINANcIAL REVIEW (cONT.)                                             South Africa. As part of the Mining Right application, the Environmental
                                                                                      Impact Assessment and the Environmental Management Program
     REVIEW Of OPERATIONS (cONT.)                                                     Report were submitted to the Department of Mineral Resources on 21
                                                                                      June 2011. The grant of the Mining Right is expected by the end of the
     IRON ORE (CONT.)
                                                                                      calendar year 2011.
     West Pilbara Iron Ore Project (cont.)
                                                                                      In addition to the Company’s participation in the Manganese Industry
     The ongoing consultation with the Traditional Owners in the areas of
                                                                                      Forum, which deals with expansion of manganese export corridors
     mine and rail facilities has been progressing and it is anticipated that
                                                                                      from the Northern Cape Province, the Company is involved in the Pre-
     an agreement with the Traditional Owners will be reached during
                                                                                      Feasibility Study for the Ore Line Expansion Project. This study assesses
     the second quarter of the new financial year. The preferred Project
                                                                                      the opportunity of expanding the Saldanha Bay export corridor to cater
     Managing Contractor has been identified and the award of the contract
                                                                                      for the increase in iron ore and manganese exports.
     is scheduled in the second quarter of the new financial year. Expressions
     of interest have also been sought from experienced contractors for
     certain early start activities under the Project Execution Plan.
                                                                                      SIGNIfIcANT chANGES IN ThE STATE Of AffAIRS
                                                                                      There were no significant changes in the state of affairs of the
     Discussions are continuing with the State Government with respect to
                                                                                      consolidated entity during the financial year.
     the design and award of port proponency of the proposed multi-user
     Anketell Port, with environmental approval of the Public Environmental
     Review scheduled before the end of the 2011 calendar year.
                                                                                   7. dIVIdENdS
                                                                                      There was no dividend paid or declared by the Company since the end
     Exploration activity continues at a number of targets, with potential for
                                                                                      of the previous financial year and the Directors do not recommend the
     additional resources to utilise the infrastructure servicing Stage 1 of the
                                                                                      payment of a dividend in respect of the current financial year (2010: Nil).
     WPIOP.
     The information in this report that relates to the West Pilbara Iron Ore      8. EVENTS SUBSEQUENT TO ThE REPORTING dATE
     Project Ore Reserves is based on information compiled by Mr Steve
     Craig, Managing Director of ORElogy (Mining Consultants). Mr Craig               On 8 August 2011, 1,420,000 options were issued to employees of
     is a Member of the Australasian Institute of Mining and Metallurgy and           the consolidated entity under its Employee Share Option Plan, with an
     has sufficient experience which is relevant to the style of mineralisation       exercise price of $8.71 and which vest over a four-year period.
     and type of deposit under consideration, and to the activity he is               On 24 August 2011, the consolidated entity paid a compensation
     undertaking, to qualify as a Competent Person as defined in the 2004             payment of $5,851,000 pursuant to a land access agreement that had
     Edition of the “Australasian Code for Reporting of Exploration Results,          been agreed with the land owner for one of the consolidated entity’s
     Mineral Resources and Ore Reserves”. Mr Craig consents to the inclusion          coal projects in Queensland.
     of the matters based on his information in the form and context in               As at the date of this report, there have been no events occurring
     which it appears.                                                                subsequent to the reporting date, other than the matters above, which
     Thabazimbi Iron Ore Project                                                      would have a material impact on the consolidated entity or require
     (Aquila Resources Limited -74%)                                                  disclosure in this financial report.
     In South Africa, the Meletse Iron Ore Deposit resource has been
     upgraded to 48Mt at 62.9% Fe, with exploration drilling ongoing to            9. LIKELY dEVELOPMENTS
     extend the deposit. A positive Scoping Study for the development of the          The consolidated entity will continue to explore and mine its coal, iron ore
     Meletse Iron Ore Deposit indicated that it is viable to undertake a 2Mtpa        and manganese projects and evaluate related corporate opportunities.
     operation based on the current known resource, with the potential to             Disclosure of further information regarding likely developments in the
     expand the initial production to 4Mtpa in the expectation of a larger            operations of the consolidated entity in future years and the expected
     ore body.                                                                        results of those operations is likely to result in unreasonable prejudice
     The estimates of iron ore Resources for the Meletse Iron Ore Deposit             to the consolidated entity and accordingly, has not been included in
     presented in this report have been prepared in accordance with                   this report.
     the Australasian Code for Reporting of Exploration Results, Mineral
     Resources and Ore Reserves 2004. The estimates are based on                   10. dIREcTORS’ INTERESTS
     information compiled by Mr Brent E Green who is a member of the
                                                                                      The relevant interest of each Director in the ordinary share capital of
     Australian Institute of Geoscientists and a full-time employee of the
                                                                                      the Company as notified by the Directors to the ASX in accordance
     Company. Mr Green has sufficient experience that is relevant to the
                                                                                      with Section 205G(1) of the Corporations Act 2001, at the date of this
     style of mineralisation and type of deposit under consideration and to
                                                                                      report, is as follows:
     the activity which he is undertaking to qualify as a Competent Person
     as defined in the JORC Code. Mr Green consents to the inclusion in the                                           Number of                Number of
     report of the matters based on the information in the form and context                                            fully paid             options over
     in which it appears.                                                             Name of Directors             ordinary shares          ordinary shares
                                                                                      Tony Poli                      108,276,852                    -
     MANGANESE
                                                                                      Charles B Bass                  42,877,681                    -
     Avontuur (Gravenhage) Manganese Project
                                                                                      Derek T Cowlan                  10,368,974                    -
     (Aquila Resources Limited -74%)
                                                                                      Gordon T Galt                               -                 -
     The Feasibility Study for development of the Gravenhage Deposit
                                                                                      Zhihao Dai                                  -                 -
     is progressing towards completion during 2011. Mine studies are
     underway to optimise the open pit design for the start of production.
     The production level of saleable product is expected to be up to 2Mtpa.
     During the year, the Social and Labour Plan projects for Gravenhage
     were ratified by the Joe Morolong Local Municipality and a Mining Right
     application was submitted to the Department of Mineral Resources in


46
11. ShARE OPTIONS                                                                  Insurance premiums
                                                                                   No details of the nature of the liabilities covered and the amount of
   Options granted to directors and Officers of the company                        premium paid in respect of the Directors’ and Officers’ Liability Insurance
   During or since the end of the financial year, the Company granted              policy have been disclosed, as such disclosure is prohibited under the
   options for no consideration over unissued ordinary shares in Aquila            terms of the policy.
   Resources Limited to the following of the five most highly remunerated
   Officers of the Company as part of their remuneration:                       13. NON-AUdIT SERVIcES
                    Number                                                         During the year, KPMG, the Company’s auditor, has performed certain
                   of options Exercise                                             other services in addition to their statutory duties.
   Name             granted    price   Grant date             Expiry date
                                                                                   The Board has considered the non-audit services provided during the
   Mr M N Alciaturi 600,000    $11.40 2 July 2010            1 July 2014           year by the auditor and is satisfied that the provision of those non-
   Mr J A Pavy         600,000       $8.71 8 August 2011 7 August 2015             audit services during the year by the auditor is compatible with, and
                                                                                   did not compromise, the auditor independence requirements of the
                                                                                   Corporations Act 2001 for the following reasons:
   Unissued shares under option
                                                                                   •	 all	 non-audit	 services	 were	 subject	 to	 the	 corporate	 governance	
   At the date of this report, details of unissued ordinary shares of the
                                                                                      procedures adopted by the Company and were reviewed by the
   Company under option are as follows:
                                                                                      Audit Committee to ensure they do not impact the integrity and
   Expiry date                Exercise price        Number of shares                  objectivity	of	the	auditor;	and
   21 June 2013(i)                $7.65                3,502,950                   •	 the	 non-audit	 services	 provided	 do	 not	 undermine	 the	 general	
   1 July 2014(ii)              $11.40                 1,749,000                      principles relating to auditor independence as set out in APES
                                                                                      110 Code of Ethics for Professional Accountants, as they did not
   7 August 2015                  $8.71                1,420,000                      involve reviewing or auditing the auditor’s own work, acting in a
                                                       6,671,950                      management or decision making capacity for the Company, acting
                                                                                      as an advocate for the Company or jointly sharing risks and rewards.
   All vested options expire on the earlier of their expiry date or 30 days
                                                                                   Details of the amounts paid to the auditor of the Company, KPMG, for
   after cessation of the employee’s employment.
                                                                                   audit and non-audit services provided during the year are set out in
   (i) Number of shares includes participation in the 1 for 10 Bonus Issue on      Note 9 to the consolidated financial statements.
       23 December 2009 and the 1 for 10 Bonus Issue on 23 December 2010.
   (ii) Number of shares includes participation in the 1 for 10 Bonus Issue     14. AUdITOR’S INdEPENdENcE dEcLARATION
        on 23 December 2010.
                                                                                    UNdER SEcTION 307c Of ThE cORPORATIONS
   Analysis of shares issued on exercise of options                                 AcT 2001
   During the financial year, the consolidated entity issued ordinary shares       The auditor’s independence declaration is set out on page 51 and forms
   of the Company as a result of the exercise of options as follows (there         part of the Directors’ Report for the year ended 30 June 2011.
   are no amounts unpaid on the shares issued):
    Number of options Amount paid per                Number of shares           15. ROUNdING Off
       exercised         option                          issued                    The Company is of a kind referred to in ASIC Class Order 98/100 dated
         366,666          $5.50                           580,800                  10 July 1998 and in accordance with that Class Order, amounts in the
       5,000,000          $4.00                        19,166,400                  consolidated financial statements and Directors’ Report have been
                                                                                   rounded to the nearest thousand dollars, unless otherwise stated.
          52,500          $7.65                            62,700


12. INdEMNIfIcATION ANd INSURANcE
    Of OffIcERS
   Indemnification
   The Company has entered into agreements indemnifying the Directors
   and certain Executives of the Company and/or its controlled entities
   against all liabilities to another person (other than the Company or a
   related body corporate) that may arise from their position as Directors
   of the Company and/or its controlled entities, with the exception of
   conduct involving a wilful breach of duty or improper use of information
   to gain a personal advantage.
   The agreements stipulate that the Company will meet the full amount of
   any such liabilities, including costs and expenses.




                                                                                                    Annual Report 2011: Aquila Resources Limited            47
dIREcTORS’
REPORT




16. REMUNERATION REPORT - AUdITEd                                              Executive remuneration policies
     The following were key management personnel of the consolidated           Remuneration of Executives comprises a combination of fixed and
     entity at any time during the reporting period and unless otherwise       incentive pay and is structured in a manner designed to link reward
     indicated were key management personnel for the entire period:            to corporate and individual performances. Contracts of employment
                                                                               requiring more than 12 months’ notice must be brought to the attention
     Executive Director                                                        of the Board.
     Mr T Poli                                                                 Performance linked compensation
     (Executive Chairman and Chief Executive Officer)
                                                                               Performance linked compensation includes both short-term and long-
     Non-Executive Directors                                                   term incentives and is designed to reward personnel in a manner that
     Mr C B Bass                                                               aligns with the Company’s business objectives and as recognition for
     Mr D T Cowlan                                                             strong individual performance.
     Mr G T Galt                                                               Short-term incentives
     Mr Zhihao Dai                                                             The Company’s short-term incentive program is comprised of cash
     Executives                                                                bonuses, determined following an annual review of the individual’s
     Mr R G Tipper (General Manager – Iron Ore)                                achievements of key performance indicators relevant to their role as
                                                                               well as their contribution to the performance of the consolidated entity.
     Mr S J Pilcher (General Manager – Coal)
     Mr M N Alciaturi (General Manager – Finance and Corporate,                The maximum cash bonus levels are set at between 10% and 50% of the
     commenced on 19 July 2010)                                                employee’s total fixed remuneration. Milestones and key performance
                                                                               indicators for eligible employees are reviewed and set annually between
     Mr H C Rae (Chief Financial Officer)
                                                                               the employee and their immediate manager. These milestones must be
     Mr J A Pavy (General Manager – Legal, commenced on 8 August 2011)
                                                                               appropriate for the relevant role and must in all cases be approved by
     Mr J R Wood (General Counsel/Company Secretary)                           the CEO.
     Mr B E Green (Head of Exploration)                                        Long-term incentives
                                                                               Long-term incentives are presently comprised of share options, which are
16.1 REMUNERATION POLIcIES                                                     granted from time to time to encourage sustained strong performance in
     Remuneration levels are competitively set to attract and retain           the realisation of strategic outcomes and growth in shareholder wealth.
     appropriately qualified and experienced Directors and Executives.         Options are granted for no consideration and do not carry voting or
     Company policy is to set fixed annual remuneration at the market          dividend entitlements.
     median, with the Company’s short-term incentive program providing
                                                                               The exercise price of the options is determined after taking into account
     the opportunity for high performing staff to earn total remuneration
                                                                               the underlying share price performance during the period leading up to
     in the upper quartile relative to the market. Where necessary, the
                                                                               the date of grant and applicable vesting conditions relating to the share
     Remuneration Committee will obtain independent advice on the
                                                                               options. Subject to specific vesting conditions, each option is convertible
     appropriateness of remuneration packages.
                                                                               into one ordinary share. Refer to Note 24 of the consolidated financial
     Non-Executive remuneration policies                                       statements for vesting conditions attached to share options granted.
     Fees paid to Non-Executive Directors are within the aggregate amount      Key management personnel are not permitted to enter into arrangements
     approved by shareholders. Recommendations are made by the Board           that limit their exposure to risk in relation to an element of that person’s
     with respect to the approval of this aggregate amount at the Company’s    remuneration that depends on a performance condition.
     Annual General Meeting.
                                                                               Service contracts
     Compensation for Non-Executive Directors is set with reference to fees
                                                                               All key management personnel are employed by standard employment
     paid to other Non-Executive Directors of comparable companies.
                                                                               agreements which run for indefinite lengths, do not provide termination
     This remuneration is made by way of fees (in the form of cash and         payments and are able to be terminated after statutory notice periods,
     superannuation benefits).                                                 with the exception of the consultancy agreement with Omega
     There are no retirement benefits paid to Non-Executive Directors (other   Management Services Pty Ltd (“Omega”), a company associated with
     than statutory superannuation benefits) and they do not participate       the CEO, which is due to expire on 30 April 2012. Under this agreement,
     in equity based remuneration schemes that are used to remunerate          Omega provides the services of Mr Poli (or another approved employee)
     Executives from time to time.                                             to act as Executive Chairman of the Company. Certain Executives also
     Total remuneration for all Non-Executive Directors, last approved by      have a contractual entitlement to additional redundancy payments in
     shareholders at a meeting in November 2009, is not to exceed $500,000     the event that their position is terminated as a direct result of a takeover
     per annum. As per section 16.2, $288,000 was paid to Non-Executive        of the Company.
     Directors for the year (2010: $213,984).
     Non-Executive Directors do not receive performance related
     compensation. Directors’ fees cover all main Board activities and
     membership of Board committees.




48
    consequences of performance on shareholders wealth
    Performance in respect of the current year and the previous four years is detailed in the table below:
                                                                   2011                       2010             2009                     2008               2007
                                                                   $’000                      $’000            $’000                   $’000               $’000
    Net profit (loss)                                           ($64,558)                  ($33,072)        ($26,162)                 $97,269           ($12,527)
    Increase (decrease) in share price                                0%                        50%            (65%)                    297%                 79%

    The increase (decrease) in the Company’s share price noted above has been adjusted to reflect the impact of bonus issues.
    During the years noted above, there were no dividends paid or other returns of capital made by the Company to shareholders.
    The consolidated entity’s performance is impacted not only by market factors, but also by employee performance. The measures of performance of the
    consolidated entity set out in the table above have been taken into consideration in the determination of appropriate levels of remuneration.

16.2 dIREcTORS’ ANd ExEcUTIVE OffIcERS’ REMUNERATION
    The following table provides the remuneration details of all Directors of the Company (“Specified Directors”) and each of the named Executives of the
    Company and the consolidated entity with the highest remuneration (“Specified Executives”), being all key management personnel, including the nature
    and amount of the elements of their remuneration for the year ended 30 June 2011.
                                                                                                 Post         Equity                    Performance
                                                            Short-term                        employment   compensation                    related
                                                                                                                                          bonus as     Value of options
                                              Salary/    Directors    Cash                       Super       Value of                  proportion of   as proportion of
                                               fees        fees      bonus         Total        benefits     options(i)     Total      remuneration     remuneration
    Name                              Year      $           $          $            $              $             $           $              %                %
    Specified Directors
    Executive
    Mr T Poli(ii)                     2011    500,000     49,542             -    549,542        22,458              -     572,000              -              -
    (Executive Chairman/CEO)          2010    500,000          -             -    500,000        57,500              -     557,500              -              -
    Non-Executive
    Mr C B Bass                       2011          -     22,000             -     22,000        50,000              -      72,000              -              -
                                      2010          -          -             -          -        57,500              -      57,500              -              -
    Mr D T Cowlan                     2011          -     72,000             -     72,000             -              -      72,000              -              -
                                      2010          -     57,500             -     57,500             -              -      57,500              -              -
    Mr G T Galt                       2011          -     72,000             -     72,000             -              -      72,000              -              -
                                      2010          -     65,000             -     65,000             -              -      65,000              -              -
    Mr Zhihao Dai                     2011          -     72,000             -     72,000             -              -      72,000              -              -
                                      2010          -     33,984             -     33,984             -              -      33,984              -              -
    Total – Executive Director        2011    500,000     49,542             -    549,542        22,458              -     572,000              -              -
                                      2010    500,000          -             -    500,000        57,500              -     557,500              -              -
    Total – Non-Executive Directors   2011          -    238,000             -    238,000        50,000              -     288,000              -              -
                                      2010          -    156,484             -    156,484        57,500              -     213,984              -              -
    Total – Specified Directors       2011    500,000    287,542             -    787,542        72,458              -     860,000              -              -
                                      2010    500,000    156,484             -    656,484       115,000              -     771,484              -              -
    Specified Executives
    Mr R G Tipper                     2011    400,000           -    117,000      517,000        50,000      425,388        992,388        12%             43%
    (General Manager - Iron Ore)      2010    400,000           -     45,000      445,000        50,000      462,154        957,154         5%             48%
    Mr S J Pilcher                    2011    425,000           -    135,000      560,000        25,000      340,310        925,310        15%             37%
    (General Manager – Coal)          2010    275,229           -    120,000      395,229        24,771      369,723        789,723        15%             47%
    Mr M N Alciaturi                  2011    456,410           -    175,000      631,410        25,000      560,873      1,217,283        14%             46%
    (General Manager – Finance        2010          -           -          -            -             -            -              -           -               -
    and Corporate, appointed
    19 July 2010 )
    Mr H C Rae                        2011    332,000           -     61,250      393,250        18,000      141,796       553,046         11%             26%
    (Chief Financial Officer)         2010    297,000           -     31,500      328,500        18,000      178,831       525,331          6%             34%
    Mr J R Wood                       2011    267,499           -     15,000      282,499        50,000      141,796       474,295          3%             30%
    (General Counsel/Company          2010    265,000           -     31,500      296,500        50,000      154,051       500,551          6%             31%
    Secretary)
    Mr B E Green                      2011     243,119         -      51,675       294,794       21,881      141,796        458,471        11%             31%
    (Head of Exploration)             2010     229,358         -      75,000       304,358       20,642      188,123        513,123        15%             37%
    Total – Specified Executives      2011   2,124,028         -     554,925     2,678,953      189,881    1,751,959      4,620,793        12%             38%
                                      2010   1,466,587         -     303,000     1,769,587      163,413    1,352,882      3,285,882         9%             41%
    Total compensation – Key          2011   2,624,028   287,542     554,925     3,466,495      262,339    1,751,959      5,480,793        10%             32%
    Management Personnel              2010   1,966,587   156,484     303,000     2,426,071      278,413    1,352,882      4,057,366         7%             33%

    (i) The fair values of the options are calculated at the date of grant using a binomial option pricing model and allocated to each reporting year over the
        period from grant date to vesting date. The values disclosed are the portion of the fair values of the options recognised in this reporting year. Refer to
        Note 24 of the consolidated financial statements.
    (ii) The remuneration for Mr Poli, who acts as Executive Chairman and CEO of the Company, is included in the remuneration for Specified Directors, but
         not in the remuneration for Specified Executives.




                                                                                                             Annual Report 2011: Aquila Resources Limited            49
dIREcTORS’
REPORT




16. REMUNERATION REPORT - AUdITEd (cONT.)
16.3 ANALYSIS Of BONUSES INcLUdEd IN REMUNERATION – GRANTEd AS cOMPENSATION
     Cash bonuses awarded as remuneration to the relevant Specified Executives were granted following the attainment of specific performance targets agreed
     upfront between the Executive and the CEO in accordance with the Company’s short-term incentive program or on a discretionary basis based upon an
     annual review of the Executive’s overall achievements and performance for the year. Mr Rae’s bonus was paid on 14 July 2011. All other bonuses paid to
     key management personnel were paid on 12 August 2011.
     The cash bonuses awarded as remuneration to the relevant Specified Executives were fully vested in the year ended 30 June 2011 and none were forfeited
     during the current or prior year.
16.4 ANALYSIS Of MOVEMENTS IN OPTION hOLdINGS – GRANTEd AS cOMPENSATION
                                                                                                                         Vested    % vested          Vested and
                                  Held at         Granted as                          Other             Held at          during    during the       exercisable at
     Name                       1 July 2010     remuneration        Exercised       changes(i)       30 June 2011       the year      year          30 June 2011
     Specified Director
     Mr T Poli                   5,000,000                  -     (5,000,000)                -                    -            -         -                      -
     Specified Executives
     Mr R G Tipper(iii)            750,000                 -                -               -            750,000        150,000      20%                 262,500
     Mr S J Pilcher(iii)           600,000                 -                -               -            600,000        120,000      20%                 210,000
     Mr M N Alciaturi(ii)                -           600,000                -               -            600,000              -        -                       -
     Mr H C Rae(iii)               400,000                 -        (187,500)               -            212,500         50,000      24%                  50,000
     Mr J R Wood(iii)              250,000                 -                -               -            250,000         50,000      20%                  87,500
     Mr B E Green(iii)             500,000                 -        (216,666)        (33,334)            250,000         50,000      20%                  87,500

     (i) Other changes represent options that were forfeited or expired during the financial year.
     (ii) 600,000 options were granted to Mr Alciaturi on 2 July 2010, with an exercise price of $11.40 and an expiry date of 1 July 2014. 15% of these options
          vested on 1 July 2011. Subject to continued employment, a further 20% of these options vest on 1 July 2012, a further 25% vest on 1 July 2013 and
          the remaining 40% vest on 1 July 2014. The fair value of each option is $2.69.
     (iii) For the unvested options held by Messrs Tipper, Pilcher, Rae, Wood and Green, 38% will vest on 21 June 2012, with the remaining 62% vesting on
           21 June 2013, subject to continued employment.
     No options held by the Specified Director or the Specified Executives are vested but not exercisable.
16.5 ANALYSIS Of ExERcISE Of OPTION hOLdINGS - GRANTEd AS cOMPENSATION
     During the reporting period, the following shares were issued on the exercise of options granted as compensation:
                                                          Number
                                                         of options         Amount paid           Number of           Market price per       Value derived at
     Name                       Date of exercise         exercised           per option          shares issued            share               exercise date
     Specified Director
     Mr T Poli                 10 December 2010              350,000            $4.00                 1,341,648           $10.01                12,029,896
     Mr T Poli                 30 December 2010            4,650,000            $4.00                17,824,752            $9.87               157,330,302
     Specified Executives
     Mr H C Rae                24 August 2010                150,000            $5.50                  237,600             $8.30                  1,147,080
     Mr H C Rae                11 April 2011                  37,500            $7.65                   45,375             $9.76                    155,985
     Mr B E Green              17 August 2010                150,000            $5.50                  237,600             $8.69                  1,239,744
     Mr B E Green              24 August 2010                 66,666            $5.50                  105,600             $8.30                    509,817


     Dated at Perth this 14th day of September 2011.


     Signed in accordance with a resolution of the Directors.




     Tony Poli
     Executive Chairman




50
AUdITOR’S
INdEPENdENcE
dEcLARATION




Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001


To: the directors of Aquila Resources Limited


I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2011 there have been:
(i)	 no	contraventions	of	the	auditor	independence	requirements	as	set	out	in	the	Corporations	Act	2001	in	relation	to	the	audit;	and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.




KPMG




Trevor Hart
Partner


Perth
14 September 2011




                                    KPMG, an Australian partnership and a member firm of the KPMG network
                                    of independent member firms affiliated with KPMG International, a Swiss cooperative.




                                                                                                  Annual Report 2011: Aquila Resources Limited   51
cONSOLIdATEd
STATEMENT Of
cOMPREhENSIVE INcOME
for the year ended 30 June 2011




                                                                                                Note                 2011                      2010
                                                                                                                    $’000                     $’000

Revenue from sale of product                                                                                      133,453                    129,841
Cost of sales                                                                                                   (103,794)                  (118,611)
Gross profit                                                                                                       29,659                     11,230


Other income                                                                                      5                   507                      2,679
Exploration and evaluation expenses                                                                             (104,227)                   (60,209)
Corporate, legal and administration expenses                                                                     (18,981)                   (12,367)
Profit (loss) from operating activities                                                           6              (93,042)                   (58,667)

Finance income                                                                                                    14,316                     10,082
Finance expense                                                                                                   (6,486)                    (1,013)
Net finance income                                                                                8                 7,830                      9,069

Profit (loss) before income tax                                                                                  (85,212)                   (49,598)
Income tax benefit                                                                              10(b)              20,654                     16,526
Profit (loss) for the year                                                                                       (64,558)                   (33,072)

Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets                                                   (1,860)                     (2,985)
Net change in fair value of cash flow hedges                                                                        1,067                     (1,556)
Foreign currency translation differences for foreign operations                                                     1,837                          26
Other comprehensive income (loss) for the year, net of income tax                                                   1,044                    (4,515)
Total comprehensive income (loss) for the year                                                                   (63,514)                   (37,587)
Profit (loss) attributable to owners of the Company                                                              (64,558)                   (33,072)
Total comprehensive income (loss) attributable to owners of the Company                                          (63,514)                   (37,587)

Earnings per share
Basic earnings (loss) per share                                                                 11(a)            ($0.177)                   ($0.099)
Diluted earnings (loss) per share                                                               11(b)            ($0.177)                   ($0.099)


The Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Consolidated Financial Statements.




52
cONSOLIdATEd
BALANcE ShEET
As at 30 June 2011




                                                                                                  Note                    2011              2010
                                                                                                                         $’000             $’000

CURRENT ASSETS
Cash and cash equivalents                                                                          12                  184,547           281,174
Trade and other receivables                                                                        13                   18,302            16,334
Inventories                                                                                        14                   10,699             8,168
Other assets                                                                                       15                   25,443            10,779
Total current assets                                                                                                   238,991           316,455

NON-CURRENT ASSETS
Receivables                                                                                        13                    1,968            13,169
Investments                                                                                        16                   26,317            25,387
Deferred tax assets                                                                                18                   45,914            25,008
Property, plant and equipment                                                                      19                   75,975            64,166
Exploration and evaluation expenditure                                                             20                   12,442             4,026
Intangible assets                                                                                  21                    4,371               200
Total non-current assets                                                                                               166,987           131,956
TOTAL ASSETS                                                                                                           405,978           448,411

CURRENT LIABILITIES
Trade and other payables                                                                           22                   31,307            24,140
Loans and borrowings                                                                               23                        -             6,209
Employee benefits                                                                                 24(a)                    871               486
Total current liabilities                                                                                               32,178            30,835


NON-CURRENT LIABILITIES
Loans and borrowings                                                                               23                        -             6,587
Provisions                                                                                         25                    6,516             5,859
Total non-current liabilities                                                                                            6,516            12,446
TOTAL LIABILITIES                                                                                                       38,694            43,281
NET ASSETS                                                                                                             367,284           405,130

EQUITY
Issued capital                                                                                     26                  384,194           361,776
Reserves                                                                                           27                    25,799           21,505
Retained earnings (accumulated losses)                                                                                 (42,709)           21,849
TOTAL EQUITY                                                                                                           367,284           405,130


The Consolidated Balance Sheet is to be read in conjunction with the Notes to the Consolidated Financial Statements.




                                                                                                    Annual Report 2011: Aquila Resources Limited   53
cONSOLIdATEd
STATEMENT Of
chANGES IN EQUITY
for the year ended 30 June 2011



                                                                             Available-     Share-             Foreign     Retained
                                                                              for-sale      based             currency     earnings
                                                                  Issued     fair value   payment    Hedging translation (accumulated
                                                         Note     capital     reserve      reserve   reserve   reserve       losses)          Total
                                                                   $’000       $’000        $’000     $’000     $’000         $’000           $’000
Balance at 1 July 2010                                           361,776       6,972      15,574     (1,067)       26         21,849        405,130
Loss for the year                                                        -           -           -         -         -      (64,558)        (64,558)
Other comprehensive income (loss)
Net change in fair value of                                              -    (1,860)           -           -           -               -    (1,860)
available-for-sale financial assets
Net change in fair value of cash flow hedge                              -          -           -      1,067           -                -      1,067
Foreign currency translation differences                                 -          -           -          -       1,837                -      1,837
Total other comprehensive income (loss)                                  -    (1,860)           -      1,067       1,837                -      1,044
Total comprehensive income (loss) for the year                           -    (1,860)           -      1,067       1,837         (64,558)   (63,514)
Transactions with owners, recorded directly in
equity:
Issue of ordinary shares                                    26    22,418           -           -            -          -                -    22,418
Share-based payments                                                   -           -       3,250            -          -                -     3,250
Balance at 30 June 2011                                          384,194       5,112      18,824            -      1,863         (42,709)   367,284

Balance at 1 July 2009                                            76,124       9,957      13,285         489            -         54,921    154,776
Loss for the year                                                      -           -           -           -            -        (33,072)   (33,072)
Other comprehensive income (loss)
Net change in fair value of                                              -    (2,985)           -           -           -               -    (2,985)
available-for-sale financial assets
Net change in fair value of cash flow hedges                             -          -           -     (1,556)           -               -    (1,556)
Foreign currency translation differences                                 -          -           -           -          26               -         26
Total other comprehensive income (loss)                                  -    (2,985)           -     (1,556)          26               -    (4,515)
Total comprehensive income (loss) for the year                           -    (2,985)           -     (1,556)          26        (33,072)   (37,587)
Transactions with owners, recorded directly
in equity:
Issue of ordinary shares                                    26   285,652           -           -            -           -               -   285,652
Share-based payments                                                   -           -       2,289            -           -               -     2,289
Balance at 30 June 2010                                          361,776       6,972      15,574      (1,067)          26          21,849   405,130


The above amounts are stated net of tax where applicable.
The Consolidated Statement of Changes in Equity is to be read in conjunction with the Notes to the Consolidated Financial Statements.




54
cONSOLIdATEd
STATEMENT Of
cASh fLOWS
for the year ended 30 June 2011




                                                                                                 Note                  2011                 2010
                                                                                                                      $’000                $’000

CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations                                                                           135,845             119,104
Cash payments in the course of operations                                                                         (126,628)           (117,767)
Cash payments for exploration and evaluation expenditure                                                          (104,870)             (66,773)
Interest received                                                                                                    16,619                7,430
Interest paid                                                                                                         (801)               (1,268)
Net cash used in operating activities                                                             31               (79,835)             (59,274)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equity investments                                                                                 37                2,974
Payments for exploration assets                                                                                     (8,533)                 (702)
Payments for equity investments                                                                                     (4,042)                   (57)
Payment for property, plant and equipment                                                                          (18,553)               (5,017)
Payment for intangible assets                                                                                       (4,344)                   (12)
Refund of (payments for) security deposits                                                                           10,864               (7,366)
Net cash used in investing activities                                                                              (24,571)             (10,180)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares                                                                     26                 22,418             285,652
Repayment of borrowings                                                                                             (5,000)              (7,500)
Payment of finance lease liabilities                                                                                (9,238)              (1,385)
Net cash provided by financing activities                                                                             8,180             276,767
Net (decrease) increase in cash and cash equivalents held                                                          (96,226)             207,313
Cash and cash equivalents at the beginning of the year                                                             281,174               73,522
Effect of foreign exchange rate fluctuations on cash held                                                             (401)                  339
Cash and cash equivalents at the end of the year                                                  12               184,547              281,174


The Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Consolidated Financial Statements.




                                                                                                   Annual Report 2011: Aquila Resources Limited      55
     NOTES TO ThE cONSOLIdATEd
     fINANcIAL STATEMENTS
     cONTENTS
     1.    Reporting entity .................................................. 57       19.   Property, plant and equipment .......................... 71
     2.    Basis of preparation ............................................ 57         20.   Exploration and evaluation expenditure ........... 73
     3.    Summary of significant accounting policies ...... 58                         21.   Intangible assets .................................................. 73
     4.    Financial risk management ................................. 64               22.   Trade and other payables ................................... 73
     5.    Other income ....................................................... 65      23.   Loans and borrowings......................................... 74
     6.    Loss from operating activities ............................ 65               24.   Employee benefits ............................................... 75
     7.    Personnel expenses ............................................. 65          25.   Provisions ............................................................. 76
     8.    Net finance income ............................................. 65          26.   Issued capital ....................................................... 76
     9.    Auditors’ remuneration....................................... 66             27.   Reserves ............................................................... 77
     10.   Income tax............................................................ 66    28.   Controlled entities ............................................... 78
     11.   Earnings per share ............................................... 67        29.   Financial instruments .......................................... 79
     12.   Cash and cash equivalents .................................. 68              30.   Commitments....................................................... 82
     13.   Trade and other receivables................................ 68               31.   Reconciliation of cash flows from
     14.   Inventories ........................................................... 68         operating activities.............................................. 83
     15.   Other assets ......................................................... 68    32.   Related parties ..................................................... 84
     16.   Investments.......................................................... 68     33.   Events subsequent to the reporting date .......... 87
     17.   Interests in joint ventures ................................... 69           34.   Operating segments ............................................ 87
     18.   Tax assets and liabilities ...................................... 70         35.   Parent entity disclosure....................................... 88




56
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



1. REPORTING ENTITY                                                                Key sources of estimation uncertainty and judgements
                                                                                   Minesite rehabilitation and restoration provisions
    Aquila Resources Limited (“the Company”) is a company domiciled
                                                                                   Certain assumptions are required to be made in determining the
    in Australia.
                                                                                   amount the consolidated entity is expected to incur to settle its
    The consolidated financial statements of the Company for the financial         obligations in relation to rehabilitation and restoration of areas
    year ended 30 June 2011 comprises the Company and its controlled               disturbed by exploration, development and production activity. The
    entities (together referred to as “the consolidated entity”) and the           discounted value reflects a combination of management’s assessment
    consolidated entity’s interest in jointly controlled operations and jointly    of the cost of performing the work required, the impact of changes
    controlled entities.                                                           in technology, the timing of future cash flow estimates, the life of the
    The consolidated financial statements were authorised for issue by the         mine (based on economically recoverable reserves at the Isaac Plains
    Directors on 14 September 2011.                                                North Deposit of 27.7 million tonnes (2010: 28 million tonnes) and
                                                                                   the discount rate of 6.25% (2010: 6.0%) applied. Refer to Note 3(t)
                                                                                   for relevant accounting policy and Note 25 for further detail.
2. BASIS Of PREPARATION
                                                                                   Recoverability of non-current assets
    (a) Statement of compliance                                                    Certain assumptions are required to be made in order to assess the
       The consolidated financial statements are general purpose financial         recoverability of non-current assets where there is an impairment
       statements which have been prepared in accordance with Australian           indicator. Key assumptions include the future commodity price,
       Accounting Standards (AASBs) (including Australian Interpretations),        future cash flows, future capital requirements, appropriate discount
       adopted by the Australian Accounting Standards Board (AASB) and             rate and estimates of recoverable reserves. Refer to Note 3(r) for
       the Corporations Act 2001.                                                  relevant accounting policy.
       The consolidated financial statements comply with International             Overburden in advance
       Financial Reporting Standards (IFRSs) and interpretations of the            The consolidated entity defers overburden costs that give rise to
       International Accounting Standards Board.                                   future economic benefits during the production stage of its coal
    (b) Basis of measurement                                                       mining operations. This calculation requires the use of judgements
       The consolidated financial statements have been prepared on a               and estimates such as estimates of tonnes of waste to be removed
       historical cost basis, except for derivative financial instruments and      over the life of the mining strip and economically recoverable reserves
       financial assets classified as available-for-sale financial assets, which   extracted as a result. Changes in the life of the mine and its design
       are measured and recorded at fair value.                                    will usually result in changes to the estimates of average stripping
                                                                                   ratios (waste to coal reserves ratio). These changes are accounted for
       The methods used to measure fair values are included in Note 29(b).
                                                                                   prospectively. Refer to Note 3(l) for relevant accounting policy.
    (c) functional and presentation currency                                       Reserve estimates
       The consolidated financial statements are presented in Australian           Reserves are estimates of the amount of product that can be
       dollars, which is the Company’s functional currency and the                 economically and legally extracted from the consolidated entity’s
       functional currency of the majority of the entities comprising the          properties. In order to calculate reserves, estimates and assumptions
       consolidated entity.                                                        are required about a range of geological, technical and economic
       The Company is of a kind referred to in ASIC Class Order 98/100             factors, including quantities, grades, production techniques, recovery
       dated 10 July 1998 and, in accordance with that Class Order,                rates, production costs, transport costs, commodity demand,
       amounts in the consolidated financial statements have been rounded          commodity prices and exchange rates.
       to the nearest thousand dollars, unless otherwise stated.                   The consolidated entity determines and reports ore reserves in
    (d) Use of estimates and judgements                                            Australia under the principles incorporated in the Australasian Code
       The preparation of consolidated financial statements in conformity          for Reporting of Exploration Results, Mineral Resources and Ore
       with Australian Accounting Standards requires management to make            Reserves 2004 (the JORC Code).
       judgements, estimates and assumptions that affect the application           Because the economic assumptions used to estimate reserves change
       of policies and reported amounts of assets and liabilities, income and      from period to period, and because additional geological data is
       expenses.                                                                   generated during the course of operations, estimates of reserves may
       These estimates and associated assumptions are based on historical          change from period to period. Changes in reported reserves may
       experience and various other factors that are believed to be                affect the consolidated entity’s financial results and financial position
       reasonable under the circumstances, the results of which form the           in a number of ways including the following:
       basis of making judgements about carrying amounts of assets and             •	 depreciation	 and	 amortisation	 charged	 to	 the	 profit	 or	 loss	 and	
       liabilities that are not readily apparent from other sources. Actual           against assets’ carrying amounts may change where such charges
       results may differ from these estimates.                                       are determined by the units of production basis, or where the
       The estimates and underlying assumptions are reviewed on an                    useful	economic	lives	of	assets	change;
       ongoing basis. Revisions to accounting estimates are recognised in          •	 overburden	 removal	 costs	 recorded	 on	 the	 consolidated	 balance	
       the period in which the estimate is revised if the revision affects only       sheet or charged to the profit or loss may change due to changes
       that period, or in the period of the revision and future periods if the        in	stripping	ratios	or	the	units	of	production	basis	of	depreciation;	
       revision affects both current and future periods.                           •	 minesite	 rehabilitation	 and	 restoration	 provisions	 may	 change	
       In particular, information about significant areas of estimation               where changes in estimated reserves affect expectations about
       uncertainty and critical judgements in applying accounting policies            the	timing	or	cost	of	these	activities;
       that have the most significant effect on the amounts recognised in          •	 the	amount	of	any	impairment	to	be	charged	to	the	profit	or	loss	
       the consolidated financial statements are discussed below.                     may change where changes in estimated reserves affect expectations
                                                                                      about the quantities of product that can be economically extracted
                                                                                      from	the	consolidated	entity’s	properties;	and
                                                                                   •	 the	amount	of	deferred	tax	assets	to	be	recognised,	including	tax	
                                                                                      losses may change due to changes in expected future cash flows.




                                                                                                 Annual Report 2011: Aquila Resources Limited               57
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



2. BASIS Of PREPARATION (cONT.)                                                         3. SUMMARY Of SIGNIfIcANT
     (d) Use of estimates and judgements (cont.)                                           AccOUNTING POLIcIES
        Exploration and evaluation expenditure                                             The accounting policies set out below have been applied consistently
        Determining the recoverability of exploration and evaluation                       to all periods presented in these consolidated financial statements and
        expenditure capitalised in accordance with the consolidated                        have been applied consistently by the consolidated entity, except as
        entity’s accounting policy (refer to Note 3(k)) requires estimates and             explained in Note 2(e), which addresses changes in accounting policies.
        assumptions as to whether successful development and commercial
        exploitation, or alternatively sale, of the respective areas of interest           (a) Principles of consolidation
        will be achieved. This assessment requires estimates and assumptions                  Subsidiaries
        about the reserves (refer to the above), the timing of expected                       Subsidiaries are entities controlled by any member of the consolidated
        cash flows, exchange rates, commodity prices and future capital                       entity. Control exists when a member of the consolidated entity has
        requirements. If, after having capitalised the expenditure under                      the power, directly or indirectly, to govern the financial and operating
        accounting policy Note 3(k), a judgement is made that recovery of                     policies of any entity so as to obtain benefits from its activities.
        expenditure is unlikely, an impairment loss is recognised in the profit               In assessing control, potential voting rights that presently are
        or loss in accordance with accounting policy Note 3(r).                               exercisable or convertible are taken into account. The financial
        Recognition of tax losses                                                             statements of subsidiaries are included in the consolidated financial
        In accordance with the consolidated entity’s accounting policy for                    statements from the date that control commences until the date that
        deferred taxes (refer to Note 3(f)), a deferred tax asset is recognised               control ceases. The accounting policies of subsidiaries have been
        for unused tax losses only if it is probable that future taxable profits              changed where necessary to align them with the policies adopted by
        will be available to utilise those losses. Determination of future                    the consolidated entity.
        taxable profits requires certain assumptions. The key assumptions                     Joint ventures
        are future commodity prices, future cash flows, future capital                        Joint ventures are those entities over whose activities the consolidated
        requirements, estimates of recoverable reserves and exchange rates.                   entity has joint control, established by contractual agreements.
        Share-based payments                                                                  Jointly controlled operations, entities and assets
        The fair value of options granted to employees is measured using a                    The interest of the consolidated entity in jointly controlled operations
        binomial option pricing model, taking into account the terms and                      (including unincorporated joint ventures), jointly controlled entities
        conditions upon which the options were granted. Measurement                           and jointly controlled assets are brought to account by recognising
        inputs include share price on grant date, exercise price of the option,               in its consolidated financial statements the assets it controls and the
        estimated future volatility, estimated employee turnover and the risk-                liabilities that it incurs, and the expenses it incurs and its share of
        free interest rate. Refer to Note 3(w) for relevant accounting policy                 income that it earns from the sale of goods produced by the joint
        and Note 24 for further detail.                                                       venture.
     (e) changes in accounting policies                                                       Transactions eliminated on consolidation
        The consolidated entity has adopted the new and amended                               Intragroup balances (including balances related to jointly controlled
        Australian Accounting Standards that were effective from 1 July                       operations and assets) and any unrealised gains and losses or income
        2010 including:                                                                       and expenses arising from intragroup transactions are eliminated in
        •	 AASB	 127	 Consolidated and Separate Financial Statements                          preparing the consolidated financial statements.
           (Revised)                                                                          Loss of control in a subsidiary
          Consequential amendments have been made to AASB 127 as a result                     Upon the loss of control in a subsidiary, the consolidated entity
          of the issue of the revised AASB 3. The amendments relate to                        derecognises the assets and liabilities of the subsidiary. Any surplus
          the accounting for changes in the non-controlling interest in a                     or deficit arising on the loss of control is recognised in the profit or
          subsidiary and the loss of control in a subsidiary. The consolidated                loss. If the consolidated entity retains any interest in the previous
          entity’s accounting policies have incorporated the changes                          subsidiary, then such interest is measured at fair value at the date
          regarding the loss of control in a subsidiary.                                      that control is lost. Subsequently it is accounted for as an equity-
          The change in the accounting policy was applied prospectively                       accounted investee or as an available-for-sale financial asset
          and did not have any impact on the financial statements of the                      depending on the level of influence retained.
          consolidated	entity;	and                                                            Loss of joint control in a jointly controlled entity
        •	 AASB	131 Interests in Joint Ventures                                               On loss of joint control in a jointly controlled entity, any retained
                                                                                              interest in the former entity is recognised at its fair value at the date
          The amendments to AASB 131 relate to the accounting for the
                                                                                              that joint control is lost. A gain or loss arising on the loss of joint
          loss of joint control in a jointly controlled entity. It clarifies that any
                                                                                              control is recognised in the profit or loss.
          retained interest in the former jointly controlled entity is recognised
          at its fair value at the date that joint control is lost, with a gain            (b) Revenue
          or loss recognised in the profit or loss. The consolidated entity’s                 Sale of goods
          accounting policies have incorporated these changes regarding                       Revenue from the sale of coal is recognised (net of penalties,
          the loss of joint control in a jointly controlled entity.                           returns, discounts, allowances and hedging gains/losses) in the profit
          The change in the accounting policy was applied prospectively                       or loss when the significant risks and rewards of ownership have
          and did not have any impact on the financial statements of the                      been transferred to the buyer, being the bill of lading date when
          consolidated entity.                                                                the commodity has been delivered for shipment. No revenue is
        The consolidated entity has not elected to early adopt any new or                     recognised if:
        amended Standards or Interpretations that are issued but not yet                      (i) there are significant uncertainties regarding recovery of the
        effective.                                                                                 consideration	due;
                                                                                              (ii)	 the	costs	incurred	or	to	be	incurred	cannot	be	measured	reliably;
                                                                                              (iii)	there	is	a	risk	of	return	of	goods;	and
                                                                                              (iv) there is continuing management involvement with the goods.



58
   In cases where the terms of the sales agreement allow for an                   that does not result in the consolidated entity losing control over a
   adjustment to the sales price based on survey or analysis of the               subsidiary that includes a foreign operation, the relevant proportion
   product by the customer (for instance, an assay for impurity content),         of the cumulative amount in the FCTR is reattributed to non-
   recognition of the revenue is based on the most recently determined            controlling interests and is not recognised in the profit or loss. For
   estimate of product specifications.                                            all other partial disposals, the relevant proportion of the cumulative
                                                                                  amount in the FCTR is transferred to the profit or loss.
(c) finance income and expenses
   Finance income comprises interest income, foreign currency gains               When the settlement of a monetary item of receivable from or
   and gains on hedging instruments that are recognised in the profit             payable to a foreign operation is neither planned nor likely in the
   and loss. Interest income is recognised as it accrues, using the               foreseeable future, unrealised foreign exchange gains and losses on
   effective interest rate.                                                       these monetary items are recognised in other comprehensive income
                                                                                  and presented in the FCTR in equity.
   Finance expenses comprise interest expenses on borrowings,
   unwinding of any discount on provisions, foreign currency losses,           (f) Income tax
   impairment losses recognised on financial assets (other than trade             Income tax comprises current and deferred tax. Income tax is
   receivables) and losses on hedging instruments.                                recognised in the profit or loss except to the extent that it relates to
   Borrowing costs directly attributable to the acquisition, construction         items recognised directly in equity, in which case it is recognised in
   or production of a qualifying asset are capitalised as part of the             equity.
   cost of that asset (refer to Note 3(j)). All other borrowing costs are         Current tax is the expected tax payable on the taxable income for the
   recognised in the profit or loss, using the effective interest rate.           year, using tax rates enacted or substantially enacted at the reporting
   Foreign currency gains and losses and gains and losses on hedging              date, and any adjustment to tax payable in respect of previous years.
   instruments are both reported on a net basis.                                  Deferred tax is provided using the balance sheet liability method,
                                                                                  providing for temporary differences between the carrying amounts of
(d) Goods and services tax (GST)
                                                                                  assets and liabilities for financial reporting purposes and the amounts
   Revenue, expenses and assets are recognised net of the amount                  used for taxation purposes. The amount of deferred tax provided is
   of GST or overseas equivalent, except where the amount of GST                  based on the expected manner of realisation or settlement of the
   incurred is not recoverable from the taxation authority. In these              carrying amount of assets and liabilities, using tax rates enacted or
   circumstances, the GST is recognised as part of the cost of acquisition        substantively enacted at the reporting date.
   of the asset or as part of the expense.
                                                                                  A deferred tax asset is recognised only to the extent that it is probable
   Receivables and payables are stated with the amount of GST                     that future taxable profits will be available against which the asset
   included. The net amount of GST recoverable from, or payable to,               can be utilised. Deferred tax assets are reduced to the extent that it
   the taxation authority is included as a current asset or liability in the      is no longer probable that the related tax benefit will be realised.
   consolidated balance sheet.
                                                                                  Tax consolidation
   Cash flows are included in the consolidated statement of cash flows
                                                                                  The Company and its wholly-owned Australian resident entities
   on a gross basis. The GST components of cash flows arising from
                                                                                  formed a tax-consolidated group with effect from 1 July 2003 and
   investing and financing activities which are recoverable from, or
                                                                                  are therefore taxed as a single entity from that date. The head entity
   payable to, the taxation authority are classified as operating cash
                                                                                  within the tax-consolidated group is Aquila Resources Limited.
   flows.
                                                                                  Current tax expense/income, deferred tax liabilities and deferred
(e) foreign currency                                                              tax assets arising from temporary differences of the members of
   Foreign currency transactions                                                  the tax-consolidated group are recognised in the separate financial
   Transactions in foreign currencies are translated to Australian                statements of the members of the tax-consolidated group using
   dollars at the foreign exchange rates ruling at the dates of the               the ‘stand alone taxpayer’ approach by reference to the carrying
   transactions. Monetary assets and liabilities denominated in foreign           amounts in the separate financial statements of each entity and the
   currencies at the reporting date are translated to Australian dollars          tax values applying under tax consolidation.
   at the foreign exchange rate ruling at that date. Foreign exchange             Current tax liabilities and assets and deferred tax assets arising
   differences arising on translation are recognised in the profit or loss.       from unused tax losses and tax credits of the members of the tax-
   Non-monetary assets and liabilities that are measured in terms of              consolidated group are recognised by the Company (as head entity
   historical cost in a foreign currency are translated using the foreign         in the tax-consolidated group).
   exchange rate at the date of the transaction.
                                                                                  Any current tax liabilities (or assets) and deferred tax assets arising
   Non-monetary assets and liabilities denominated in foreign currencies          from unused tax losses assumed by the head entity from the
   that are stated at fair value are translated to Australian dollars at          subsidiaries in the tax-consolidated group are recognised as amounts
   the foreign exchange rates ruling at the dates the fair value was              receivable or payable to other entities in the tax-consolidated group
   determined.                                                                    in conjunction with any tax funding arrangement amounts.
   Foreign operations                                                             The Company recognises deferred tax assets arising from unused tax
   The assets and liabilities of foreign operations are translated to             losses of the tax-consolidated group to the extent that it is probable
   Australian dollars at the foreign exchange rates as at the reporting           that future taxable profits of the tax-consolidated group will be
   date. The income and expenses of foreign operations are translated             available against which the asset can be utilised.
   to Australian dollars at the foreign exchange rates at the dates of the
                                                                                  Any subsequent period adjustments to deferred tax assets arising
   transactions.
                                                                                  from unused tax losses assumed from subsidiaries are recognised by
   Foreign currency differences arising upon translation of foreign               the head entity only.
   operations are recognised in other comprehensive income and
   presented in the foreign currency translation reserve (FCTR) within
   equity.
   When a foreign operation is disposed of such that control, significant
   influence or joint control is lost, the cumulative amount in the FCTR
   related to that foreign operation is transferred to the profit or loss as
   part of the gain or loss on disposal. In the case of a partial disposal



                                                                                                Annual Report 2011: Aquila Resources Limited             59
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



3.   SUMMARY Of SIGNIfIcANT                                                             entity’s incremental borrowing rate, being the rate at which a similar
                                                                                        borrowing could be obtained from an independent financier under
     AccOUNTING POLIcIES (c0NT.)                                                        comparable terms and conditions.
     (f) Income tax (cont.)                                                             Sale of non-current assets
        Tax funding and sharing agreements                                              Sales of non-current assets are recognised at the date control of the
        The members of the tax-consolidated group have entered into                     assets passes to the buyer, usually when an unconditional contract of
        a funding arrangement that sets out the funding obligations of                  sale is signed.
        members of the tax-consolidated group in respect of tax amounts.                The gain or loss on disposal is calculated as the difference between
        The tax funding arrangements require payments to/from the head                  the carrying amount of the asset at the time of disposal and the net
        entity equal to the current tax liability (asset) assumed by the head           proceeds on disposal, and disclosed as other income.
        entity and any tax-loss deferred tax asset assumed by the head entity,
        resulting in the head entity recognising an inter-entity receivable          (j) Property, plant and equipment
        (payable) in the separate financial statements of the members of                Owned assets
        the tax-consolidated group equal in amount to the tax liability (asset          Items of property, plant and equipment are stated at cost or deemed
        assumed. The inter-entity receivables (payables) are at call.                   cost less accumulated depreciation and impairment losses. The
        The head entity recognises the assumed current tax amounts as current           cost of self-constructed assets includes the cost of materials, direct
        tax liabilities (assets), adding to its own current tax amounts, since          labour and an appropriate proportion of production overheads. The
        they are also due to or from the same taxation authority. The current           cost of self-constructed assets and acquired assets includes (i) the
        tax liabilities (assets) are equivalent to the tax balances generated           initial estimate at the time of installation and during the period of
        by external transactions entered into by the tax-consolidated group.            use, when relevant, of the costs of dismantling and removing the
        Contributions to fund the current tax liabilities are payable as per the        items and restoring the site on which they are located, (ii) changes
        tax funding arrangement and reflect the timing of the head entity’s             in the measurement of existing liabilities recognised for these costs
        obligation to make payments for tax liabilities to the relevant tax             resulting from changes in the timing or outflow of resources required
        authorities.                                                                    to settle the obligation or from changes in the discount rate, and (iii)
        The members of the tax-consolidated group have also entered into a              capitalised borrowing costs.
        tax sharing agreement. The tax sharing agreement provides for the               Where parts of an item of property, plant and equipment have
        determination of the allocation of income tax liabilities between the           different useful lives, they are accounted for as separate items of
        entities should the head entity default on its tax payment obligations.         property, plant and equipment.
        No amounts have been recognised in the consolidated financial                   Gains and losses on disposal of an item of property, plant and
        statements in respect of this agreement as payment of any amounts               equipment are determined by comparing the proceeds from disposal
        under the tax sharing agreement is considered remote.                           with the carrying amount of property, plant and equipment and are
     (g) Earnings per share                                                             recognised on a net basis within other income in the profit and loss.
        Basic earnings per share                                                        Development assets
        Basic earnings per share is calculated by dividing the profit attributable      Development expenditure relates to costs incurred to access a mineral
        to equity holders of the Company, excluding any costs of servicing              resource. It represents costs incurred after the technical feasibility
        equity other than ordinary shares, by the weighted average number               and commercial viability of extracting the mineral resource has been
        of ordinary shares outstanding during the year.                                 demonstrated. Capitalisation of development expenditure ceases
        Diluted earnings per share                                                      once the mining property is capable of commercial production, at
                                                                                        which point it is depreciated in accordance with the consolidated
        Diluted earnings per share is calculated by dividing basic earnings per
                                                                                        entity’s accounting policy in relation to depreciation.
        share (adjusted by the after tax effect of financing costs associated
        with dilutive potential ordinary shares and the effect of revenues              Leased assets
        and expenses associated with the conversion to ordinary shares of               Leases, where the consolidated entity assumes substantially all of
        dilutive potential ordinary shares) by the weighted average number              the risks and rewards of ownership, are classified as finance leases.
        of ordinary shares and dilutive potential ordinary shares.                      Assets under finance lease are stated at an amount equal to the
                                                                                        lower of their fair value and the present value of the minimum lease
     (h) cash and cash equivalents
                                                                                        payments at inception of the lease, less accumulated depreciation
        Cash and cash equivalents comprise cash balances and call deposits              and impairment losses.
        with an original maturity of three months or less.
                                                                                        Subsequent costs
     (i) Acquisition of assets                                                          The consolidated entity recognises in the carrying amount of an
        The purchase method of accounting is used to account for all                    item of property, plant and equipment the cost of replacing part of
        acquisitions of assets regardless of whether equity instruments or              such an item when that cost is incurred if it is probable that the
        other assets are acquired. Cost is measured as the fair value of the            future economic benefits embodied within the item will flow to the
        assets given, shares issued or liabilities incurred or assumed at the           consolidated entity and the cost of the item can be measured reliably.
        date of exchange, together with costs directly attributable to the              All other costs are recognised in the profit or loss as an expense as
        acquisition.                                                                    incurred.
        Where equity instruments are issued in an acquisition, the value                Depreciation and amortisation
        of the instruments is their published market price as at the date of            Depreciation is calculated over the depreciable amount, which is the
        exchange, unless it can be demonstrated that the published price                cost of an asset, or other amount substituted for cost, less its residual
        at the date of exchange is an unreliable indicator of fair value and            value.
        that other evidence and valuation methods provide a more reliable
        measure of fair value.
        Transaction costs arising on the issue of equity instruments are
        recognised directly in equity.
        Where settlement of any part of the consideration is deferred, the
        amounts payable in the future are discounted to their present value
        as at the date of exchange. The discount rate used is the consolidated


60
   Depreciation is recognised in the profit or loss on a straight-line basis         (l) Overburden in advance
   over the estimated useful lives of each part of an item of property,                 Expenditure incurred to remove overburden or waste material from
   plant and equipment, except for the following:                                       coal deposits is deferred to the extent it gives rise to future economic
   •	 leased	 assets	 are	 depreciated	 over	 the	 shorter	 of	 the	 lease	 term	       benefits and charged to operating costs on a unit of production basis
      and	their	useful	lives;	                                                          using the estimated average stripping ratio for the area being mined.
   •	 land	is	not	depreciated;	and	                                                     Changes in estimates of average stripping ratios are accounted for
                                                                                        prospectively. For the purpose of assessing impairment, overburden in
   •	 mining	property	and	development	assets	are	depreciated	over	the	                  advance is grouped with other assets of the relevant cash-generating
      lives of economically recoverable reserves.                                       unit.
   The estimated useful lives in the current and comparative years are as
                                                                                     (m) Intangible assets
   follows:
                                                                                        Intangible assets that are acquired by the consolidated entity are
   •	 plant	and	equipment:	                   2	 to	 13	 years	 or	 based	 upon         stated at cost less accumulated amortisation and impairment losses.
                                              reserves on a unit of production
                                              basis                                     Subsequent expenditure
                                                                                        Subsequent expenditure on capitalised intangible assets is capitalised
   •	 buildings	and	infrastructure:	          8	 to	 10	 years	 or	 based	 upon
                                                                                        only when it increases the future economic benefits embodied in the
                                              reserves on a unit of production
                                                                                        specific asset to which it relates. All other expenditure is expensed as
                                              basis
                                                                                        incurred.
   •	 mine	property	and	development:	 based	upon	reserves	on	a	unit	of
                                                                                        Amortisation
                                      production basis
                                                                                        Amortisation is charged to the profit or loss on a straight-line basis
   The reserves, the residual values, the useful lives and the depreciation             over the estimated useful lives of intangible assets unless such lives
   methods used are reviewed annually and adjusted, if appropriate, on                  are indefinite. Goodwill and intangible assets with an indefinite
   a prospective basis.                                                                 useful life are systematically tested for impairment at each reporting
(k) Exploration and evaluation expenditure                                              date. Other intangible assets are amortised from the date they
   Expenditure on exploration and evaluation activities in relation to                  are available for use. The estimated useful lives in the current and
   areas of interest which have not yet reached a stage which permits                   comparative years are as follows:
   reasonable assessment of the existence or otherwise of economically                  •	 software	and	software	licences:	 2	to	3	years
   recoverable reserves are expensed as incurred. An area of interest                   •	 contract	based	intangible	assets:	 based	 upon	 reserves	 on	 a	 unit
   is an individual geological area which is considered to constitute a                                                       of production basis
   favourable environment for the presence of a mineral deposit or has
   been proved to contain such a deposit.                                            (n) Inventories
   Identifiable exploration assets acquired are accounted for in                        Inventories are stated at the lower of cost and net realisable value.
   accordance with the consolidated entity’s policy on acquisition of                   Net realisable value is the estimated selling price in the ordinary
   assets.                                                                              course of business, less the estimated costs of completion and selling
                                                                                        expenses.
   The carrying amount of exploration and evaluation assets is assessed
   annually in accordance with AASB 6 Exploration for and Evaluation                    The cost of mining inventories is determined using a weighted
   of Mineral Resources (AASB 6) and the consolidated entity’s policy                   average basis. Cost includes direct material, overburden removal,
   in relation to impairment. In accordance with AASB 6, exploration                    mining, processing, labour, related transportation costs to the point
   and evaluation assets are tested for impairment when any of the                      of sale, mine rehabilitation costs incurred in the extraction process
   following facts and circumstances exist:                                             and other fixed and variable overhead costs directly related to mining
                                                                                        activities.
   •	 The	term	of	an	exploration	licence	in	the	specific	area	of	interest	
      has expired during the reporting period or will expire in the near             (o) Non-derivative financial assets
      future	and	is	not	expected	to	be	renewed;                                         The consolidated entity has the following non-derivative financial
   •	 Substantive	expenditure	on	further	exploration	for	and	evaluation	                assets:
      of mineral resources in the specific area are not budgeted nor                    Loans and receivables
      planned;                                                                          Loans and receivables are non-derivative financial assets with fixed
   •	 Exploration	for	and	evaluation	of	mineral	resources	in	the	specific	              or determinable payments that are not quoted in an active market.
      area have not led to the discovery of commercially viable quantities              Such assets are initially recognised at fair value plus transaction costs
      of mineral resources and the decision was made to discontinue                     directly attributable to the acquisition.
      such	activities	in	the	specified	area;	or                                         Subsequent to initial recognition, loans and receivables are measured
   •	 Sufficient	data	exists	to	indicate	that,	although	a	development	in	               at amortised cost using the effective interest method less any
      the specific area is likely to proceed, the carrying amount of the                impairment losses.
      exploration and evaluation asset is unlikely to be recovered in full              Available-for-sale financial assets
      from successful development or by sale.                                           Available-for-sale financial assets are non-derivative financial assets,
   Where a potential impairment is indicated, an assessment is                          such as marketable equity securities, that are either designated
   performed for each cash-generating unit which is no larger than the                  as available-for-sale or are not classified in any of the other
   area of interest. The consolidated entity performs impairment testing                categories, identified in AASB 139 Financial Instruments: Recognition
   in accordance with its accounting policy in relation to impairment.                  and Measurement.
   Farm-out arrangements                                                                Subsequent to initial recognition, they are measured at fair value and
   Arrangements whereby an external party earns an ownership interest                   changes therein, other than impairment losses, are recognised in
   in an exploration or development property via the sole-funding of                    other comprehensive income and presented within equity in the fair
   a specified exploration, evaluation or development program or by                     value reserve. When an investment is derecognised, the cumulative
   injection of funds to be utilised for such a program, will be accounted              gain or loss in equity is transferred to the profit or loss.
   for so that the consolidated entity recognises its share of assets, liabilities      The fair value of quoted financial assets is based on their bid price at the
   and equity associated with the property. Any gain or loss upon initial               reporting date, however in the case of financial assets without active
   recognition of these items is recognised in the profit or loss.                      markets, fair value is established using relevant valuation techniques.


                                                                                                       Annual Report 2011: Aquila Resources Limited               61
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



3. SUMMARY Of SIGNIfIcANT                                                               evidence that the asset is impaired, the cumulative loss that had been
                                                                                        recognised directly in equity is recognised in the profit or loss even
   AccOUNTING POLIcIES (cONT.)                                                          though the financial asset has not been derecognised. The amount
     (p) derivative financial instruments                                               of the cumulative loss that is recognised in the profit or loss is the
        The consolidated entity uses derivative financial instruments from              difference between the acquisition cost and current fair value, less
        time to time to hedge its exposure to foreign exchange risks arising            any impairment loss on that financial asset previously recognised in
        from operating activities. The consolidated entity does not hold                the profit or loss.
        derivative financial instruments for trading purposes. However,                 Calculation of recoverable amount
        derivatives that do not qualify for hedge accounting are accounted              The recoverable amount of the consolidated entity’s receivables
        for as trading instruments.                                                     carried at amortised cost is calculated as the present value of
        Derivative financial instruments are initially recognised at fair value.        estimated future cash flows, discounted at the original effective
        Subsequent to initial recognition, derivative financial instruments             interest rate (i.e. the effective interest rate computed at initial
        are stated at fair value. The gain or loss on remeasurement to fair             recognition of these financial assets). Receivables with a short
        value is recognised immediately in the profit or loss. However, where           duration are not discounted.
        derivatives qualify for hedge accounting, the effective component               Impairment of receivables is not recognised until objective evidence
        of any resultant gain or loss is recognised directly in equity and then         is available that a loss event has occurred. Significant receivables are
        is subsequently recognised in the profit or loss in the period during           individually assessed for impairment.
        which the hedge transaction affects the profit or loss.                         The recoverable amount of other assets is the greater of their fair
     (q) hedging                                                                        value less costs to sell and value in use. In assessing value in use, the
        On entering into a hedging relationship, the consolidated entity                estimated future cash flows are discounted to their present value
        formally designates and documents the hedge relationship and the                using a pre-tax discount rate that reflects current market assessments
        risk management objective and strategy for undertaking the hedge.               of the time value of money and the risks specific to the asset. For an
        The documentation includes identification of the hedging instrument,            asset that does not generate largely independent cash inflows, the
        the hedged item or transaction, the nature of the risk being hedged             recoverable amount is determined for the cash-generating unit to
        and how the entity will assess the hedging instrument’s effectiveness           which the asset belongs.
        in offsetting the exposure to changes in the hedged item’s fair                 Reversal of impairment
        value or cash flows attributable to the hedged risk. Such hedges                An impairment loss in respect of receivables carried at amortised cost
        are expected to be highly effective in achieving offsetting changes             is reversed through the profit or loss if the subsequent increase in
        in cash flows and are assessed on an ongoing basis to determine                 recoverable amount can be related objectively to an event occurring
        that they actually have been highly effective throughout the financial          after the impairment loss was recognised.
        reporting periods for which they are designated.
                                                                                        An impairment loss in respect of an investment in an equity instrument
        Where a derivative financial instrument is designated as a hedge                classified as available-for-sale is not reversed through the profit or
        of the variability in cash flows of a highly probable forecast                  loss. If the fair value of a debt instrument classified as available-for-
        transaction, the effective part of any gain or loss on the derivative           sale increases and the increase can be objectively related to an event
        financial instrument is recognised directly in equity in the hedging            occurring after the impairment loss was recognised in the profit or
        reserve.                                                                        loss, the impairment loss shall be reversed, with the amount of the
        The associated cumulative gain or loss is subsequently removed                  reversal recognised in the profit or loss.
        from equity and recognised in the profit or loss in the same period             In respect of other assets, an impairment loss is reversed if there has
        or periods during which the forecast hedge transaction affects the              been a change in the estimates used to determine the recoverable
        profit or loss. The ineffective part of any gain or loss on the derivative      amount. An impairment loss is reversed only to the extent that the
        financial instrument is recognised in the profit or loss.                       asset’s carrying amount does not exceed the carrying amount that
        When a hedging instrument expires or is sold, terminated or                     would have been determined, net of depreciation or amortisation, if
        exercised, or the consolidated entity revokes designation of the hedge          no impairment loss had been recognised.
        relationship, but the forecast hedged transaction is still expected to       (s) Payables
        occur, the cumulative gain or loss at that point remains in equity
                                                                                        Trade and other payables are initially stated at fair value and
        and is recognised in accordance with the above policy when the
                                                                                        subsequently stated at amortised cost.
        transaction occurs. If the hedged transaction is no longer expected
        to take place, the cumulative unrealised gain or loss recognised in          (t) Provisions
        equity is recognised immediately in the profit or loss.                         A provision is recognised in the consolidated balance sheet when
     (r) Impairment                                                                     the consolidated entity has a present legal or constructive obligation
                                                                                        as a result of a past event, and it is probable that an outflow of
        The carrying amounts of the consolidated entity’s assets, other than
                                                                                        economic benefits will be required to settle the obligation. If the
        inventories and deferred tax assets, are reviewed at each reporting
                                                                                        effect is material, provisions are determined by discounting the
        date to determine whether there is any indication of impairment.
                                                                                        expected future cash flows at a pre-tax rate that reflects current
        If any such indication exists, the asset’s recoverable amount is
                                                                                        market assessments of the time value of money and the risks specific
        estimated.
                                                                                        to the liability. The unwinding of the discount is recognised as a
        An impairment loss is recognised whenever the carrying amount of                finance expense.
        an asset or its cash-generating unit exceeds its recoverable amount.
                                                                                        Mine rehabilitation and restoration
        Impairment losses are recognised in the profit or loss. Impairment
        losses recognised in respect of cash-generating units are allocated             Provisions are made for the estimated cost of rehabilitation relating
        first to reduce the carrying amount of goodwill (if any) allocated              to areas disturbed during exploration and development activity up to
        to the cash-generating unit (group of cash-generating units) and                reporting date but not yet rehabilitated. Provision has been made in full
        then, to reduce the carrying amount of the other assets in the                  for all disturbed areas at the reporting date based on current estimates
        cash-generating unit (group of cash-generating units) on a pro rata             of costs to rehabilitate such areas, discounted to their present value
        basis.                                                                          based on expected future cashflows. The estimated cost of rehabilitation
                                                                                        includes the current cost of recontouring, topsoiling and revegetation
        When a decline in the fair value of an available-for-sale financial             employing legislative requirements. Changes in estimates are dealt with
        asset has been recognised directly in equity and there is objective             on a prospective basis as they arise.


62
   Significant uncertainty exists as to the amount of rehabilitation             (v) Loans and borrowings
   obligations which will be incurred due to the impact of changes                  Loans and borrowings are recognised on the date they are originated.
   in environmental legislation over time. The amount of the                        Such liabilities are recognised initially at fair value less attributable
   provision relating to rehabilitation of mine infrastructure and                  transaction costs. Subsequent to initial recognition, loans and
   dismantling obligations is recognised at the commencement of the                 borrowings are stated at amortised cost with any difference between
   mining project and/or construction of the assets where a legal or                cost and redemption value being recognised in the profit or loss
   constructive obligation exists at that time. The provision is recognised         over the period of the borrowings using the effective interest rate
   as a non-current liability with a corresponding asset included in mine           method.
   development assets.
                                                                                 (w)Share-based payments
   At each reporting date, the rehabilitation liability is re-measured in line
   with changes in discount rates and the timing or amount of the costs             The fair value of options granted is recognised as an expense with a
   to be incurred. Changes in the liability relating to rehabilitation of mine      corresponding increase in equity.
   infrastructure and dismantling obligations are added to or deducted              The fair value is measured at grant date and spread over the period
   from the related asset, other than the unwinding of the discount, which          during which the option holders become unconditionally entitled
   is recognised as a finance expense in the profit or loss as it occurs.           to the options. The fair value of the options granted is measured
   If the change in the liability results in a decrease in the liability that       using an option pricing model, taking into account the exercise price,
   exceeds the carrying amount of the asset, the excess is recognised               the term of the option, the vesting and performance criteria, the
   immediately in the profit or loss. If the change in the liability results        impact of dilution, the share price at the date of grant, the expected
   in an addition to the cost of the asset, the recoverability of the new           volatility of the underlying share, the expected dividend yield and the
   carrying amount is considered. Where there is an indication that the             risk-free interest rate for the term of the option.
   new carrying amount is not fully recoverable, an impairment test is              Non-market vesting conditions, such as project generation criteria,
   performed with the write-down recognised in the profit or loss in the            are taken into account in assumptions regarding the number of
   period in which it occurs.                                                       options that are expected to become exercisable. At each reporting
   The amount of the provision relating to rehabilitation of environmental          date, the consolidated entity revises its estimate of the number of
   disturbance caused by ongoing production and extraction activities is            options that are expected to become exercisable.
   recognised in the profit or loss as incurred. Changes in the liability are       The amount recognised as an expense is adjusted to reflect the
   charged to the profit or loss as rehabilitation expense, other than the          actual number of share options that vest except where forfeiture is
   unwinding of the discount, which is recognised as a finance expense.             only due to share prices not achieving the threshold for vesting.
(u) Employee benefits                                                            (x) Share capital
   Wages and salaries and annual leave                                              Ordinary shares
   Liabilities for employee benefits for wages, salaries and annual leave           Ordinary shares are classified as equity. Incremental costs directly
   represent present obligations resulting from employees’ services                 attributable to the issue of ordinary shares and share options are
   provided to the reporting date, calculated at undiscounted amounts               recognised as a deduction from equity, net of any related income tax
   based on remuneration wage and salary rates that the consolidated                benefit.
   entity expects to pay as at the reporting date including related                 Dividends
   on-costs, such as workers compensation insurance and payroll tax.                Dividends are recognised as a liability in the period in which they are
   Long service leave                                                               declared.
   The consolidated entity’s net obligation in respect of long-term              (y) comparatives
   service benefits is the amount of future benefit that employees have
                                                                                    Certain comparative disclosures have been reclassified to conform
   earned in return for their service in the current and prior periods. The
   obligation is calculated using expected future increases in wage and             with current year’s presentation.
   salary rates including related on-costs and expected settlement dates,        (z) New standards and interpretations not yet adopted
   and is discounted using the rates attached to the Commonwealth                   The following standards, amendments to standards and
   Government bonds at the reporting date which have maturity dates                 interpretations have been identified as those which may impact
   approximating the terms of the consolidated entity’s obligations.                the consolidated entity in the period of initial application. They are
   Cash bonuses                                                                     available for early adoption at 30 June 2011, but have not been
   Cash bonuses are expensed once the related service has been                      applied in preparing these consolidated financial statements.
   provided.                                                                        •	 AASB	9	Financial Instruments (AASB 9) includes requirements for
   A liability is recognised for the amount expected to be paid under                  the classification and measurement of financial assets resulting
   short-term cash bonus if the consolidated entity has a present legal                from the first part of Phase 1 of the project to replace AASB 139
   or constructive obligation to pay this amount as a result of past                   Financial Instruments: Recognition and Measurement. AASB 9 will
   service provided by the Director or employee and the obligation can                 become mandatory for the consolidated entity’s 30 June 2014
   be estimated reliably.                                                              consolidated financial statements. Retrospective application is
                                                                                       generally required, although there are exceptions, particularly if
   Retirement benefits
                                                                                       the consolidated entity adopts the standard for the year ended
   Obligations for contributions to defined contribution superannuation                30 June 2012 or earlier. The consolidated entity has not yet
   plans are recognised as an expense in the profit or loss as incurred.               determined the potential effect of the standard.
   Severance benefits                                                               •	 AASB	 2009-5	 Further Amendments to Australian Accounting
   Certain employees are entitled to severance benefits as regulated by                Standards arising from the Annual Improvements Process affect
   the Labour Act applicable in Botswana. Severance benefits are not                   various AASBs resulting in minor changes for presentation,
   considered to be a retirement benefit plan as the benefits are payable              disclosure, recognition and measurement purposes. The
   on completion of each 60-month period of continuous employment                      amendments, which become mandatory for the consolidated
   or on termination of employment after a continuous employment                       entity’s 30 June 2012 consolidated financial statements, are not
   of 60 months. These benefits are recognised when they are accrued                   expected to have significant impact on the consolidated financial
   to employees and a provision is made for the estimated liability as                 statements.
   a result of services provided by the employee up to the reporting
   date.

                                                                                                 Annual Report 2011: Aquila Resources Limited              63
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



3. SUMMARY Of SIGNIfIcANT                                                             Interest rate risk
                                                                                      When managing interest rate risk the consolidated entity seeks to
   AccOUNTING POLIcIES (cONT.)                                                        minimise its overall cost of funds with a preference for variable interest
     (z) New standards and interpretations not yet adopted (cont.)                    rate exposures. Borrowings at variable interest rates expose the
        •	 AASB	 11	 Joint Arrangements, which becomes mandatory for                  consolidated entity to cash flow interest rate risk while borrowings at
           the consolidated entity’s 30 June 2014 consolidated financial              fixed interest rates expose the consolidated entity to fair value interest
           statements and could change the classification and measurement             rate risk.
           of investments in jointly controlled entities. The consolidated
                                                                                      credit risk
           entity does not plan to adopt this standard early and the extent of
           the impact has not been determined.                                        Credit risk represents the loss that would be recognised if counterparties
                                                                                      fail to perform as contracted. The maximum exposure to credit risk in
        •	 Amended	AASB	119	Employee Benefits, which becomes mandatory
                                                                                      relation to each class of recognised financial asset is the carrying amount
           for the consolidated entity’s 30 June 2014 consolidated financial
           statements and could change the definition of short-term and other         of those assets.
           long-term employee benefits and some disclosure requirements. The          Transactions involving derivative financial instruments are with
           consolidated entity does not plan to adopt this standard early and the     counterparties with whom the consolidated entity has signed
           extent of the impact has not been determined.                              netting agreements and that maintain strong credit ratings. As a
                                                                                      result, management does not expect any counterparty to fail to
4. fINANcIAL RISK MANAGEMENT                                                          meet its obligations in relation to derivative financial instrument
                                                                                      transactions.
     The consolidated entity’s activities expose it to a variety of financial risks
     such as market risk (including currency risk, interest rate risk and price       Credit risk, with respect to cash, is managed by depositing funds only
     risk), credit risk and liquidity risk.                                           with recognised financial institutions that maintain strong credit ratings
                                                                                      and by limiting amounts held with any one institution.
     The Board of Directors has overall responsibility for the establishment
     and oversight of the risk management framework. Operational, financial           Credit risk relating to trade receivables is minimised by only selling coal
     reporting and compliance risks are continually assessed, monitored and           to customers that are established in the industry with an appropriate
     managed at management level and any specific areas of risk which are             credit history.
     classified as material are considered and dealt with at Board level.             Liquidity risk
     Market risk                                                                      Prudent liquidity risk management implies maintaining sufficient
     Currency risk                                                                    cash and marketable securities, the availability of funding through an
     The consolidated entity manages currency risk arising from various               adequate amount of committed credit facilities and the ability to close-
     currency exposures. Currency risk arises when transactions and                   out market positions. The consolidated entity manages liquidity risk by
     recognised assets and liabilities are denominated in a currency other            continuously monitoring forecast and actual cash flows and matching
     than the respective functional currencies of the Company and the                 the maturity profiles of financial assets and liabilities.
     entities comprising the consolidated entity.                                     capital management
     The functional currency of the Company and the majority of the entities          The Board’s policy is to maintain a strong capital base and net asset
     comprising the consolidated entity is Australian dollars. To reduce              position, so as to maintain investor, creditor and market confidence and
     foreign currency exposure, hedging commitments are denominated in                to sustain future development of the business.
     Australian dollars.                                                              In the event that management consider that the consolidated entity
     The consolidated entity is exposed to foreign currency risk on forecast          would benefit from strengthening its capital base and/or net asset
     sales of coal from the Isaac Plains Coal Mine that are denominated in            position, multiple options would be considered, for example raising
     United States dollars.                                                           additional capital and/or introduction of strategic investors into the
     The consolidated entity may hedge up to 90 per cent of its estimated             mineral project portfolio. The Directors would assess such options that
     foreign currency exposure in respect of forecast sales in accordance with        are expected to be the most beneficial for shareholders.
     its Foreign Exchange and Interest Rate Risk Management Policy. The               The ultimate objective of managing the consolidated entity’s equity is
     consolidated entity uses derivative financial instruments from time to           to enable an adequate Total Shareholder Return (TSR). TSR includes the
     time to hedge its foreign currency risk.                                         total increase (decrease) in the Company’s share price, after adjusting for
     The consolidated entity classifies its forward exchange contracts as cash        the effects of bonus issues and dividends.
     flow hedges and states them at fair value.                                       There were no changes in the consolidated entity’s approach to capital
     The consolidated entity also holds monetary assets and liquid investments        management during the year.
     which are denominated in other currencies, primarily South African
     Rand, United States Dollars, Botswana Pula and Indonesian Rupiah. The
     consolidated entity ensures that its exposure to foreign currency risk on
     these assets is kept to an acceptable level by minimising its holdings in
     the foreign currency, where practicable.
     Price risk
     The consolidated entity is exposed to equity securities price risk. This
     arises from investments classified on the consolidated balance sheet as
     available-for-sale financial assets. All of the consolidated entity’s equity
     investments in other companies are publicly traded on the Australian
     Securities Exchange.




64
5. OThER INcOME
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
    Net gain on disposal of equity investments                                                                           26                    2,287
    Administration overheads charged                                                                                    400                      392
    Other income                                                                                                         81                        -
    Total other income                                                                                                  507                    2,679


6. LOSS fROM OPERATING AcTIVITIES
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
   Loss from operating activities before income tax benefit has been arrived at after charging the
   following items
       Net expense from movements in provision for employee benefits                                                    385                       32
       Depreciation and amortisation                                                                                  8,073                    6,723
       Operating lease rental                                                                                         4,238                    3,960
       Flood related expenses(i)                                                                                      4,258                        -
   (i) The consolidated entity incurred these expenses due to severe flooding in central Queensland. These expenses relate to direct repair and recovery
       costs associated with damage to equipment and infrastructure.


7. PERSONNEL ExPENSES
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
   Wages and salaries                                                                                                14,486                    9,015
   Other associated personnel expenses                                                                                1,064                      866
   Management fees                                                                                                      500                      500
   Contributions to defined contribution superannuation funds                                                         1,004                      710
   Annual leave expense                                                                                                 117                      204
   Long-service leave expense                                                                                           127                       27
   Equity-settled share-based payment to employees                                                                    3,250                    2,289
   Total personnel expenses                                                                                          20,548                   13,611


8. NET fINANcE INcOME
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
   Interest income                                                                                                   14,316                   10,082
   Finance income                                                                                                    14,316                   10,082

   Interest expense on financial liabilities measured at amortised cost                                             (2,374)                   (1,347)
   Impairment loss on listed investments                                                                              (567)                         -
   Net foreign exchange (loss)(i) gain                                                                              (3,545)                       334
   Finance expense                                                                                                  (6,486)                   (1,013)
   Net finance income                                                                                                 7,830                     9,069
   (i) On consolidation, intragroup monetary liabilities denominated in a currency other than Australian dollars were translated to Australian dollars,
       resulting in unrealised foreign exchange losses recognised in the profit or loss.




                                                                                                     Annual Report 2011: Aquila Resources Limited          65
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



9. AUdITORS’ REMUNERATION
                                                                                                                     2011                     2010
                                                                                                                        $                        $
     Audit services
     Auditors of the Company – KPMG Australia
        Audit and review of financial statements                                                                  157,731                 144,956
        Audit of joint venture operations                                                                         106,000                  78,805
     Overseas KPMG firms
        Audit and review of financial statements                                                                   91,406                  60,649
                                                                                                                  355,137                 284,410
     Other auditors
        Audit and review of financial statements                                                                    6,301                   4,942
                                                                                                                  361,438                 289,352
     Other services
     Auditors of the Company – KPMG Australia
        Other assurance services                                                                                        -                    1,500
        Taxation services                                                                                               -                    1,500
        Other services                                                                                             10,182                        -
     Overseas KPMG firms
        Taxation services                                                                                           5,756                    5,872
                                                                                                                   15,938                    8,872


10. INcOME TAx
                                                                                                                     2011                     2010
                                                                                                                    $’000                    $’000
     (a) Income tax benefit
         Current tax                                                                                                  (24)                       -
         Deferred tax                                                                                              20,678                   16,526
         Total income tax benefit                                                                                  20,654                   16,526
         Deferred income tax benefit included in income tax benefit comprises origination and reversal of temporary differences including recognition of
         deferred tax assets arising from tax losses that are available to be offset against future taxable income.


                                                                                                                     2011                     2010
                                                                                                                    $’000                    $’000
     (b) Reconciliation of income tax benefit to prima facie tax payable
         Loss before income tax benefit                                                                           (85,212)                (49,598)
         Tax benefit at the Australian tax rate of 30% (2010: 30%)                                                  25,564                  14,879
         Tax effect of amounts which are not assessable (deductible) in calculating taxable income:
             Non-deductible foreign income and expenditure                                                            (12)                     (20)
             Impact of impairment losses                                                                                 -                     492
             Share-based payment expense                                                                            (975)                     (687)
             Impact of research and development tax concession                                                      2,279                    4,228
             Other (non-deductible) non-assessable items                                                            (644)                       482
                                                                                                                   26,212                   19,374
         Impact of overseas subsidiaries
             Tax losses not recognised                                                                             (4,906)                  (2,355)
             Impact of differing foreign jurisdiction tax rates                                                      (652)                    (493)
         Total income tax benefit                                                                                  20,654                   16,526

                                                                                                                     2011                     2010
                                                                                                                    $’000                    $’000
     (c) Amounts recognised directly in other comprehensive income
         Available-for-sale financial assets                                                                         (684)                    (605)
         Cash flow hedges                                                                                              456                    (456)



66
11. EARNINGS PER ShARE
   (a) Basic earnings per share
       The calculation of basic earnings per share at 30 June 2011 was based on the loss attributable to ordinary shareholders of $64,558,000
       (2010: $33,072,000) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2011 of 364,710,091
       (2010: 335,752,499), calculated as follows:

       Loss attributable to ordinary shareholders
                                                                                                                       2011                       2010
                                                                                                                       $’000                     $’000
       Loss attributable to ordinary shareholders                                                                   (64,558)                  (33,072)

       Weighted average number of ordinary shares
                                                                                                                       2011                     2010
       Issued ordinary shares at 1 July                                                                         322,273,136              249,029,672
       Effect of shares issued by means of exercise of options                                                   10,151,492                        -
       Effect of shares issued via placement                                                                              -               26,849,452
       Effect of shares issued by means of bonus issue                                                           32,285,463               59,873,375
       Weighted average number of ordinary shares at 30 June(i)                                                 364,710,091              335,752,499
       (i) Prior year weighted average number of ordinary shares has been adjusted to reflect the 1 for 10 Bonus Issue on 23 December 2010.


   (b) diluted earnings per share
       The calculation of diluted earnings per share at 30 June 2011 was based on the loss attributable to ordinary shareholders of $64,558,000
       (2010: $33,072,000) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2011 of 364,710,091
       (2010: 335,752,499). Potential ordinary shares on issue are not considered dilutive as the consolidated entity made a loss for the year ended 30 June
       2011 and the exercise of potential ordinary shares would not increase that loss.

       Loss attributable to ordinary shareholders (diluted)
                                                                                                                        2011                      2010
                                                                                                                       $’000                     $’000
       Loss attributable to ordinary shareholders                                                                   (64,558)                  (33,072)

       Weighted average number of ordinary shares (diluted)
                                                                                                                       2011                     2010
       Weighted average number of ordinary shares on issue                                                      364,710,091              335,752,499
       Effect of share options on issue                                                                                   -                        -
       Weighted average number of ordinary shares (diluted)(i)                                                  364,710,091              335,752,499
       (i) Prior year weighted average number of ordinary shares has been adjusted to reflect the 1 for 10 Bonus Issue on 23 December 2010.




                                                                                                    Annual Report 2011: Aquila Resources Limited           67
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




12. cASh ANd cASh EQUIVALENTS
                                                                                                                           2011          2010
                                                                                                                          $’000         $’000
     Cash at bank and on hand                                                                                            39,643        30,927
     Call deposits                                                                                                      144,904       250,247
     Total cash and cash equivalents                                                                                    184,547       281,174


13. TRAdE ANd OThER REcEIVABLES
                                                                                                                            2011         2010
                                                                                                                           $’000        $’000
     Current
     Trade receivables                                                                                                    9,257        10,810
     Interest receivable                                                                                                    391         2,612
     GST/VAT receivable                                                                                                   3,671         2,348
     Other receivables(i)                                                                                                 4,983           564
     Total current receivables                                                                                           18,302        16,334
     (i) Includes amounts which the consolidated entity has provided to a third party to conduct a feasibility study into the potential development
         of a coal export terminal. This amount is interest-free and is repayable in the next 12 months.
     Non-current
     Security deposits                                                                                                     1,968       13,169
     Total non-current receivables                                                                                         1,968       13,169


14. INVENTORIES
                                                                                                                           2011          2010
                                                                                                                          $’000         $’000
     Coal stocks – at cost                                                                                               10,699         8,168
     Total inventories                                                                                                   10,699         8,168


15. OThER ASSETS
                                                                                                                           2011          2010
                                                                                                                          $’000         $’000
     Prepayments                                                                                                            418           483
     Overburden in advance                                                                                               25,025        10,296
     Total other assets                                                                                                  25,443        10,779


16. INVESTMENTS
                                                                                                                           2011          2010
                                                                                                                          $’000         $’000
     Investments in listed entities – at fair value(i)                                                                   26,317        25,387
     Total investments                                                                                                   26,317        25,387
     (i) Fair value is based on the quoted market price at reporting date. These investments are classified as available-for-sale.




68
17. INTERESTS IN JOINT VENTURES
   The consolidated entity has the following interests in joint venture operations and jointly controlled entities that are proportionally accounted for and
   reported in the consolidated financial statements.
                                                                                                                                      Consolidated entity
                                                                                                                                           interest
   Joint venture operations                Principal activities                                                                        2011       2010
   Isaac Plains Coal Joint Venture         Operation of open cut coal mine in Queensland                                                50%        50%
   Bowen Central Coal Joint Venture        Exploration and development of coal resources in Queensland                                  50%        50%
   Belvedere Coal Joint Venture            Exploration and development of coal resources in Queensland                                24.5%      24.5%
   Australian Premium Iron Joint Venture   Exploration and development of iron ore resources in Western Australia                       50%        50%
   Red Hill Iron Ore Joint Venture         Exploration and development of iron ore resources in Western Australia                       30%        30%
   Mt Stuart Iron Ore Joint Venture        Exploration and development of iron ore resources in Western Australia                       35%        35%
   Yalleen Iron Ore Joint Venture          Exploration and development of iron ore resources in Western Australia                       35%        35%
   Thabazimbi Joint Venture                Exploration and development of iron ore and manganese resources in South Africa              74%        74%
   Asenjo Energy Joint Venture             Exploration and development of coal resources in Botswana                                    50%        50%

                                                                                                                                      Consolidated entity
                                                                                                                                           interest
   Jointly controlled entities             Principal activities                                                                        2011       2010
   Isaac Plains Coal Management Pty Ltd    Manages the operations of the Isaac Plains Coal Joint Venture                                50%        50%
   Eagle Downs Coal Management             Manages the operations of the Bowen Central Coal Joint Venture                               50%        50%
   Pty Ltd (formerly known as Bowen
   Central Coal Management Pty Ltd)
   API Management Pty Ltd                  Manages the operations of the Australian Premium Iron Joint Venture, Red Hill Iron            50%          50%
                                           Ore Joint Venture, Mt Stuart Iron Ore Joint Venture and Yalleen Iron Ore Joint Venture
   Australian Premium Iron Pty Ltd         Preserves the name Australian Premium Iron                                                    50%          50%
   African Energy (Mauritius) Pty Ltd      Holding company of African Energy (Botswana) Pty Ltd                                          50%          50%
   African Energy (Botswana) Pty Ltd       Manages the operations of the Asenjo Energy Joint Venture                                     50%          50%


   The following amounts are included in the consolidated entity’s financial statements, consistent with the consolidated entity’s accounting policies:
                                                                                                                          2011                     2010
                                                                                                                         $’000                    $’000
   Current assets                                                                                                       62,693                   42,888
   Non-current assets                                                                                                   84,237                   69,667
   Current liabilities                                                                                                  23,748                   21,815
   Non-current liabilities                                                                                               6,516                   12,446

   Income                                                                                                              136,150                  131,390
   Expenses                                                                                                          (183,791)                 (162,397)
   Profit (loss) for the year                                                                                         (47,641)                  (31,007)
   Included within the amounts above are trade receivables of $8,554,000 (2010: $10,317,000), sales revenue of $133,453,000 (2010: $129,841,000),
   and expenses of $7,658,000 (2010: $1,563,000) which are attributable to wholly-owned subsidiaries of the Company which hold the consolidated
   entity’s interests in joint ventures.

   Vale Belvedere purchase option over the consolidated entity’s interest in the Belvedere Coal Joint Venture
   In June 2010, the consolidated entity was notified by Vale Belvedere Pty Ltd (“Vale Belvedere”), a wholly-owned subsidiary of Vale, of the exercise of
   its option over the consolidated entity’s 24.5% interest in the Belvedere Coal Joint Venture. Vale Belvedere is obliged to pay Fair Market Value for the
   consolidated entity’s interest. The determination and payment of the consideration for the consolidated entity’s interest has been delayed by proceedings
   that were instituted by Vale Belvedere. Vale Belvedere’s Statement of Claim on this matter was struck out in its entirety by the Supreme Court of
   Queensland on 20 June 2011. Subsequent to year end, Vale Belvedere advised the consolidated entity that it was appealing this decision.
   The exercise of this option has not resulted in a change in the accounting treatment of the consolidated entity’s interest in the Belvedere Coal Joint
   Venture. Subsequent to the date that Vale Belvedere exercised its purchase option in respect of the consolidated entity’s interest in the Belvedere Coal
   Joint Venture, the consolidated entity has provided as an expense, further cash call funding, up to 30 June 2011, of $4,021,000 in respect of its 24.5%
   participating interest.




                                                                                                      Annual Report 2011: Aquila Resources Limited             69
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




18. TAx ASSETS ANd LIABILITIES
     deferred tax assets and liabilities
     Deferred tax assets arising from tax losses are only recognised in respect of the consolidated entity’s Australian activities. Management consider that it is
     probable that the operations of the consolidated entity will generate sufficient future taxable profits in future years to utilise these Australian tax losses.
     These are expected to be realised as a result of profits from the consolidated entity’s Isaac Plains Coal Mine as well as the capital gain expected to be
     derived from the sale of the consolidated entity’s 24.5% interest in the Belvedere Hard Coking Coal Project to Vale at Fair Market Value, following Vale’s
     exercise of its purchase option in respect of this project.
     Overseas jurisdiction tax losses relating to the consolidated entity’s overseas subsidiaries are not recognised as deferred tax assets as the activities to date
     have not reached a stage whereby it can be reliably forecast that there are likely to be sufficient probable future taxable profits derived in the relevant
     jurisdictions to utilise these losses.

     Recognised deferred tax assets and liabilities
     Deferred tax assets and liabilities are attributable to the following:


                                                                        Assets                            Liabilities                              Net
                                                                    2011          2010                 2011             2010               2011               2010
                                                                    $’000        $’000                 $’000           $’000               $’000             $’000
     Cash and cash equivalents                                          -             -                   72              72                  72                 72
     Trade and other receivables                                        -             -                  215           1,008                 215             1,008
     Investments                                                  (1,460)         (605)                     -               -            (1,460)              (605)
     Other assets                                                       -             -                7,515           3,476               7,515             3,476
     Property, plant and equipment                                      -             -                3,633           3,607               3,633             3,607
     Exploration and evaluation expenditure                             -             -                  686             686                 686                686
     Trade and other payables                                     (4,278)       (2,845)                     -               -            (4,278)            (2,845)
     Loans and borrowings                                         (2,519)       (2,397)                     -               -            (2,519)            (2,397)
     Employee benefits                                              (215)         (105)                     -               -              (215)              (105)
     Issued capital                                                     -             -                     -               -                  -                  -
     Tax loss carry-forwards                                     (49,563)      (27,905)                     -               -           (49,563)           (27,905)
     Tax (assets) liabilities                                    (58,035)      (33,857)               12,121           8,849            (45,914)           (25,008)
     Set off of tax                                                12,121         8,849             (12,121)          (8,849)                  -                  -
     Net tax (assets) liabilities                                (45,914)      (25,008)                     -               -           (45,914)           (25,008)



     Movement in temporary differences during the year
                                              Balance         Recognised       Recognised         Balance          Recognised       Recognised         Balance
                                            1 July 2009        in income        in equity       30 June 2010        in income        in equity       30 June 2011
                                               $’000             $’000            $’000             $’000             $’000            $’000             $’000
     Cash and cash equivalents                    76                 (4)               -                72                 -               -                72
     Trade and other receivables                 492                516                -            1,008              (793)               -               215
     Investments                                    -                  -           (605)             (605)             (171)           (684)           (1,460)
     Other assets                              2,513                963                -            3,476             4,039                -             7,515
     Property, plant and equipment             4,041              (434)                -            3,607                 26               -             3,633
     Exploration and evaluation                  686                   -               -               686                 -               -               686
     expenditure
     Trade and other payables                 (2,834)             445              (456)           (2,845)          (1,889)               456             (4,278)
     Loans and borrowings                     (2,791)             394                  -           (2,397)            (122)                 -             (2,519)
     Employee benefits                          (115)              10                  -             (105)            (110)                 -               (215)
     Issued capital                             (128)             128                  -                 -                -                 -                   -
     Tax loss carry-forwards                  (9,278)         (18,627)                 -          (27,905)         (21,658)                 -            (49,563)
                                              (7,338)         (16,609)           (1,061)          (25,008)         (20,678)             (228)            (45,914)




70
19. PROPERTY, PLANT ANd EQUIPMENT
                                                                                                                      2011                  2010
                                                                                                                     $’000                 $’000
   Buildings and infrastructure – at cost                                                                          27,258                 17,470
   Accumulated depreciation                                                                                        (8,097)                (6,626)
                                                                                                                   19,161                 10,844

   Mine properties – at cost                                                                                       13,547                 13,319
   Accumulated amortisation                                                                                        (5,939)                (2,796)
                                                                                                                     7,608                10,523

   Plant and equipment – at cost                                                                                   54,057                 15,335
   Accumulated depreciation                                                                                        (8,417)                (6,094)
                                                                                                                   45,640                   9,241

   Leased assets – at cost                                                                                               -                12,387
   Accumulated depreciation                                                                                              -                (3,274)
                                                                                                                         -                  9,113

   Land – at cost                                                                                                     240                    240
   Capital works in progress                                                                                        3,326                 24,205
   Total property, plant and equipment                                                                             75,975                 64,166
   A reconciliation of the carrying amounts for each class of property, plant and equipment is set out below.
                                                                                                                     2011                   2010
                                                                                                                    $’000                  $’000
   Buildings and infrastructure
   Carrying amount at 1 July                                                                                       10,844                 12,814
   Additions                                                                                                             -                      -
   Transfers from capital works in progress                                                                          1,548                    227
   Transfers from leased assets                                                                                      8,240                      -
   Depreciation                                                                                                    (1,471)                (2,197)
   Carrying amount at 30 June                                                                                      19,161                 10,844
   Mine properties
   Carrying amount at 1 July                                                                                       10,523                   8,305
   Additions                                                                                                           228                  3,437
   Amortisation                                                                                                    (3,143)                (1,219)
   Carrying amount at 30 June                                                                                        7,608                10,523




                                                                                                    Annual Report 2011: Aquila Resources Limited    71
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




19. PROPERTY, PLANT ANd EQUIPMENT (cONT.)
                                                                                                                           2011                     2010
                                                                                                                          $’000                    $’000
     Plant and equipment
     Carrying amount at 1 July                                                                                            9,241                    9,839
     Additions                                                                                                            1,758                      918
     Disposals                                                                                                                 -                     (79)
     Transfers from capital works in progress                                                                           36,968                       859
     Depreciation                                                                                                       (2,323)                   (2,296)
     Currency translation differences                                                                                        (4)                        -
     Carrying amount at 30 June                                                                                         45,640                     9,241
     Leased assets(i)
     Carrying amount at 1 July                                                                                            9,113                    9,994
     Additions                                                                                                               90                         -
     Transfers to buildings and infrastructure                                                                          (8,240)                         -
     Depreciation                                                                                                         (963)                     (881)
     Carrying amount at 30 June                                                                                               -                    9,113
     Land
     Carrying amount at 1 July                                                                                              240                      240
     Additions                                                                                                                -                        -
     Disposals                                                                                                                -                        -
     Carrying amount at 30 June                                                                                             240                      240
     Capital works in progress
     Carrying amount at 1 July                                                                                           24,205                   21,599
     Additions                                                                                                           17,637                    3,692
     Transfers to buildings and infrastructure                                                                          (1,548)                     (227)
     Transfers to plant and equipment                                                                                  (36,968)                     (859)
     Carrying amount at 30 June                                                                                           3,326                   24,205

     (i) The participants in the Isaac Plains Coal Joint Venture (in which the consolidated entity has a 50% interest) have an agreement with Queensland Rail
         which has been recognised as a finance lease arrangement consistent with AASB Interpretation 4 – Determining whether an arrangement contains
         a lease, notwithstanding that the relevant arrangement does not take the legal form of a lease. Following the settlement of the lease liability during
         2011, the leased assets have been reclassified to buildings and infrastructure.




72
20. ExPLORATION ANd EVALUATION ExPENdITURE
                                                                                                                         2011                     2010
                                                                                                                        $’000                    $’000
   Capitalised exploration and evaluation expenditure at 1 July                                                         4,026                    3,324
   Add – exploration assets acquired                                                                                    8,934                      702
   Less – currency translation differences                                                                              (518)                        -
   Capitalised exploration and evaluation expenditure at 30 June                                                       12,442                    4,026


21. INTANGIBLE ASSETS
                                                                                                                         2011                     2010
                                                                                                                        $’000                    $’000
   IT licenses and software – at cost                                                                                     689                      521
   Accumulated amortisation                                                                                             (494)                     (321)
                                                                                                                          195                      200

   Contract based intangible assets – at cost(i)                                                                        4,176                        -
   Accumulated amortisation                                                                                                 -                        -
                                                                                                                        4,176                        -
   Total intangible assets                                                                                              4,371                      200
   (i) During the year ended 30 June 2011, the consolidated entity purchased a contractual entitlement to an allocation of water to be provided by
       SunWater Limited in respect of its future requirements for one of its coal projects in Queensland. These rights will be amortised over the life of the
       relevant project upon commencement of operations.

   A reconciliation of the carrying amounts of the intangible assets is set out below.
                                                                                                                         2011                     2010
                                                                                                                        $’000                    $’000
   IT licenses and software
   Carrying amount at 1 July                                                                                              200                      318
   Additions                                                                                                              168                        12
   Amortisation                                                                                                         (173)                     (130)
   Carrying amount at 30 June                                                                                             195                      200
   Contract based intangible assets
   Carrying amount at 1 July                                                                                                -                          -
   Additions                                                                                                            4,176                          -
   Amortisation                                                                                                             -                          -
   Carrying amount at 30 June                                                                                           4,176                          -


22. TRAdE ANd OThER PAYABLES
                                                                                                                         2011                     2010
                                                                                                                        $’000                    $’000
   Trade payables                                                                                                       5,675                    6,649
   Unrealised loss on foreign exchange contracts(i)                                                                         -                    1,525
   Other payables and accruals                                                                                         25,632                   15,966
   Total trade and other payables                                                                                      31,307                   24,140
   (i) The consolidated entity enters into foreign exchange forward contracts from time to time in order to manage future exchange rate exposures on
       forecast sales in United States dollars. The consolidated entity classifies foreign exchange forward contracts as cash flow hedges and measures them
       at fair value. As at 30 June 2011, there were no such foreign exchange forward contracts in place. The after tax amount recorded as a cash flow
       hedge in the hedging reserve was nil (2010: $1,067,000).




                                                                                                     Annual Report 2011: Aquila Resources Limited           73
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




23. LOANS ANd BORROWINGS
     This note provides information about the contractual terms of the consolidated entity’s loans and borrowings. For more information on the consolidated
     entity’s exposure to interest rate and foreign currency risk, refer to Note 29.
                                                                                                                           2011                     2010
                                                                                                                          $’000                    $’000
     Current
     Cash advance facility                                                                                                     -                   5,000
     Deferred borrowing costs                                                                                                  -                     (29)
     Finance lease liabilities                                                                                                 -                   1,238
     Total current loans and borrowings                                                                                        -                   6,209
     Non-current
     Finance lease liabilities                                                                                                 -                   6,587
     Total non-current loans and borrowings                                                                                    -                   6,587
     Financing facilities
     Corporate contingent instrument facility(i)                                                                         38,556                        -
     Cash advance facility(ii)                                                                                                -                    5,000
     Financial guarantee facility(ii)                                                                                         -                   12,705
                                                                                                                         38,556                   17,705
     (i) During the year, the consolidated entity executed new funding arrangements with the National Australia Bank Limited and the Commonwealth
         Bank of Australia relating to the provision of performance bonds and guarantees in respect of its various project developments. The new unsecured
         corporate facilities comprise an initial $60,000,000 committed facility that will provide the consolidated entity with access to various forms of
         financial instruments for general business purposes. The facilities also provide the consolidated entity with an additional $20,000,000 uncommitted
         facility.

     (ii) A Syndicated Multi-Option Facility Agreement between the participants in the Isaac Plains Coal Joint Venture and a bank syndicate comprising
          Investec Bank (Australia) Limited, Société Générale Australia and BOS International (Australia) Limited that was executed in March 2006 in which
          a $41,295,000 cash advance facility, $25,705,000 financial guarantee facility and related foreign exchange hedging facilities were provided. The
          consolidated entity, through IP Coal Pty Ltd, has a 50% interest in this joint venture. The facility was provided subject to security over assets and
          undertakings, guarantees and indemnities from the consolidated entity and the Isaac Plains Coal Joint Venture. The consolidated entity has repaid
          all borrowings under this facility as at 30 June 2011 and the facility has now expired.

                                                                                                                           2011                     2010
                                                                                                                          $’000                    $’000
     Financing utilised at reporting date
     Corporate contingent instrument facility                                                                            38,556                        -
     Cash advance facility                                                                                                    -                    5,000
     Financial guarantee facility                                                                                             -                   12,705
                                                                                                                         38,556                   17,705
     Facilities not utilised at reporting date
     Corporate contingent instrument facility – committed facility                                                       21,444                          -
     Corporate contingent instrument facility – uncommitted facility                                                     20,000                          -
                                                                                                                         41,444                          -




74
   finance lease liabilities
   As per Note 19, an agreement with Queensland Rail in relation to the rail loop servicing the Isaac Plains Coal Mine was classified as a finance lease for
   accounting purposes. During the current year, in accordance with the terms of the Access Facilitation Deed, Queensland Rail requested a mandatory
   prepayment of all rail loop access charges for the remaining life of the agreement. Deemed finance lease expense of $2,054,000 (2010: $782,000)
   associated with this treatment was recognised in finance expense.
                                                          Minimum                                             Minimum
                                                            Lease                                               Lease
                                                          Payments          Interest        Principal         Payments            Interest      Principal
                                                              2011             2011             2011              2010               2010           2010
                                                             $’000            $’000            $’000             $’000              $’000          $’000
   Less than one year                                             -                -               -             2,020                782          1,238
   Between one and five years                                     -                -                -            8,081              3,128          4,953
   More than five years                                           -                -                -            2,693              1,059          1,634
                                                                  -                -                -           12,794              4,969          7,825


24. EMPLOYEE BENEfITS
                                                                                                                        2011                      2010
                                                                                                                       $’000                     $’000
   (a) Aggregate liability for employee entitlements, including on-costs
       Provision - current                                                                                                 871                    486


   (b) Share-based payments
       Share options are granted to eligible employees from time to time as part of the consolidated entity’s Employee Share Option Plan.
       Options are granted for no consideration and do not carry voting or dividend entitlements.
       The exercise price of the options is determined after taking into account the underlying share price performance during the period leading up to
       the grant date and applicable vesting conditions relating to the share options. Subject to vesting conditions, each option is convertible into one
       ordinary share.
       Options are expensed over the period of expected vesting, taking into account the value of option at the grant date and its related vesting
       conditions.
       The number of share options outstanding during the current and comparative reporting years is set out below.

                                                                 Granted                                                                       Exercisable
           Grant        Expiry      Exercise    At start of     during the       Exercised during        Expired during          At end of    at end of the
           date          date        price       the year          year             the year(i)             the year             the year         year
       2011
        23 Nov 05     31 Dec 10       $4.00    2,500,000                    -         (2,500,000)                  -              -                      -
        23 Nov 05     31 Dec 10       $4.00    2,500,000                    -         (2,500,000)                  -              -                      -
         19 Jun 07    31 Aug 10       $5.50      300,000                    -           (300,000)                  -              -                      -
         19 Jun 07    31 Aug 10       $5.50      100,000                    -            (66,666)           (33,334)              -                      -
         22 Jun 09     21 Jun 13      $7.65    2,940,000                    -            (45,000)                  -      2,895,000                984,000
          2 July 10     1 July 14    $11.40              -        1,650,000                      -          (60,000)      1,590,000                      -
                                               8,340,000          1,650,000           (5,411,666)           (93,334)      4,485,000                984,000
       (i) The weighted average share price at the date of exercise of these options was $9.84 (2010: no options were exercised).

                                                                 Granted                                                                       Exercisable
         Grant          Expiry      Exercise    At start of     during the       Exercised during        Expired during          At end of    at end of the
          date           date        price       the year          year              the year               the year             the year         year
       2010
        23 Nov 05     31 Dec 10       $4.00      2,500,000                   -                     -                   -          2,500,000      2,500,000
        23 Nov 05     31 Dec 10       $4.00      2,500,000                   -                     -                   -          2,500,000      2,500,000
        19 Jun 07     31 Aug 10       $5.50        300,000                   -                     -                   -            300,000        300,000
        19 Jun 07     31 Aug 10       $5.50        100,000                   -                     -                   -            100,000              -
        22 Jun 09      21 Jun 13      $7.65      3,105,000                   -                     -           (165,000)          2,940,000        441,000
                                                 8,505,000                   -                     -           (165,000)          8,340,000      5,741,000




                                                                                                       Annual Report 2011: Aquila Resources Limited           75
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




24. EMPLOYEE BENEfITS (cONT.)
     (b) Share-based payments (cont.)
         Vesting conditions attaching to the share options are as follows:
                                                                                                                                                  % vested at
                                         Number of share                                                                                          end of the
                Grant date                  options                                        Vesting conditions                                        year
                22 June 2009                2,895,000            Options vest 15% after one year, 20% after two years, 25% after three               34%
                                                                 years and remaining 40% at the end of four years.
                   2 July 2010                 1,590,000         Options vest 15% after one year, 20% after two years, 25% after three                   Nil
                                                                 years and remaining 40% at the end of four years.

         fair value of options granted
         The assessed fair value at grant date of the options is determined using binomial, or where market performance conditions exist, trinomial, option
         pricing models which incorporate the following inputs:
                                                                                                                            2011                       2010
         Term                                                                                                             4 years                          -
         Exercise price                                                                                                    $11.40                          -
         Underlying share price at the grant date                                                                           $7.59                          -
         Expected share price volatility over the term of the options                                                        55%                           -
         Risk-free rate for the term of the options (based on the Government bond rate)                                    4.69%                           -

         The assessed fair value of the share options issued during the year ended 30 June 2011 was $2.69 each. There were no share options issued during
         the year ended 30 June 2010.
         During the current financial year, the consolidated entity recognised share-based payments expense of $3,250,000 (2010: $2,289,000).


25. PROVISIONS
                                                                                                                           Minesite rehabilitation
                                                                                                                              and restoration
                                                                                                                            2011                    2010
                                                                                                                           $’000                   $’000
     Balance at 1 July                                                                                                     5,859                   2,485
     Provisions made during the year                                                                                         229                   3,240
     Unwind of discount                                                                                                      428                     134
     Balance at 30 June                                                                                                    6,516                   5,859
     In accordance with legislative requirements, a provision has been recognised for mine rehabilitation and restoration works throughout the life of the
     Isaac Plains Coal Mine. The provision has been made in full for all disturbed areas as at reporting date, based on current estimates of costs to rehabilitate
     the area, discounted to their present value based on expected future cash flows.


26. ISSUEd cAPITAL
                                                                                                                                  2011                2010
                                                                                                                                 $’000                $’000
     374,368,499 fully paid ordinary shares (2010: 322,273,136)                                                               386,218              363,800
     Less – share issue costs                                                                                                  (2,024)              (2,024)
     Total issued capital                                                                                                     384,194              361,776




76
                                                                                    2011                 2010                  2011                  2010
                                                                                  Shares                Shares                $’000                 $’000
   Movement in fully paid ordinary shares
   Balance at 1 July                                                       322,273,136           249,029,672                361,776                76,124
   Issued during the year
       Ordinary shares issued at $6.50 each                                           -            43,946,413                     -              285,652
       Ordinary shares issued by means of the exercise of                       580,800                     -                 2,017                    -
       366,666 options at $5.50 per option
       Ordinary shares issued by means of the exercise of                    19,166,400                       -              20,000                       -
       5,000,000 options at $4.00 per option
       Ordinary shares issued by means of the exercise of                         62,700                      -                  401                      -
       52,500 options at $7.65 per option
       Bonus issue of 1 share for every 10 ordinary shares held             32,285,463            29,297,051                      -                    -
   Balance at 30 June                                                      374,368,499           322,273,136                384,194              361,776

   The Company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary shares are entitled to receive dividends
   as declared from time to time and are entitled to one vote per share at meetings of the Company.
   Options
   As at 30 June 2011, the following options remain outstanding:
   •	 2,895,000	options	exercisable	at	$7.65	each	on	or	before	21	June	2013,	for	3,502,950	shares.	
   •	 1,590,000		options	exercisable	at	$11.40	each	on	or	before	1	July	2014,	for	1,749,000	shares.
   These options do not entitle the holders to participate in any share issue of the Company. However, in the event of a bonus issue during the term of
   the options, the holder is entitled, upon subsequent exercise, to receive the number of ordinary shares which would have been issued to the holder had
   the options been exercised (and shares issued) prior to the record date of the bonus issue. For details of the vesting conditions of these options, refer
   to Note 24.


27. RESERVES
                                                                                                                               2011                 2010
                                                                                                                              $’000                 $’000
   (a) Reserves
       Available-for-sale fair value reserve                                                                                  5,112                  6,972
       Share-based payment reserve                                                                                           18,824                15,574
       Hedging reserve - cash flow hedges                                                                                         -                (1,067)
       Foreign currency translation reserve                                                                                   1,863                     26
       Total reserves                                                                                                        25,799                21,505


   (b) Nature and purpose of reserves
       Available-for-sale fair value reserve
       Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in the available-for-sale fair
       value reserve, until the asset is sold or impaired, at which point the cumulative gain or loss is transferred to the profit or loss.
       Share-based payment reserve
       The share-based payment reserve represents accrued employee entitlements under the Employee Share Option Plan that have been charged to
       the profit or loss.
       Hedging reserve – cash flow hedges
       The hedging reserve is used to record gains or losses on the effective portion of cash flow hedges that are recognised directly in equity. Amounts
       are transferred to the profit or loss when the associated hedged transaction is recognised in the profit or loss.
       Foreign currency translation reserve
       The foreign currency translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign
       operations.




                                                                                                       Annual Report 2011: Aquila Resources Limited              77
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




28. cONTROLLEd ENTITIES
                                                              Date           Ownership interest     Country of
     controlled entities                                  incorporated        2011       2010     incorporation
     Parent entity
     Aquila Resources Limited                             14 March 2000
     Controlled entities
     Penoir Pty Ltd                                        5 January 2001    100%       100%         Australia
     Aquila Coal Pty Ltd                                  10 August 2001     100%       100%         Australia
     Aquila Steel Pty Ltd                                 13 August 2001     100%       100%         Australia
     BT.X Pty Ltd                                        25 January 2002     100%       100%         Australia
     BD Coal Pty Ltd                                          1 April 2005   100%       100%         Australia
     IP Coal Pty Ltd                                         12 May 2005     100%       100%         Australia
     Aquila Steel (S Africa) (Pty) Ltd                       17 June 2005    100%       100%      South Africa
     Aquila Steel (SA) Pty Ltd                            30 August 2005     100%       100%         Australia
     Aquila Energy (S Africa) (Pty) Ltd                  30 January 2007     100%       100%      South Africa
     Aquila Steel (Mauritius) Pty Ltd                     16 August 2007     100%       100%         Mauritius
     Aquila Energy Holdings (Mauritius) Pty Ltd           20 August 2007     100%       100%         Mauritius
     Aquila Exploration Pty Ltd                          24 January 2008     100%       100%         Australia
     Argos Energy (Offshore) Pty Ltd                     25 January 2008     100%       100%         Australia
     Argos Steel (Offshore) Pty Ltd                      25 January 2008     100%       100%         Australia
     Argos (Qld) Pty Ltd                                 25 January 2008     100%       100%         Australia
     Argos (WA) Pty Ltd                                  25 January 2008     100%       100%         Australia
     Aquila Coal (S Africa) (Pty) Ltd                         7 June 2008    100%       100%      South Africa
     Aquila (Washpool) Pty Ltd                           13 October 2009     100%       100%         Australia
     Washpool Coal Pty Ltd                               13 October 2009     100%       100%         Australia
     Aquila Energy EK (Singapore) (Pte.) Ltd            5 November 2009      100%       100%        Singapore
     Aquila Energy Holdings (Singapore) (Pte.) Ltd      5 November 2009      100%       100%        Singapore
     Aquila Energy Services (Singapore) Pte. Ltd        4 December 2009      100%       100%        Singapore
     PT Aquila Energy Development Indonesia                   9 April 2010   100%       100%        Indonesia
     Aquila Steel Northern Cape (S Africa) (Pty) Ltd        16 April 2010    100%       100%      South Africa
     Aquila Steel Thabazimbi (S Africa) (Pty) Ltd           16 April 2010    100%       100%      South Africa
     Aquila Steel Northern Cape (Mauritius) Pty Ltd         27 April 2010    100%       100%         Mauritius
     Aquila Steel Thabazimbi (Mauritius) Pty Ltd            27 April 2010    100%       100%         Mauritius
     Aquila Energy Mitra (Singapore) (Pte.) Ltd           8 October 2010     100%           -       Singapore
     Aquila Energy Bara (Singapore) (Pte.) Ltd            8 October 2010     100%           -       Singapore
     Aquila (Talwood) Pty Ltd                          16 November 2010      100%           -        Australia
     Talwood Coal Pty Ltd                              16 November 2010      100%           -        Australia
     West Pilbara Iron Management Pty Ltd                  8 March 2011      100%            -       Australia
     Eagle Downs Pty Ltd                                  31 March 2011      100%            -       Australia
     Isaac Plains Coal Marketing Pty Ltd                     6 April 2011    100%            -       Australia




78
29. fINANcIAL INSTRUMENTS
   (a) Interest rate risk
       At the reporting date, the interest rate profile of the consolidated entity’s interest-bearing financial instruments was:
                                                                                                                                   Carrying amount
                                                                                                                                  2011                       2010
                                                                                                                                 $’000                      $’000
       Fixed rate instruments
       Financial assets
           Cash and cash equivalents                                                                                          144,904                     250,250
       Financial liabilities
           Loans and borrowings                                                                                                     -                      (7,825)
                                                                                                                              144,904                     242,425
       Variable rate instruments
       Financial assets
           Cash and cash equivalents                                                                                           34,749                      28,679
           Receivables                                                                                                          1,968                      13,169
       Financial liabilities
           Loans and borrowings                                                                                                     -                      (5,000)
                                                                                                                               36,717                      36,848

       Fair value sensitivity analysis for fixed rate instruments
       The consolidated entity does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest
       rates at the reporting date would not affect the carrying amounts of fixed rate financial assets and liabilities in a manner that would impact the profit or loss.
       Cash flow sensitivity analysis for variable rate instruments
       A change of 100 basis points (2010: 100 basis points) in interest rate at the reporting date would have increased (decreased) equity and profit or
       loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis
       is performed on the same basis for 2010.


                                                                    100bp (2010: 100bp) Increase                           100bp (2010: 100bp) Decrease
                                                                 Profit or loss           Equity                        Profit or loss           Equity
                                                                     $’000                $’000                             $’000                $’000
       30 June 2011
       Variable rate instruments                                        367                            -                     (367)                            -
       30 June 2010
       Variable rate instruments                                        369                            -                     (369)                            -
   (b) fair values of financial assets and liabilities
       The carrying amounts of financial assets and liabilities of the consolidated entity approximate their fair values.
       Determination of fair values
       Fair values for financial assets and liabilities have been determined for measurement and/or disclosure purposes based on the following methods:
       Investments in equity securities
       The fair value of available-for-sale financial assets is determined by reference to their quoted market price at the reporting date.
       Trade and other receivables
       The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the
       reporting date.
       Derivatives
       The fair value of forward exchange contracts is calculated by external treasury advisers and is based on the current market exchange rates using the
       forward curve method. Fair value is estimated by discounting the difference between the contractual forward price and current forward price for the
       residual maturity of the contract using a risk-free interest rate.
       Non-derivative financial liabilities
       Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted
       at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
       Fair value hierarchy
       The consolidated entity classifies balance sheet items carried at fair value using a fair value hierarchy that reflects the significance of the inputs
       used in determining that value. The table below analyses financial instruments carried at fair value, by valuation method. The different levels in the
       hierarchy have been defined as follows:
       •	 Level	1:	quoted	prices	in	active	markets	for	identical	assets	or	liabilities.
       •	 Level	2:	inputs	other	than	quoted	prices	included	within	Level	1	that	are	observable	for	the	asset	or	liability,	either	directly	or	indirectly.
       •	 Level	3:	inputs	for	the	asset	or	liability	that	are	not	based	on	observable	market	data.


                                                                                                            Annual Report 2011: Aquila Resources Limited                79
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



29. fINANcIAL INSTRUMENTS (cONT.)
     (b) fair values of financial assets and liabilities (cont.)
                                                                   Level 1                   Level 2                   Level 3                     Total
                                                                    $’000                     $’000                     $’000                      $’000
         30 June 2011
         Investments in listed entities                            26,317                          -                         -                  26,317
         Unrealised losses on foreign exchange                          -                          -                         -                       -
         contracts
                                                                   26,317                          -                         -                  26,317
         30 June 2010
         Investments in listed entities                            25,387                         -                          -                  25,387
         Unrealised losses on foreign exchange                          -                   (1,525)                          -                  (1,525)
         contracts
                                                                   25,387                   (1,525)                          -                  23,862

     (c) Price risk
         The consolidated entity is exposed to equity securities price risk, which arises from investments classified on the consolidated balance sheet as
         available-for-sale financial assets.
         Sensitivity analysis
         A 10 percent (2010: 10 percent) increase (decrease) of the share price for the equity securities at the reporting date would have increased (decreased)
         equity and profit or loss by the amounts shown in the following analysis. This analysis assumes that all other variables, in particular foreign currency
         rates, remain constant.


                                                                     10% (2010: 10%) Increase                           10% (2010: 10%) Decrease
                                                                Profit or loss           Equity                    Profit or loss          Equity
                                                                    $’000                $’000                         $’000                $’000
         30 June 2011
         Available-for-sale financial assets(i)                          -                     2,632                         -                  (2,632)
         30 June 2010
         Available-for-sale financial assets(i)                          -                     2,539                         -                  (2,539)
         (i) Decreases in a particular investment which are significant or prolonged are classified as impaired and would be reflected in the profit or loss.

     (d) currency risk
         The consolidated entity’s asset (liability) exposure to foreign currency risk at the reporting date was as follows, based on notional amounts converted
         to Australian dollars (“AUD”) from United States dollars (“USD”), South African Rand (“ZAR”) and Indonesian Rupiah (“IDR”).
                                                                                                       2011                                2010
                                                                                       USD              ZAR       IDR            USD        ZAR             IDR
         In AUD equivalent                                                             $’000           $’000     $’000           $’000     $’000           $’000
         Cash and cash equivalents                                                     5,922             252          -          2,475     3,223                -
         Trade receivables                                                             8,554               -          -              -         -                -
         Security deposits                                                             1,259               -         8           1,549         -                -
         Derivatives – designated as cash flow hedges
                       Foreign exchange contracts                                          -              -           -     (93,990)           -                -
         Gross balance sheet asset (liability) exposure                               15,735            252           8     (89,966)       3,223                -

         The consolidated entity also holds minimal levels of cash that are denominated in Botswana Pula (“BWP”).
         The following significant exchange rates applied during the year:
                                                                                                                                         Reporting date spot
                                                                                                                   Average rate                  rate
                                                                                                                 2011       2010           2011       2010
         AUD : USD                                                                                                0.9889     0.8822         1.0595     0.8567
         AUD : ZAR                                                                                                6.8962     6.7076         7.2360     6.5559
         AUD : IDR                                                                                              8,707.02 8,353.27         9,122.38 7,852.09




80
    Sensitivity analysis
    A 10 percent (2010: 10 percent) (strengthening) weakening of the AUD against the total amount of financial assets held in all currencies at the
    reporting date would have increased (decreased) equity and profit or loss by the amounts shown in the following analysis, assuming that all other
    variables, in particular interest rates, remain constant.

                                                                                                              10% Increase               10% Decrease
                                                                                              Carrying     Profit or                  Profit or
                                                                                              amount         loss     Equity            loss     Equity
                                                                                               $’000        $’000      $’000           $’000     $’000
    30 June 2011
    Financial assets
    Cash and cash equivalents                                                                 184,547            -          (561)           -          686
    Trade receivables                                                                           9,257        (778)              -         950            -
    Security deposits                                                                           1,968            -          (115)           -          141
    Financial liabilities
    Derivatives – designated as cash flow hedges
                  Foreign exchange contracts                                                          -           -              -           -              -

    30 June 2010
    Financial assets
    Cash and cash equivalents                                                                 281,174             -         (587)            -         490
    Security deposits                                                                          13,169             -         (172)            -        (141)
    Financial liabilities
    Derivatives – designated as cash flow hedges
                  Foreign exchange contracts                                                     1,525            -       (10,410)           -       8,529

(e) Liquidity risk
    The table below sets out the consolidated entity’s financial liabilities into relevant maturity groupings, based on the remaining period at the reporting
    date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, including the estimated
    interest payments.

                                                         Carrying
                                                          amount         Contractual      Less than 12                                           More than 5
                                                         liabilities     cash flows         months          1 – 2 years        2 – 5 years         years
                                                            $’000          $’000             $’000             $’000              $’000            $’000
    30 June 2011
    Non-derivative financial liabilities
    Cash advance facility                                     -                 -                -                    -               -                 -
    Finance lease liabilities                                 -                 -                -                    -               -                 -
    Trade and other payables                             31,307          (31,307)         (31,307)                    -               -                 -
    Derivative financial liabilities
    Forward foreign exchange contracts used for
    hedging:
        AUD equivalent outflows                               -                 -                -                    -               -                 -
        AUD inflows                                           -                 -                -                    -               -                 -
                                                         31,307          (31,307)         (31,307)                    -               -                 -

    30 June 2010
    Non-derivative financial liabilities
    Cash advance facility                                 5,000           (5,165)          (5,165)                 -                  -                 -
    Finance lease liabilities                             7,825          (12,794)          (2,020)           (2,020)            (6,061)           (2,693)
    Trade and other payables                             22,615          (22,615)         (22,615)                 -                  -                 -
    Derivative financial liabilities
    Forward foreign exchange
    contracts used for hedging(i):
        AUD equivalent outflows                           1,525          (93,990)         (93,990)                 -                  -                 -
        AUD inflows                                           -            93,950           93,950                 -                  -                 -
                                                         36,965          (40,614)         (29,840)           (2,020)            (6,061)           (2,693)
    (i) The cash flows associated with derivatives that are cash flow hedges are expected to occur and impact the profit or loss in the same period as
        the underlying hedged contract cash flows.


                                                                                                     Annual Report 2011: Aquila Resources Limited               81
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



29. fINANcIAL INSTRUMENTS (cONT.)
     (f) credit risk
         Exposure to credit risk
         The maximum exposure to credit risk is represented by the carrying amount of the consolidated entity’s financial assets in the consolidated balance
         sheet. The maximum exposure to credit risk at the reporting date was:
                                                                                                                               Carrying amount
                                                                                                                              2011                2010
                                                                                                                             $’000               $’000
         Cash and cash equivalents                                                                                         184,547             281,174
         Available-for-sale financial assets                                                                                26,317              25,386
         Receivables                                                                                                        20,270              29,503
                                                                                                                           231,134             336,063
         The consolidated entity’s most significant customer (23% of sales revenue) accounts for $8,554,000 of the receivables carrying amount at 30 June
         2011 (2010: $5,578,000).

30. cOMMITMENTS
     (a) Exploration and mining lease expenditure commitments
         The consolidated entity has certain statutory requirements to undertake a minimum level of exploration activity in order to maintain rights of tenure
         to its exploration licences. In respect of joint venture arrangements, all joint venture participants are required to meet the conditions under which
         the tenements are granted. These requirements may vary from time to time in accordance with the type of tenements held and are expected to be
         fulfilled in the normal course of operations of the consolidated entity to avoid forfeiture of any tenement.

                                                                                                                               2011                      2010
                                                                                                                              $’000                     $’000
         These exploration commitments are not provided for in the consolidated financial statements
         and are payable
            Within one year                                                                                                 12,934                     12,217
            One year or later and not later than five years                                                                 17,299                     10,946
            Later than five years                                                                                              829                        548
                                                                                                                            31,062                     23,711

     (b) Operating lease commitments
         The consolidated entity has entered into operating leases in respect of its various office premises. These operating leases provide the consolidated entity
         with a right of renewal. Lease payments comprise a base amount plus an incremental rental linked to movements in the applicable Consumer Price Index.
         The participants in the Isaac Plains Coal Joint Venture have leased minesite accommodation under operating leases which expire on 13 July 2013.
         Lease payments are subject to incremental increases linked to the Consumer Price Index.

                                                                                                                               2011                      2010
                                                                                                                              $’000                     $’000
         The consolidated entity’s share of these commitments is not provided for in the consolidated
         financial statements and is payable
             Within one year                                                                                                 4,603                      3,450
             One year or later and not later than five years                                                                 6,356                      5,048
                                                                                                                            10,959                      8,498

     (c) capital expenditure commitments
                                                                                                                               2011                      2010
                                                                                                                              $’000                     $’000
         The consolidated entity’s share of these commitments is not provided for in the consolidated
         financial statements and is payable
             Within one year                                                                                                  2,372                    13,270
                                                                                                                              2,372                    13,270




82
   (d) Operating commitments – joint ventures
       The Isaac Plains Coal Joint Venture has commitments arising from contractual agreements. These predominantly relate to water, rail and port service
       providers for the Isaac Plains Coal Mine.
                                                                                                                    2011                       2010
                                                                                                                   $’000                      $’000
       The consolidated entity’s share of these commitments is not provided for in the consolidated
       financial statements and is payable
           Within one year                                                                                       18,672                      18,934
           One year or later and not later than five years                                                       79,798                      71,191
           Later than five years                                                                                 54,554                      30,536
                                                                                                                153,024                     120,661

   (e) Other commitment
       Other commitment relates to a consultancy agreement with Omega Management Services Pty Ltd, a company associated with a Director, that is due
       to expire on 30 April 2012. The agreement is subject to certain rights of termination by either party.
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
       The consolidated entity’s share of these commitments is not provided for in the consolidated
       financial statements and is payable
           Within one year                                                                                              417                         -
          One year or later and not later than five years                                                                  -                        -
          Later than five years                                                                                            -                        -
                                                                                                                        417                         -


31. REcONcILIATION Of cASh fLOWS fROM OPERATING AcTIVITIES
                                                                                                                       2011                     2010
                                                                                                                      $’000                    $’000
   Profit (loss) for year                                                                                          (64,558)                 (33,072)
   Adjustments for
      Share-based payment expense                                                                                     3,250                    2,289
      Depreciation and amortisation                                                                                   8,073                    6,723
      Impairment losses on listed investments                                                                           567                         -
      Unwind of discount on minesite rehabilitation and restoration                                                     428                      134
      Net foreign exchange loss (gain)                                                                                3,545                     (334)
      Profit on sale of equity investments                                                                              (26)                  (2,287)
   Net cash used in operating activities before changes in assets and liabilities                                  (48,721)                 (26,547)
      Add (less) – change in assets and liabilities
      (Increase) decrease in receivables                                                                            (1,968)                 (12,540)
      (Increase) decrease in inventories                                                                            (2,531)                    6,646
      (Increase) decrease in other assets                                                                          (14,664)                   (2,044)
      (Increase) decrease in deferred tax assets                                                                   (20,678)                 (16,526)
      Increase (decrease) in trade and other payables                                                                 8,342                  (8,295)
      Increase (decrease) in employee benefit provisions                                                                385                        32
   Net cash used in operating activities                                                                           (79,835)                 (59,274)




                                                                                                   Annual Report 2011: Aquila Resources Limited          83
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011




32. RELATEd PARTIES
     (a) Key management personnel disclosure
         The following were key management personnel of the consolidated entity at any time during the reporting year and unless otherwise indicated were
         key management personnel for the entire reporting year:

         Executive Director

         Mr T Poli (Executive Chairman and Chief Executive Officer)

         Non-Executive Directors

         Mr C B Bass
         Mr D T Cowlan
         Mr G T Galt
         Mr Zhihao Dai

         Executives

         Mr R G Tipper (General Manager – Iron Ore)
         Mr S J Pilcher (General Manager – Coal)
         Mr M N Alciaturi (General Manager – Finance and Corporate, commenced on 19 July 2010)
         Mr H C Rae (Chief Financial Officer)
         Mr J R Wood (General Counsel/Company Secretary)
         Mr B E Green (Head of Exploration)

         Key management personnel compensation
         The key management personnel compensation included in ‘employee benefits expense’ and ‘share-based payment expense’
         is as follows:
                                                                                                                         2011                     2010
                                                                                                                        $’000                    $’000
         Short-term employee benefits                                                                                   3,467                    2,318
         Post-employment benefits                                                                                         262                      278
         Equity compensation benefits                                                                                   1,752                    1,353
                                                                                                                        5,481                    3,949


         Individual directors and Executives compensation disclosures
         Information regarding individual Directors and Executives compensation and certain equity instrument disclosures as permitted by the Corporations
         Regulations 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report.
         Apart from the details disclosed in this note, no Director has entered into a material contract with the consolidated entity since the end of the
         previous financial year and there were no material contracts involving Directors’ interests existing at year-end.
         Equity instruments
         Equity holdings and transactions
         The movement of the number of ordinary shares of the Company held, directly, indirectly or beneficially, by each Specified Director and Specified
         Executive (key management personnel), including their personally-related entities during the reporting year is as follows:

                                                                                            Received via
         2011                               Held at                        Received via      exercise of                         Other           Held at
         Name                             1 July 2010      Purchases       bonus issue(i)     options           Sales           changes       30 June 2011
         Specified Directors
         Mr T Poli                         82,827,687                  -       8,282,768      19,166,400      (2,000,000)                 -    108,276,852
         Mr C B Bass                       38,995,166                  -       3,899,515               -         (17,000)                 -     42,877,681
         Mr D T Cowlan                     10,562,704                  -       1,056,270               -      (1,250,000)                 -     10,368,974
         Specified Executives
         Mr R G Tipper                          11,000                 -           1,100               -                -                 -         12,100
         Mr S J Pilcher                         27,500                 -           2,750               -                -                 -         30,250
         Mr H C Rae                                  -                 -          23,760         282,975                -                 -        306,735
         Mr B E Green                                -                 -          20,220         343,200        (141,000)                 -        222,420




84
                                   Held at                                           Received via
2010                                1 July                          Received via      exercise of                           Other             Held at
Name                                2009           Purchases        bonus issue(i)     options               Sales         changes         30 June 2010
Specified Directors
Mr T Poli                          75,297,898                   -       7,529,789                    -               -                 -     82,827,687
Mr C B Bass                        35,450,152                   -       3,545,014                    -               -                 -     38,995,166
Mr D T Cowlan                       9,943,368                   -         969,336                    -       (350,000)                 -     10,562,704
Specified Executives
Mr R G Tipper                           10,000                  -           1,000                    -               -                 -          11,000
Mr S J Pilcher                          25,000                  -           2,500                    -               -                 -          27,500
(i) Details regarding bonus issue are contained in Note 26.
No shares were granted as compensation to key management personnel during the reporting year.

Option holdings
The movement of the number of options over ordinary shares in the Company held directly, indirectly or beneficially, by each Specified Director and
Specified Executive, including their personally-related entities during the reporting year is as follows:
                                                                                                                      Vested            Vested and
2011                        Held at          Granted as                            Other              Held at        during the       exercisable at 30
Name                      1 July 2010      remuneration        Exercised         changes(i)        30 June 2011         year             June 2011
Specified Directors
Mr T Poli                     5,000,000                   -     (5,000,000)                   -                  -                -                       -
Specified Executives
Mr R G Tipper                   750,000                 -                   -                -            750,000        150,000               262,500
Mr S J Pilcher                  600,000                 -                   -                -            600,000        120,000               210,000
Mr M N Alciaturi                      -           600,000                   -                -            600,000               -                     -
Mr H C Rae                      400,000                 -           (187,500)                -            212,500         50,000                50,000
Mr B E Green                    500,000                 -           (216,666)         (33,334)            250,000        116,666                87,500
Mr J R Wood                     250,000                 -                   -                -            250,000         50,000                87,500
                                                                                                                      Vested            Vested and
2010                        Held at          Granted as                            Other              Held at        during the        exercisable at
Name                      1 July 2009      remuneration         Exercised        changes(i)        30 June 2010         year           30 June 2010
Specified Directors
Mr T Poli                     5,000,000                   -                 -                 -          5,000,000                -           5,000,000
Specified Executives
Mr R G Tipper                   750,000                   -                 -                 -           750,000        112,500                112,500
Mr S J Pilcher                  600,000                   -                 -                 -           600,000         90,000                 90,000
Mr H C Rae                      400,000                   -                 -                 -           400,000         87,500                187,500
Mr B E Green                    500,000                   -                 -                 -           500,000         87,500                187,500
Mr J R Wood                     250,000                   -                 -                 -           250,000         37,500                 37,500
(i) Other changes represent options that were expired or forfeited during the reporting year.
No options held by Specified Directors or Specified Executives are vested but not exercisable.

Key management personnel transactions with the company or its controlled entities
Details of transactions between the Company and its related parties are as follows:

Related parties:                 Tony Poli, Charles B. Bass, Derek T. Cowlan, Gordon T. Galt, Zhihao Dai, Russell G. Tipper, Howard C. Rae and
                                 Brent E. Green

Type of transaction:             Deed of Access, Insurance and Indemnity

Transaction details:             Deeds of Access, Insurance and Indemnity that are substantially identical in form have been entered into by the
                                 Company with each of the above key management personnel, who are each either Directors of the Company or
                                 of one or more of its controlled entities.
                                 Each Deed indemnifies the relevant individual to the extent permitted by law, against any liability, which he may incur
                                 whilst carrying out his duties as a Director of the Company (or as a Director of any of its subsidiaries) and against any
                                 costs and expenses incurred in defending legal proceedings brought against him as a Director. The Deed requires the
                                 Company to maintain in force Directors’ and Officers’ Liability Insurance, with an agreed cover level for the duration of
                                 the Directors’ term of office and a stated period thereafter.
                                 The Deed also provides for each Director to have access to Company documents (including Board papers) for a stated
                                 period after he ceases to be a Director, subject to certain confidentiality and other requirements being observed.


                                                                                                  Annual Report 2011: Aquila Resources Limited            85
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



32. RELATEd PARTIES (cONT.)
     (a) Key management personnel disclosure (cont.)
        Key management personnel transactions with the company or its controlled entities (cont.)
         Related parties:                        Veromas Pty Ltd (“Veromas”)

         Nature of relationship:                 Director related entity (Gordon T. Galt)

         Type of transaction:                    Consultancy Agreement

         Transaction details:                    Under this agreement, Veromas, a company associated with Mr Galt, agreed to provide the services of Mr
                                                 Galt to act as an independent director of the Company.
                                                 Veromas receives a consultancy fee at a rate of $72,000 (2010: $65,000) per annum, together with
                                                 reimbursement of out of pocket expenses incurred in the course of providing services under that
                                                 agreement.


         Related party:                          Omega Management Services Pty Ltd (“Omega”)

         Nature of relationship:                 Director related entity (Tony Poli)

         Type of transaction:                    Consultancy Agreement

         Transaction details:                    Under this agreement, which is to expire on 30 April 2012, Omega, a company associated with Mr Poli,
                                                 agreed to provide the services of Mr Poli (or another approved employee) to act as Executive Chairman
                                                 and also in the provision of associated services to the Company. This agreement continues to operate on
                                                 a monthly basis until renewed or renegotiated.
                                                 Omega receives a consultancy fee at a rate of $500,000 per annum, together with reimbursement of out
                                                 of pocket expenses incurred in the course of providing services under that agreement.
                                                 During the year, Omega charged the Company $500,000 (2010: $500,000) in consulting fees.


         Related party:                          Elite Developments (WA) Pty Ltd

         Nature of relationship:                 Director related entity (Tony Poli)

         Type of transaction:                    Overheads fee

         Transaction details:                    Elite Developments (WA) Pty Ltd, a company associated with Mr Poli, is charged a fee of $1,000 per
                                                 calendar month (2010: $1,000) for the use of office space, secretarial services and amenities.


                                                                                                                      2011                     2010
                                                                                                                     $’000                    $’000
         Assets and liabilities arising from the above transactions
         Current receivables
         Elite Developments (WA) Pty Ltd                                                                                  2                       2
         Less – impairment loss recognised                                                                                -                       -
                                                                                                                          2                       2
         Current payables
         Omega Management Services Pty Ltd                                                                              46                       83


     (b) Other related party transactions
         During the financial year, the Company charged the Australian Premium Iron Joint Venture a total of $388,000 (2010: $380,000). This amount was
         in respect of the reimbursement of expenses relating to the Australian Premium Iron Joint Venture that were paid by the Company including office
         occupancy and support services.




86
33. EVENTS SUBSEQUENT TO ThE REPORTING dATE
   On 8 August 2011, 1,420,000 options were issued to employees of the consolidated entity under its Employee Share Option Plan, with an exercise price
   of $8.71 and which vest over a four-year period.
   On 24 August 2011, the consolidated entity paid a compensation payment of $5,851,000 pursuant to a land access agreement that had been agreed
   with the land owner for one of the consolidated entity’s coal projects in Queensland.
   As at the date of this report, there have been no events occurring subsequent to the reporting date, other than the matters above, which would have a
   material impact on the consolidated entity or require disclosure in these consolidated financial statements


34. OPERATING SEGMENTS
   Operating segments are determined in a manner consistent with internal reporting provided to the CEO, who is the consolidated entity’s chief operating
   decision maker.
   The consolidated entity’s operating segments comprise the following:
   •	 Coal	–	encompassing	mining,	development,	feasibility	and	exploration	activities	at	the	consolidated	entity’s	coal	projects	in	Queensland	(including	
       the Isaac Plains Coal Mine, Eagle Downs Hard Coking Coal Project, Belvedere Hard Coking Coal Project, Washpool Hard Coking Coal Project and
       Talwood	Coking	Coal	Project),	Botswana	(the	Asenjo	Energy	Coal	Project)	and	Indonesia;
   •	 Iron	ore	–	encompassing	feasibility	and	exploration	activities	at	the	consolidated	entity’s	iron	ore	projects	in	Australia	(the	West	Pilbara	Iron	Ore	
       Project)	and	South	Africa	(the	Meletse	Iron	Ore	Project	and	the	Northern	Cape	Iron	Ore	Project);	and
   •	 Manganese	 –	 encompassing	 feasibility	 and	 exploration	 activities	 at	 the	 consolidated	 entity’s	 manganese	 project	 in	 South	 Africa	 (the	 Avontuur	
       (Gravenhage) Manganese Project).
   Information regarding the results of each reportable segment is included in the following table.

                                                                                                                  Corporate and
                                         Coal                    Iron Ore                  Manganese             unallocated items             Consolidated
                                     2011      2010            2011        2010           2011     2010            2011        2010            2011       2010
                                    $’000     $’000           $’000       $’000          $’000    $’000           $’000       $’000           $’000      $’000
   Revenue
   Revenue from external           133,453     129,841              -            -            -            -             -            -     133,453      129,841
   customers
   Cost of sales(i)               (103,794)   (118,611)             -            -            -            -             -            -    (103,794)    (118,611)
   Gross profit                     29,659      11,230              -            -            -            -             -            -      29,659        11,230
   Gain on sale of equity                 -           -             -            -            -            -           26        2,287            26        2,287
   investments
   Share-based payment                    -           -             -            -            -            -       (3,250)      (2,289)      (3,250)       (2,289)
   expense
   Depreciation and                   (158)       (595)        (876)         (520)        (155)        (144)        (236)         (131)      (1,425)       (1,390)
   amortisation
   Other income (expenses)         (46,057)    (24,357)     (56,234)      (34,005)      (7,245)      (3,600)      (8,516)       (6,543)    (118,052)     (68,505)
   Profit (loss) from operating    (16,556)    (13,722)     (57,110)      (34,525)      (7,400)      (3,744)     (11,976)       (6,676)     (93,042)     (58,667)
   activities
   Finance income                         -           -             -            -            -            -       14,316       10,082       14,316        10,082
   Finance expenses                 (2,747)     (1,013)        (567)             -            -            -      (3,172)             -      (6,486)       (1,013)
   Profit (loss) before            (19,303)    (14,735)     (57,677)      (34,525)      (7,400)      (3,744)        (832)        3,406      (85,212)     (49,598)
   income tax
   Income tax benefit                                                                                                                        20,654        16,526
   Profit (loss) for the year                                                                                                               (64,558)     (33,072)


   Segment assets                  181,179     101,116        36,618       54,211          326          408      187,855       292,676      405,978      448,411
   Acquisition of non-current       21,959       8,071        10,545          732          122             -          365          202       32,991         9,005
   assets
   Segment liabilities              23,121      36,668         7,697        4,169             -            -        7,876        2,444       38,694        43,281


    (i) Cost of sales includes depreciation and amortisation on the Isaac Plains Coal Mine assets of $6,648,000 (2010: $5,333,000). Therefore, total
        depreciation and amortisation was $8,073,000 (2010: $6,723,000).




                                                                                                         Annual Report 2011: Aquila Resources Limited                87
NOTES TO ThE
cONSOLIdATEd
fINANcIAL STATEMENTS
for the year ended 30 June 2011



34. OPERATING SEGMENTS (cONT.)
     Geographical information
     The consolidated entity operates predominantly in Australia. All segment assets from ordinary activities relate to operations in Australia, Africa or Asia.
     In presenting information on the basis of geographical segments (refer to the table below), segment revenue is based on the geographical location of
     customers. Segment assets are based on the geographical location of assets.

                                                                                                        2011                                2010
                                                                                                           Non-current                         Non-current
                                                                                                Revenue        assets               Revenue        assets
                                                                                                 $’000          $’000                $’000         $’000
     Australia                                                                                       -       157,456                     -       130,419
     South Africa                                                                                    -         8,950                     -         1,472
     Japan                                                                                      59,659              -               26,796              -
     China                                                                                      26,606              -               44,545              -
     India                                                                                      13,598              -               24,777              -
     Taiwan                                                                                      6,921              -               17,392              -
     Other Asia                                                                                 11,288              -                9,605              -
     South America                                                                              12,428              -                3,246              -
     Europe                                                                                      2,953              -                3,480              -
     Other                                                                                           -            581                    -            65
                                                                                               133,453       166,987               129,841       131,956
     Significant customer disclosure
     Revenues from two customers of the consolidated entity’s coal segment represent approximately $30,648,000 and $15,381,000 respectively (2010: one
     customer totalling $19,300,000) of the consolidated entity’s total revenue.


35. PARENT ENTITY dIScLOSURE
     As at, and throughout, the financial year ended 30 June 2011, the parent company of the consolidated entity was Aquila Resources Limited. The results,
     financial position and total equity of the Company for the year ended and as at 30 June 2011 are as follows:
                                                                                                                            2011                     2010
                                                                                                                           $’000                    $’000
     Result of the Company
     Profit (loss) for the year                                                                                         (66,642)                  (32,072)
     Other comprehensive income (loss)                                                                                     (565)                       308
     Total comprehensive income (loss)                                                                                  (67,207)                  (31,764)

     Current assets                                                                                                     156,211                   266,677
     Total assets                                                                                                       321,732                   359,398

     Current liabilities                                                                                                   6,441                    2,568
     Total liabilities                                                                                                     6,441                    2,568

     Total equity of the Company
     Issued capital                                                                                                     384,194                   361,776
     Available-for-sale fair value reserve                                                                                   283                       848
     Share-based payment reserve                                                                                          18,824                   15,574
     Retained earnings (accumulated losses)                                                                             (88,010)                  (21,368)
     Total equity                                                                                                       315,291                   356,830
     The Company has provided written undertakings to certain of its controlled entities, that it will continue to provide loan funding to enable those
     controlled entities to pay their debts as and when they fall due.




88
dIREcTORS’
dEcLARATION




1.     In the opinion of the Directors of Aquila Resources Limited:
      (a) the consolidated financial statements and notes set out on pages 52 to 88 are 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 financial year ended
                  on	that	date;	and
            (ii)	 complying	with	Australian	Accounting	Standards	(including	the	Australian	Accounting	Interpretations)	and	the	Corporations	Regulations	2001;	
      (b) the	consolidated	financial	statements	also	comply	with	International	Financial	Reporting	Standards	as	disclosed	in	Note	2(a);
      (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2.     The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2011
       pursuant to Section 295A of the Corporations Act 2001.


Dated at Perth this 14th day of September 2011.

Signed in accordance with a resolution of the Directors:




Tony Poli
Executive Chairman




                                                                                                         Annual Report 2011: Aquila Resources Limited           89
INdEPENdENT
AUdIT REPORT




INdEPENdENT AUdITOR’S REPORT TO ThE MEMBERS Of AQUILA RESOURcES LIMITEd

Report on the financial report
We have audited the accompanying financial report of Aquila Resources Limited (the Company), which comprises the consolidated balance sheet as at 30 June
2011, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year
ended on that date, a summary of significant accounting policies and other explanatory information and the directors’ declaration of 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 of the financial report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report
that is free from material misstatement whether due to fraud or error. In note 2(a), the directors also state, in accordance with Australian Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements of the consolidated entity 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 judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view 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 performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001
and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the consolidated entity’s financial position and of its
performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of the consolidated entity 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 2(a).

Report on the remuneration report
We have audited the Remuneration Report included in section 16 of the directors’ report for the year ended 30 June 2011. The directors of the Company are
responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion
In our opinion, the Remuneration Report of Aquila Resources Limited for the year ended 30 June 2011, complies with Section 300A of the Corporations
Act 2001.




KPMG




Trevor Hart
Partner


Perth
14 September 2011


                                            KPMG, an Australian partnership and a member firm of the KPMG network
                                            of independent member firms affiliated with KPMG International, a Swiss cooperative.

90
ShAREhOLdER
INfORMATION




The shareholder information set out below was applicable as at 31 August 2011.

 (a) distribution of listed ordinary shares
     (i) Analysis of number of shareholders by size of holding:

                                                                         Number of
                      Distribution                                      shareholders
                      1 - 1,000                                              1,741
                  1,001 - 5,000                                              1,366
                  5,001 - 10,000                                               281
                 10,001 - 100,000                                              334
                 100,001 and over                                               85
                            Total                                            3,807

     (ii) There were 427 shareholders who hold less than a marketable parcel.
     (iii) The percentage of the total holding of the twenty largest holders of ordinary shares was 91.57%.


 (b) Twenty largest shareholders
     Total number of shares on issue – 374,368,499

              Name                                                                                            Number of shares held
      1.      Mr Tony Poli                                                                                        90,318,324
      2.      Fortune BS Company Pte Ltd                                                                           53,175,159
      3.      JP Morgan Nominees Australia Limited                                                                 37,784,556
      4.      HSBC Custody Nominees (Australia) Limited                                                            35,862,716
      5.      UBS Wealth Management Australia Nominees Pty Ltd                                                     21,434,418
      6.      National Nominees Limited                                                                            20,772,906
      7.      Mr Anthony Poli & Mrs Milvia Poli                                                                    17,958,528
      8.      Quartz Mountain Mining Pty Ltd                                                                       17,196,984
      9.      Mr Charles Bass                                                                                      14,878,353
      10.     Mr Charles Bass & Mrs Sylvia Bass                                                                     9,757,440
      11.     Ashmy Pty Ltd                                                                                         9,253,350
      12.     Mr Geoffrey Francis Pigott                                                                            3,948,972
      13.     Citicorp Nominees Pty Limited                                                                         2,400,740
      14.     Mrs Milvia Poli                                                                                       2,295,000
      15.     Ricupero Holdings Pty Ltd                                                                             1,252,048
      16.     Mr David Banovich & Mrs Beverly Banovich                                                              1,040,800
      17.     Mr Neil Lithgow                                                                                       1,002,500
      18.     Bass Family Foundation Pty Ltd                                                                          897,760
      19.     Damen Holdings Pty Ltd                                                                                  861,588
      20.     AMP Life Limited                                                                                        706,196
      Total                                                                                                       342,798,338




                                                                                                      Annual Report 2011: Aquila Resources Limited   91
ShAREhOLdER
INfORMATION




(c) Substantial shareholders
     Set out below, as extracted from the Company’s register, are the number of fully paid ordinary shares held by substantial shareholders as at the date on
     which the last Substantial Shareholder Notice was lodged with the Company.

                                                                                      Date of Substantial     Number of shares at       Voting interest at
      Name                                                                            Shareholder Notice        relevant date             relevant date
      Mr Tony Poli                                                                      31 December 2010         108,276,852                 28.93%
      Mr Charles Bass                                                                    2 September 2010         38,995,166                 12.10%
      Baosteel Group Corporation                                                       20 November 2009           43,946,413                 15.00%
      BlackRock Investment Management (Australia)                                         2 December 2009         15,430,651                  5.27%
      Vanguard Precious Metals & Mining Fund                                           23 November 2010           22,721,172                  7.04%
      M&G Investment Management Limited                                                       27 April 2011       59,959,609                 16.01%
(d) Voting rights
     The voting rights attaching to ordinary shares are:
     On a show of hands, every member present in person or by proxy shall have one vote and upon a poll each share shall have a vote.

(e) Unquoted equity securities
     The following classes of unquoted equity securities are on issue:

      Type of securities                                                                          Number of securities            % held        % vested (i)
      •	 2,895,000	options	to	subscribe	for	fully	paid	ordinary	shares	exercisable	at	$7.65	          750,000                     25.91%            35%
         per option, with an expiry date of 22 June 2013, for 3,502,950 shares
         Persons holding 20% or more:
         - Mr R G Tipper
      •	 1,590,000	options	to	subscribe	for	fully	paid	ordinary	shares	exercisable	at	                   600,000                  37.74%             15%
         $11.40 per option, with an expiry date of 1 July 2014, for 1,749,000 shares
         Persons holding 20% or more:
         - Mr M N Alciaturi
      •	 1,420,000	options	to	subscribe	for	fully	paid	ordinary	shares	exercisable	at	$8.71	             600,000                  42.25%                 -
         per option, with an expiry date of 7 August 2015, for 1,420,000 shares
         Persons holding 20% or more:
         - Mr J A Pavy
     (i)   Refer to page 76 for details of option vesting conditions.

(f) On Market Buy Back
     There is no current on-market buy back.




92
REGISTERED & PRINCIPAL OFFICE
Level 2, Aquila Centre
1 Preston Street
Como WA 6152
Telephone: +61 8 9423 0111
Facsimile: +61 8 9423 0133
Email:     mail@aquilaresources.com.au
Website: www.aquilaresources.com.au

				
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